By ERNEST F. HOLLINGS, former U. S. senator
2009 -- I'm frustrated. Everyone is talking about the loss of jobs from
the recession and no one pays attention to the loss of jobs from off-shoring.
Everyone's attention is directed to the Iraq War and the Afghan War and
no one pays attention to the Trade War.
War II, Japan launched a Trade War for market share by closing its domestic
market, subsidizing its manufacture, selling its export at or near cost,
and making up the profit in its closed market. Thus, Toyota is Number
1 while GM is bankrupt.
described by Corporate America as downsizing, began in the early eighties
and hemorrhaged under President Clinton with NAFTA with Mexico and Permanent
Normal Trade Relations with China. The United States has lost a third
of its manufacturing jobs in the last ten years. In February 2007, the
Princeton economist, Alan Blinder, estimated that in ten years we would
lose thirty to forty million jobs to off-shoring. My point is that we
have lost and continue to lose far more jobs in the Trade War rather than
the recession. And everyone is fixed on creating jobs with stimulation,
but no one wants to plug the hole in the bottom of the economy boat caused
by the Trade War.
Now Corporate America is forced to off-shore. Globalization is nothing more than a Trade War with production looking for a country cheaper to produce. For example, if your competition can off-shore to China, your production in the United States has to meet the China price or you can't survive. Long ago, the big banks would not make a loan to manufacture unless it could meet the China price. Now so much production is off-shored that over half of our consumption is imported.
Bottom line: In globalization, Corporate America can't produce for a profit in America. Our country sustains on imports. More importantly, our defense depends on imports.
weeks for flat-panel displays from Japan before launching Desert Storm,
and today's list by law of materiel critical to our national security
is unattended. Losing millions of more jobs to off-shoring next year as
estimated by Blinder, there will be no recovery. And, if off-shoring continues
unabated for another two years, there is no chance of Obama being re-elected,
and it is going to be difficult to find someone who wants to be President.
When you cancel the corporate tax with a 5% VAT, you immediately remove a 44% cost incentive to off-shore and begin to make domestic production in the United States competitive in the Trade War. Next impose import quotas on foreign autos and auto parts. In the last eight years, Detroit has been subjected to a trillion dollars of subsidized auto and auto parts imports. No industry can survive in the Trade War with this assault. And the bailout will only go awry unless protected by quotas. Then in a studied way, start "tariffing" or "quotaing" items necessary for our national defense so that we can have a ready supply to defend the country.
than stimulation, is the way to create jobs. Textiles, next to steel,
have been found most important to our national security. What I mean by
"studied" is that it is not necessary to quota or tariff all
clothing, but we've got to have woolen manufacture for winter war and
parachute cloth. Three percent of the VAT will supplant the revenues lost
from canceling the corporate tax. One percent of the VAT over ten years
will take care of health reform. And the other one percent, for a total
of five percent, will start paying down the deficit. It will take the
Internal Revenue Service and business a year to gear up for a value added
tax. That means it can't take force until after next year's election.
Senator Hollings of South Carolina served 38 years in the United States Senate, and for many years was Chairman of the Commerce, Space, Science & Transportation Committee. He is the author of the recently published book, Making Government Work (University of South Carolina Press, 2008).
© 2009, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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