Patrick J. Buchanan
Death of Manufacturing
Mon Sep 1 14:06:08 2003
67.1.138.79

http://www.amconmag.com/08_11_03/cover.html
August 11, 2003 issue
Copyright © 2003 The American Conservative


Death of Manufacturing


The rise of free trade has eroded America's industrial base and with it
our sovereignty.


By Patrick J. Buchanan

After Mass at St. Mary's, a retired FBI agent who had worked as a boy in
the great steel plant in Weirton, W.Va., whose father had died in an
accident at the mill, handed me the Weirton Daily Times. "Where Do We Go
From Here?" read the May 20 banner. The front page was devoted to the
bankruptcy filing of Weirton Steel, which had once employed 14,000
workers in a town of 23,000. Mark Glyptis, president of the Independent
Steelworkers Union, said it didn't have to happen. It was a poignant
story. When I began my campaign of 2000 at the Weirton mill, Mark and
his ISU endorsed me.

That same week, a friend e-mailed me. Timco, a lumber mill where we
spent the last day of the New Hampshire campaign of 1996, had shut down.
As Weirton Steel had been hammered by subsidized steel dumped in the
U.S. market, Timco had to compete with subsidized lumber from Canada.

Across America the story is the same: steel and lumber mills going into
bankruptcy; textile plants moving to the Caribbean, Mexico, Central
America, and the Far East; auto plants closing and opening overseas;
American mines being sealed and farms vanishing. Seven hundred thousand
textile workers-many of them minorities and single women-have lost their
jobs since NAFTA passed in 1993.

Thirty years have elapsed since our free-trade era began and 30 months
since George W. Bush became president. It's time to measure the promise
of global free trade against the performance.

Undeniably, free trade has delivered for consumers. A trip to the mall,
where the variety of suits, shoes, shirts, toys, gadgets, games, TVs,
and appliances abounds, makes the case. But what has it cost our
country?

Every month George Bush has been in office, America has lost
manufacturing jobs. One in seven has vanished since his inauguration. In
1950, a third of our labor force was in manufacturing. Now, it is 12.5
percent. U.S. manufacturing is in a death spiral, and it is not a
natural death. This is a homicide. Open-borders free trade is killing
American manufacturing.

In 2002, we ran a trade deficit in goods of $484 billion. This May, it
reached the level of $562 billion, nearly 6 percent of GDP. Evangelists
of free trade tell us trade deficits do not matter. Michael Boskin,
Chairman of the Council of Economic Advisers under Bush I, declared, "It
does not make any difference whether a country makes computer chips or
potato chips."

History teaches otherwise. In 1860, Britain abandoned its Britain First
trade policy for the free-trade faith of David Ricardo, John Stuart
Mill, and Richard Cobden. By World War I, Britain, which produced twice
what America did in 1860, produced less than half and had been surpassed
by a Germany that did not even exist in 1860.

Free trade does to a nation what alcohol does to a man: saps him first
of his vitality, then his energy, then his independence, then his life.

America today exhibits the symptoms of a nation passing into late middle
age. We spend more than we earn. We consume more than we produce.

Why does it matter where our goods are produced? Because, as I wrote in
The Great Betrayal:

Manufacturing is the key to national power. Not only does it pay more
than service industries, the rates of productivity growth are higher and
the potential of new industries arising is far greater. From radio came
television, VCRs, and flat-panel screens. From adding machines came
calculators and computers. From the electric typewriter came the word
processors. Research and development follow manufacturing.

Alexander Hamilton, the architect of the U.S. economy, knew this. He had
served in the Revolution as aide to Washington and lived through the
British blockades. He had led the bayonet charge at Yorktown. And he had
resolved that never again would his country's survival depend upon
French muskets or French ships.

As first Treasury Secretary, he delivered in 1791 the "Report on
Manufactures," one of America's great state papers. Reflecting on how
close his country had come to losing its liberty, Hamilton wrote,

Not only the wealth, but the independence and security of a country,
appear to be materially connected with the prosperity of manufactures.
Every nation . ought to endeavor to possess within itself all the
essentials of a national supply. These comprise the means of
subsistence, habitation, clothing and defense.

Under the Constitution he helped write, a national free-trade zone was
created. Hamilton's idea was to use tariffs to end our dependence on
Europe and force British merchants to finance our government and the
roads, harbors, and canals that would tie America together with
commerce.

Tariffs would give our national government the revenue to operate, while
providing our people both privileged access to the fastest growing
market on earth and incentives to go into manufacturing. With American
manufacturing thus encouraged, we would soon produce ourselves the guns
and ships to defend the republic and the necessities of our national
life so we could stand alone against the world.

For 12 decades, America followed Hamilton's vision. On the eve of World
War I, the 13 agricultural colonies on the eastern seaboard had become
the richest nation on earth with the highest standard of living, a
republic that produced 96 percent of all it consumed while exporting 8
percent of its GNP, an industrial colossus that manufactured more than
Britain, France, and Germany combined.

The self-sufficiency and industrial power Hamiltonian policies created
enabled us to rearm in security, crush the Axis in four years, rebuild
Europe and Japan, and outlast the Soviet empire in a Cold War, while
meeting all the needs of our people.

But in the Clinton-Bush free-trade era, Alexander Hamilton is derided as
a "protectionist." Woodrow Wilson's free-trade dogma is gospel. Result:
our trade surpluses have vanished, our deficits have exploded, our
self-sufficiency has been lost, our sovereignty has been diminished, and
an industrial base that was the envy of mankind has been gutted.

And for what? All that junk down at the mall? What do we have now that
we did not have before we submitted to this cult of free trade?



The Loss of Independence

Consider the depths of our new dependency. Imports, 4 percent of GDP for
the first 70 years of the 20th century, are near 15 percent now, and 30
percent of the manufactures we consume. Pat Choate, author of Agents of
Influence, gives the following levels of U.S. dependency on foreign
suppliers for critical goods:

a.. Medicines and pharmaceuticals: 72 percent
b.. Metalworking machinery: 51 percent
c.. Engines and power equipment: 56 percent
d.. Computer equipment: 70 percent
e.. Communications equipment: 67 percent
f.. Semiconductors and electronics: 64 percent
In July, the U.S. Business and Industrial Council reported that the
Pentagon officials responsible for procuring U.S. weapons had joined
with defense industries to oppose legislation requiring 65 percent U.S.
content. U.S. missile defense and the Joint Strike Fighter would be
imperiled if 65 percent of the components had to be made in the USA.

As Choate writes, Dell Computers of Austin has 4,500 suppliers. Its
just-in-time supply line, which stretches across the Atlantic and
Pacific, has an inventory of four days. A dock strike on either coast,
and Dell begins to close down after 96 hours.



The Loss of Sovereignty

In the lame-duck session of Congress after the GOP triumph of 1994, Bob
Dole and Newt Gingrich colluded with Clinton to bring us into a World
Trade Organization where we are outvoted 15-1 by the European Union. In
its most important ruling, the WTO has held that the foreign sales
corporations of U.S. exporters like Microsoft and Boeing, set up to
receive tax benefits voted by Congress, violate the rules of free trade.

Europe is now authorized to impose $4 billion in tariff penalties on
U.S. exports if Congress fails to rewrite our tax laws to conform to WTO
commands.

When America bailed out the world in the Asian crisis of 1997-98,
Indonesia, South Korea, Russia, and Brazil devalued their currencies,
slashing the dollar price of their exports. To enable them to earn the
hard currency to pay back Western banks and the IMF, America agreed to
keep her markets open. Soon, steel from Indonesia, South Korea, Japan,
Russia, and Brazil was being dumped in the United States, and American
mills were reeling.

The recent steel decision is instructive. By 2002, 25 steel companies
had gone bankrupt, and the International Trade Commission had identified
dumping as the industry killer. Invoking U.S. trade law, President Bush
imposed tariffs. The dumpers howled and ran to the WTO, which declared
the U.S. tariffs unjustified. Either the Congress removes them or the EU
is empowered to impose $2 billion in tariff penalties on U.S. exports.

Consider what submission to the WTO has meant. Our Congress is ordered
by foreign bureaucrats to alter U.S. law or our companies face
penalties. Presidential decisions to protect vital American industries
are declared invalid by Eurocrats. The terms of access to the U.S.
market are now to be decided in Geneva by Lilliputians of the New World
Order.



Why are we letting this happen?

Libertarians teach that free trade provides a check on government power.
By enabling citizens to buy outside their borders, free trade forces
governments to reduce regulations and taxes to stay competitive.

A fine theory. Has it worked out? Hardly. History shows that the
opposite is true. Bismarck's Zollverein, or customs union, went
hand-in-hand with the rise of the Second Reich. The EU evolved from a
free-trade common market into the socialist superstate of today that is
the model for the world government under which all nations surrender
sovereignty and how we live will be decided by Platonic guardians.

In the protectionist era from 1789 to 1933, U.S. taxes rarely took more
than 3 percent of GNP, except in wartime. Government relied on tariffs.
Before 1913, except for the Civil-War era and briefly under Cleveland,
we had no income tax. But in the free-trade era, U.S. tax rates on
incomes, currently 35 percent, have risen as high as 70 percent, and
spending has exceeded 20 percent of GDP in peacetime. The free-trade era
is the era of Big Government.

As a former Friedmanite free trader, let me say it: free trade is a
bright shining lie. Free trade is the Trojan Horse of world government.
Free trade is the murderer of manufacturing and the primrose path to the
loss of national sovereignty and the end of our independence.



NAFTA: The Big Sting

In 1993, the NAFTA debate gripped the country. Clinton had the backing
of the political establishment, the Heritage Foundation, AEI, Brookings,
National Review, New Republic, Wall Street Journal, Washington Post,
Chamber of Commerce, Business Roundtable. Perot, Buchanan, Nader, and
the AFL-CIO were opposed, as were the people. But that did not matter.
Before the vote, the bazaar opened, and Congressmen began selling votes
to Clinton for whatever they could get. NAFTA won.

Ten years later, returns are in. We were told our trade surplus with
Mexico would grow, that NAFTA would create jobs here, that the rising
wages in Mexico would end the invasion of illegal aliens.

But, the year after NAFTA passed, Mexico devalued the peso, and the
United States began to run a string of trade deficits that has reached
$40 billion a year. Drug cartels in South America shifted operations to
Mexico. U.S. exports to Mexico are up, but it is not finished goods we
send south but parts to be assembled-and factories and jobs as owners
shutter plants north of the Rio Grande in search of wages that are 10 to
20 percent of what they have to pay in the United States.

By 2000, a million Mexicans were working in maquiladora plants south of
the border at jobs once held by Americans. But now, the creative
destruction of globalization has come to Mexico. Factories there are
being shut down and moved to America's new enterprise zone, China.

And the Mexican people? Half of the 100 million are still mired in
poverty. Tens of millions are unemployed or underemployed. Real wages
are below what they were in 1993. And the migration north continues as
1.5 million are caught each year breaking into the United States. Of
those who make it, one-third head for California where their claims on
welfare, Medicaid, schools, and prisons have tipped the state toward
bankruptcy as the taxpayers have begun a great exodus to Nevada, Idaho,
and Colorado.

NAFTA has helped to convert California into Mexifornia and the Golden
State into a Third-World country. Ten years after its passage, Mexico's
leading export continues to be Mexicans.



Factory Floor to the World

While Americans are sacrificing the future for the present, China is
sacrificing the present for the future.

Beijing's boom began after it devalued its currency in 1994. While a
blow to Chinese consumers, devaluation gave Beijing a competitive edge
over the other "Asian tigers." Beijing then invited Western companies to
locate new factories there to tap its pool of low-wage labor. As the
price of access, Beijing demanded that Western companies transfer
technology to Chinese partners. What the companies do not transfer, the
Chinese extort or steal.

By offering excellent workers at $2 a day, guaranteeing no union
trouble, allowing levels of pollution we would not tolerate, and
ignoring health and safety standards, China has become the factory floor
of the Global Economy and surpassed the United States as the world's
first choice for foreign investment.

What analyst Charles McMillion calls "the world's most unequal trading
relationship," can be seen in the trade statistics. In 2002, the U.S.
trade deficit with China was $103 billion. In May, it was running at
$120 billion, the largest deficit between two trading nations in
history.

It is thus a myth to say President Bush is presiding over a "jobless
recovery." The Bush tax cuts and Bush deficits are creating millions of
manufacturing jobs -in China. America buys 14 percent of China's
production and delivers Beijing a trade surplus of 12 percent of its
entire GDP. American purchases probably account today for 100 percent of
China's economic growth.

The U.S.-China relationship cannot truly be described as trade. It is
rather the looting of America by China and its corporate collaborators
in the United States. Beijing understands what economic nationalist
Friedrich List wrote long ago: "The power of producing wealth is
infinitely more important than the wealth itself."

China has now amassed $360 billion in reserves from her trade surpluses
since 1990. Much of that is invested in U.S. bonds and T-bills, earning
Beijing billions in interest from the U.S. Treasury. America may be the
most advanced nation on earth, and China a developing country, but you
could not tell that from studying the trade statistics.

In 2002, China ran up its largest trade surpluses with us in electrical
machinery, computers, toys, games, footwear, furniture, clothing,
plastics, articles of iron and steel, vehicles, optical and photographic
equipment, and other manufactures. Among the 23 items where we had a
surplus with China were soybeans, corn, wheat, animal feeds, meat,
cotton, metal ores, scrap, hides and skins, pulp and waste paper,
cigarettes, gold, coal, mineral fuels, rice, tobacco, fertilizers,
glass. Beijing uses us as George III used his Jamestown colony.

One who has studied how China deals with craven capitalists who come
courting is columnist Terry Jeffrey. On inspecting the Web site of
Motorola, Jeffrey found this description of how it sees its future:

• WTO-CANCUN/TRADE-ASIA - Convert Conference into Battlefield — AmaNoGawa, Mon Sep 1 14:19