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The Anti-Manufacturing Forces in Washington

Reposted from the Huffington Postgil kaplan


The Anti-Manufacturing Forces in Washington 

Gilbert Kaplan  |  April 25, 2013  |  Huffington Post

Hard as it may be to believe, there are forces in Washington that oppose the revival of the U.S. manufacturing sector. Who are they, and how do we counter their efforts? I think — roughly — they fall into five groups.

First, we have the people who are making big money by moving manufacturing off-shore. This includes some retailers that make no bones about buying everything from the lowest price source possible, even if that means closing down U.S. plants and buying from producers that ignore even rudimentary environmental and labor laws. It also includes major U.S. multinationals that find it in their interests to move U.S. jobs abroad because of lower wages and because many foreign countries will give them big subsidies to abandon their U.S. roots and obligations. These companies fight against any law or policy change that will keep manufacturing here, or that seeks to incentivize bringing it back.

Second, are the people who believe without reservation in free trade — no matter what. To them, any changes in trade law or policy to toughen our stance violates some basic philosophical belief and will never be countenanced. Certainly open trade has helped world growth and the development of many countries, such as Korea and Brazil. But it is almost impossible to talk to these people about our manufacturing decline. What they do not understand is that the U.S. is fighting, so to speak, a two-front war when it comes to trade. On the one hand, we are seeking reasonable market opening and regulatory changes to expand the benefits of free trade — such as the effort to create a U.S./EU Free Trade Agreement. But on the other hand, we are dealing with blatantly mercantilist export machines that are seeking to harm the U.S. economy, or at least certainly couldn’t care less if they do. We see this kind of conduct in China. We cannot treat both kinds of foreign trading partners (or should we say competitors) the same. It would be like saying we must — in our foreign policy — have totally consistent rules of the road with every other country no matter who they are — for example the same policy toward North Korea that we have toward Italy. No one would even propose something so absurd. But classic free trade proselytizers want us to treat every country with the same set of rules, no matter how different their systems or motivations.

Third, we have the people who believe that trade is less important than foreign policy, and so any time we might want to take a position in support of U.S. manufacturing — a position that may rub one of our trading partners the wrong way — they are usually against it for foreign policy reasons. One example is our continual reluctance to take very strong, fast action against currency undervaluation, despite the clear evidence of the harm it is causing us. This appalling lack of action is brought about by a number of factors, one of them being the concern that our diplomatic relationships are more important than dealing with trade problems.

Fourth, there are the people who have undercut our ability to apply the trade laws to unfair trade practices. We used to have a robust body of trade laws, but years of negative decisions at the World Trade Organization (“WTO”) — which now has the right to oversee the application of our trade cases — have cut back on their efficacy. Most recently the WTO, in a truly astounding decision, said that even when a company in China is owned by the Chinese government that does not mean the company is following the directives of the Chinese government in terms of subsidizing or assisting its customers. A rudimentary knowledge of the Chinese Communist system shows the fallacies in this thinking; a more thorough knowledge shows it is totally absurd. These WTO bureaucrats are in Geneva, but many in the U.S. government have failed to stand up strongly enough against these wrong-headed WTO decisions.

Finally, many conventional economists have long argued that there is no reason to have manufacturing in the U.S. It is just as good to have service jobs, they say. But that argument, at its root, makes no sense. Service jobs do not spin off other jobs to nearly the same extent that a major manufacturing plant does. They are also generally lower paid, and they don’t spawn critical innovation and research and development.

We need to counter these arguments, and look more broadly at the problem of manufacturing decline. To that end, I would like to see the creation of a Center for United States Manufacturing Revival at a major U.S. university. The revival of U.S. manufacturing — looked at from an academic perspective — will be a multidisciplinary effort requiring expertise in economics, law, engineering, business, public policy, and education, among other disciplines. An academic center bringing together these different perspectives would be very helpful. Scholars should analyze the real costs of the enormous manufacturing trade deficit, of the decimation of United States families and communities, and of the destruction of R&D capacity in our country — all the result of harm to the manufacturing base. I have begun to talk with universities and funding sources about this idea.

The U.S. problem with manufacturing was a central issue in the Presidential campaign and numerous Congressional races. Both Democrats and Republicans took up the issue. But progress in this area remains incremental. Why? The simple fact is that there are political and policy groups arrayed on the other side of the issue. Some people in Washington do not believe it is in the U.S. interest to take the actions we need to take to correct this problem. It is not that we have just made a mistake or lack the wisdom to find solutions. Nor is it the case that manufacturing base deterioration is a natural evolution that we cannot control. Rather, in the past, and in the present, we are adopting policies that are undercutting the manufacturing base. We need to confront the nay-sayers and turn this ship around.


5 Responses to “The Anti-Manufacturing Forces in Washington”

  1. Thomas Crumm says:

    Well written Gilbert Kaplan. Your colleague Al Green attended the Economy-in-Crisis event last week hosted by American University and the Coalition for a Prosperous America (CPA). I will be the Guest Speaker the week of May 14-15, presenting a way to, as you say, turn the ship around….for the automotive segment including its components. Take a look at web site above. Hope you can make it.

    Thank you Sara for posting the article.

  2. Bruce Bishop says:

    This piece was written for the HuffPo. It pays homage to all of the leftist prejudices. What it proposes is already in place — has been for years.

    1. “People making big money by moving manufacturing off-shore.” Retailers don’t troll third world sweatshops looking for cheap goods. They are approached by well-dressed, articulate, knowledgeable professionals, who offer them quality products at a better price. They have been hammered about the wonders of globalization. They really believe that it doesn’t matter where the stuff comes from.

    Sorry — Gotta go. Will finish this later.

    Check out NIST/MEP. It’s under the U.S. Dept. of Commerce.

    Bruce Bishop

    • Bruce Bishop says:


      2. “People who believe in free trade . . .” This is NOT free trade. Paul Craig Roberts, in his book, “How The Economy Was Lost,” says, “The offshoring of American jobs is the antithesis of free trade.” It is “an activity that David Ricardo, the originator of free trade theory, described as the betrayal of one’s own country . . .” For more, (look to your right) check out my review of Ian Fletcher’s book, “The Conservative Case Against Free Trade.” Dr. Fletcher also admits that this is NOT free trade.

      3. State Department working at cross purposes to Commerce Department. When I was working for the NIST/MEP, I ran into several cases where U.S. manufacturing companies were being hurt by the efforts of our State Department to help create competition in other countries.

      4. The WTO is NOT good for us. I agree with those who say we should get out of the WTO and develop an industrial policy that favors the United States.

      5. Fifteen years ago, the “experts” were telling us not to worry about the loss of manufacturing. They said we didn’t need manufacturing — we were going to become a “service economy.” The only problem with that is that services don’t produce wealth. Manufacturing produces wealth. Also, services (except for services to manufacturers) pay one-half to one-third of what manufacturing jobs pay. Prior to the globalization of millions of manufacturing jobs, millions of American high school graduates were able to support a middle class family with one manufacturing job. Now, it takes two or three service jobs to provide that same standard of living, and without the benefits that were common to manufacturing jobs.

      Mr. Kaplan suggests we create a “Center for U.S. Manufacturing Renewal.” I suggest Mr. Kaplan take a look at his own Commerce Department’s NIST/MEP. Starting with the states in 1989, and then joined by the Federal Government in the mid-nineties, the Manufacturing Extension Partnership has explored every possible way of making U.S. manufacturing more competitive. They are still around, but many of the manufacturers they helped over the years are gone — the victims of globalization.

      The only solution to our continuing loss of American jobs to offshoring is “Balanced Trade.” You can Google it. Warren Buffett recommended that we impose “balanced trade” on U.S. importers of Chinese goods in 2003. In simple terms, U.S. companies would not be allowed to import more from China than China imports from us. This would force our trade balance toward zero and would bring back millions of manufacturing jobs. This is NOT going to happen because our government does NOT want it to happen.

      For more on this, see my e-Book, “Don’t Blame Wal-Mart If Your Job Went to China,” on Amazon/Kindle.

      Bruce Bishop

  3. maggie says:

    Some people believe that trade is a tool for foreign policy, that is running up a massive trade deficit offshoring hole with “trading partner X” is a form of foreign aid, much more massive than explicit foreign aid, and necessary to be nice and make people “like” us -ha ha.
    By the way, we run up the worst trade deficits with those who need “foreign aid” the least, and turn out to not to like us much at all.
    In addition, some believe that loss of manufacturing is not a physical functionality loss and live in the unreal world of finance.

  4. Bruce Bishop says:

    For more info on how our government has driven manufacturing OUT of the U.S., check out “Sand in the Gears — How Public Policy Has Crippled American Manufacturing,” by Andrew O. Smith. Mr. Smith is a chemical engineer, a lawyer and an MBA. He was a consultant with Booz Allen Hamilton, and is currently the CEO of a paint company. He lives in Columbus, OH.

    The book is new and is available on Amazon. I have read about half of it. It is well researched and well written. I am trying to finish it so I can write the first customer review on Amazon.


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Ian Fletcher’s: “The Conservative Case Against Free Trade”

Ian Fletcher’s “Free Trade Doesn’t Work”