in the trade war
ERNEST F. HOLLINGS, former U. S. senator
2010 -- Every Southern governor has participated in the trade war to create
jobs. We started it after World War II with our right-to-work law, raiding
the northeast for its textile industry. We enacted sales taxes for the
public schools, balanced our budget with a Triple A credit rating, instituted
the technical college system for the skills that are now building automobiles
for BMW and the Dreamliner for Boeing in South Carolina. And Southern
governors are still competing in the trade war with tax deferral packages,
bringing back automobile jobs that John McCain said in the campaign would
never come back.
globalized this trade war for production and jobs when it closed its market,
subsidized its manufacture, and sold its exports below cost, making up
the profit in the closed market. The United States, anxious to spread
capitalism to defeat communism, did nothing to open Japan's market. Presidents
called for free trade, but Japan's market today remains substantially
I was drafted
in the trade war by the northern and southern textile industries to testify
before the old International Tariff Commission against Japan's dumping
textile imports below cost. We lost the case, but I got President Kennedy
to promulgate his 7-point program stabilizing the textile industry in
May of 1961. Under the War Production Act of 1950 permitting the President
to act, we had a hearing finding textiles as second to steel most important
to our national security.
kept cheating, and we couldn't get Presidents to enforce our trade agreements.
I helped pass protectionist enforcement measures through both Houses of
Congress only to be vetoed, one by President Carter, two by President
Reagan, and one by President Bush I. But then China began acting like
a Southern governor, leasing you the building for nothing; guaranteeing
cheap labor with no labor problems; and a guaranteed profit so long as
you furnished the technology and production techniques. Corporate America,
seeing protection for its investment and jobs in-country continually vetoed,
resorted to the old axiom: "If you can't beat them, join them."
And under President George W. Bush, we off-shored almost a third of our
manufacture and manufacturing jobs.
off-shoring should be immediately stopped by eliminating the tax
exemption for off-shored profits unless repatriated. We can levy
a 10% surcharge on imports, like President Nixon in 1971. With the
economy down, we can eliminate the corporate income tax and produce
more revenue with a 2% value added tax. This will easily give a
charge to President Obama's plan to boost exports. With the average
corporate income tax at 27% and a 2% VAT on exports rebated, the
price of exports is reduced 29%. Enforcing the War Production Act
of 1950 will create millions of jobs. But this won't be easy."
Ernest F. Hollings
ago, the Princeton economist, Alan Blinder, projected that for ten years
running the United States would off-shore on an average of three to four
million jobs a year. More jobs are lost today from off-shoring rather
than from the recession. Yet Washington does nothing about off-shoring
because that's what the business leadership wants.
the big banks, and Corporate America want to keep flowing these guaranteed
off-shored profits from China, India, Vietnam, etc. They know that they
can make more profit off-shoring than they can domestically. And, as long
as Washington fails to engage in the trade war, refuses to enforce its
trade laws and adjust its tax laws, the flow will continue. Thus, President
Obama and Congress keep calling for jobs, jobs, but we keep losing jobs.
To cover themselves politically, they stimulate for small business jobs
and give tax credits to small business that can't afford to hire additional
employees. They do nothing about off-shoring middle-class jobs. Political
contributions keep flowing, and the country goes broke.
The amazing thing is that the free press not only ignores the trade war,
but obscures it. In The Nation's cover article entitled "18 Million
Jobs By 2012," the author, Robert Pollin, describes the creation
of jobs, but doesn't even mention the trade war and the off-shoring of
our jobs. In Time's cover article entitled "How to Create a Job,"
the author, Barbara Kiviat, not only refuses to mention the trade war
for jobs, but obscures the off-shoring problem by stating: "
there's not much Washington can do
on such short notice,"
and "[i]n the long term, there is only one way to create enough jobs
for the economy: innovation." Tom Friedman, reporting on the Intel
science finals, highlights the fact that innovation in the United States
does not create jobs in the United States. Friedman reports: "If
I just have the spark of an idea now, I can get a designer in Taiwan to
design it. I can get a factory in China to produce a prototype. I can
get a factory in Vietnam to mass manufacture it." Cheaper production
off-shore is the jobs problem.
The important point of the Times' mislead is "
there's not much
Washington can do." In globalization or the trade war only Washington
can do. Globalization is nothing more than a trade war with production
looking for a cheaper country to produce. The United States, with its
open market and high standard of living, can't compete with China's communist
control and production. The competition in globalization is not company
vs. company, but country vs. country. And Washington is AWOL in the trade
war. We've got to come in from the cold and begin to compete in globalization
-- to trade.
Subsidizing off-shoring should be immediately stopped by eliminating the
tax exemption for off-shored profits unless repatriated. We can levy a
10% surcharge on imports, like President Nixon in 1971. With the economy
down, we can eliminate the corporate income tax and produce more revenue
with a 2% value added tax. This will easily give a charge to President
Obama's plan to boost exports. With the average corporate income tax at
27% and a 2% VAT on exports rebated, the price of exports is reduced 29%.
Enforcing the War Production Act of 1950 will create millions of jobs.
But this won't be easy.
Of all things, Corporate America will oppose the repeal of the corporate
income tax. The CEOs trying to get their stock up in three years with
off-shore profits don't want to come home to work for less in the United
States and worry about Labor. The United States Chamber of Commerce will
contribute against anyone opposing free trade or engaging in the trade
The 2% VAT ought to be increased to 5%. A 1% VAT raises approximately
$131 billion - over 10 years $1 trillion, 310 billion. We shouldn't be
wasting time waiting to see whether we can save $500 billion from Medicare.
The 1% VAT can guarantee that health care reform can either be paid for
or the extra money used to pay down the debt. Then the other 2% VAT should
be dedicated to paying down the debt.
For those nervous about taxes, let's vote. Any voting against this approach
will be voting against paying for health care, against paying down the
debt, against relieving Corporate America of income taxes, against promoting
exports by 32%, against stemming the flow of off-shoring jobs, and voting
against middle-class jobs and saving the economy of the United States.
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,
Government Work (University of South Carolina Press, 2008).
Ernest F. Hollings. All rights reserved. Contact
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Ernest F. Hollings served
the public for 56 years -- 38 years in the United States Senate and as South
Carolina's governor, lieutenant governor and a member of the S.C. House of
Today, Hollings continues
to be influential in public affairs and offers this Web site as a compendium
of current and past positions on public issues. Learn
more about Fritz Hollings.
Hollings receives French honor
France honored retired
U.S. Sen. Fritz Hollings on in 2013 by awarding him the Legion of Honor for
his World War II service. More.
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