TRANSFORMING MANUFACTURING - RESHAPING TRADE POLICY

The “giant sucking sound” of millions of manufacturing jobs being lost since 2002 was a major factor behind WIRE-Net’s decision to step into the debate over the future of US trade policy, beginning in 2004, especially since there was precious little public discussion of what was behind the manufacturing crisis.

 

While at least 40% of the jobs lost can be traced to the truly heroic efforts of US firms to improve their productivity and to become more competitive, millions of the jobs were lost due to weak demand, and to import subsitution – when buyers substitute foreign made for US products.  This number could be as high as 30% of all jobs lost, according to some estimates.  This is a huge issue and many policy makers and economic development pros don’t want to tackle the issue, preferring instead to fall back on the mantra of “free trade”.

 

Even at symposia supposedly meant to focus on this sticky issue, most discussions are held within the dominant “free trade” paradigm.  So instead of dealing with the root cause of the problem, we hear platitudes about increasing funding for the feeble Trade Adjustment Act, job training programs, and other band-aid approaches.  (Its interesting to note that many in Congress are for free trade, except when it comes to immigrant doctors, or immigration period.  Free trade is good if you are looking for lower labor and other production costs, but not for people seeking employment in the US.  In the latter case, the debate quickly shifts to how high the walls or fences around our borders should be…but not so when what’s at stake are the loss of hundreds of thousands of US manufacturing jobs, or the erosion of our business and innovation infrastructure.)

 

This is why it was refreshing to listen to Rob Atkinson at the recent Washington DC Summit of the International Economic Development Council (IEDC).  Atkinson was formerly with the Progressive Policy Institute, and best noted for his work to rate regional economies for their performance in the “new economy”.  He’s the author of a new book on US innovation.  Among his top concerns for the US are our lack of fortitude in enforcing trade laws, particularly with regards to the currency manipulation of China and other Asian nations.

 

It was refreshing to hear Atkinson list weak trade-law enforcement as one of the major factors undermining US innovation and future economic growth, and also suggesting that border-adjusted taxes were a reasonable and feasible reaction to stem the tide of jobs flowing out of the US and imports flooding in.  The US is States is the only country in the Organisation for Economic Co-operation and Development (OECD) without Border-Adjusted taxation.  Rob Atkinson has now moved on from the PPI to a new “inside the beltway” think tank focusing on the challenges to US innovation.  For more, see the Information Technology and Innovation Foundation at www.innovationpolicy.org.

 

Border Adjusted Taxation was also a key part of the case for a new approach to trade policy that Charlie Blum, of International Advisory Servces Group, made when he spoke before a group of WIRE-Net and NE Ohio business leaders several weeks ago.  For an interesting article on this approach, see this link to an article by David Hartman:

http://www.chroniclesmagazine.org/cgi-bin/hartman.cgi/Taxes/2006/01/16/Cracks_in_the_Cryst