Saturday, May 28, 2011

Let's Clarify!

In the last few days "Blkrocket" on twitter has made some comments about my views and statements.

 Let me clarify.

My interest is solely America's negative balance of trade with all foreign countries in manufactured goods, currently running at over 500 billion dollars per year.  My interest is the devastating effect of this huge negative balance of trade on the American economy, on the American people, and on the nation as a whole.

In addition, the U.S. government is making foreign purchases of goods and services, and there is the debt service on U.S. Treasury securities held by China, Japan, and other countries.

Adding up all the above items, I estimate that the total hemorrhage of money out of the country is one trillion dollars per year.  America is bleeding.  If we do not reduce the bleeding, the economy will never recover.

The negative balance of trade in manufactured goods is the largest single item and therefore is the logical place to start in reducing the bleeding.

The negative balance of trade in manufactured goods of over 500 billion dollars per year tells us directly the net amount we are paying foreign countries to do our manufacturing for us.  It is against all common sense that we are sending out of our country 500 billion dollars per year while many millions of our own workers are unemployed or under-employed.

To cut this net foreign expenditure of 500 billion dollars per year, we have to get manufacturing jobs back from China and other foreign countries.  The benefits of getting jobs back are:

+  Put Americans back to work, give them dignity, give them the ability to support their families

+  More Americans will have income and therefore more Americans will pay tax.  The government will see an increase in tax revenue and deficits will go down.

Very simply, the ONLY way available to us to solve our present economic problem is to get the manufacturing jobs back from overseas.

There are encouraging signs that economic forces are getting some of the jobs back for us.  Also, Senator Debbie Stabenow of Michigan, and Congressman Frank Wolf of Virginia, and other members of Senate and House, are working on new legislation to encourage and support existing manufacturing, and manufacturing returning from overseas.

Now here are some of Blkrocket's comments:

+  "I do not think consumers think about the hidden cost of food, diamonds or oil or iPhones."

+  "Joe6Pac is indifferent about hidden costs of weak labor, business operation practices, and environmental laws of China."

+  "The consumer is less concerned about global work conditions and inequality than product cost and value.  It's self interest."

My response is that I have never mentioned or commented on "weak labor", business practices, environmental laws, global work conditions, or inequality.  My concern is solely increasing the size of our manufacturing sector by getting the jobs back from overseas, resulting in increased employment in America, increased well-being, and increased tax revenue to reduce deficits.

I believe many consumers are already well aware of the devastating effect of our huge imports of manufactured goods from China and other foreign countries.  We can help solve the problem at the grassroots level by educating all consumers concerning the importance of purchasing American-made goods when a choice is available, and the importance of letting stores know that we want them to carry American-made goods.

I have mentioned hidden costs.  Here is what I mean by hidden costs.  Consider Mr. and Mrs. X who have two children in their twenties. The children cannot find jobs at reasonable pay levels because the economy has contracted so much due to sending millions of manufacturing jobs overseas. When Mr. and Mrs.X go to the store to buy a kitchen utensil, they are offered a Chinese-made item at a cost lower than might be paid for an American-made item.  They save a few dollars in the purchase.  The HIDDEN cost to Mr. and Mrs. X is that they have to provide financial support to their adult children.

Another hidden cost is increased unemployment and welfare payments, because so many people are unemployed.  These increased costs have to be borne by those people who still have employment and therefore are still paying taxes.

Some consumers are aware of the hidden costs of foreign-made goods.  I agree that many other consumers are not aware of the issue.  However, if the consumer needs a kitchen item, and finds ONLY Chinese-made items at the store, he or she is forced to buy the Chinese item.  Again, we should operate at the grassroots level to inform all consumers of the hidden costs of saving a few dollars by buying a Chinese item, and the need to inform store chains that they must carry American-made goods.

It is often said that stores cannot stock American-made items because all the American factories have shut down.  It is a chicken and egg situation.  However I believe that many consumer items are manufactured in America at low levels.  If the store chains would seek out these manufacturers, they could quickly ramp up production.  Also, if it becomes known that store chains are looking for American-made items, entrepreneurs would start new facilities to meet that need.

Further, a store chain that makes the effort to carry American-made goods, and advertises that fact, could well see an increase in sales and profits more than covering any extra costs.

Please note that in all of my comments above, a reference to goods coming from China is a shorthand way of saying "goods coming from China or from other countries that don't buy from us in approximately equal amounts".  Our imports from China are four times our exports to China. This is not a situation of "approximately equal amounts".  

Blkrocket also provided an article entitled "Why U.S. Companies Love China", Business Week On-line, September 13, 2005, by Dexter Roberts.  There are a few problems with this article, in addition to being somewhat out of date.

The article mixes together references to American companies operating in China and selling to the Chinese people, and American companies operating in China and sending the goods to America.  These two situations are totally different, obviously.  There is nothing wrong with an American company manufacturing in China and selling the products to the people of China.  However, again, note that the article is six years old.  I suspect that in the next few years production for the Chinese market will be taken over by Chinese companies.  American companies will see near or complete disappearance of their business activity.

At the end of the article, referring to the prospects for U.S. companies operating in China, Roberts states: "It will be many years before China develops the intellectual property rights protection, transparent policy making, and level playing field that will make it anywhere as predictable as the West or Japan."

My comment:  Protection of intellectual property rights in China is not going to happen.  Quite the opposite.  American companies would be well advised to avoid any contact with China.

At the same time, American companies are finding slow sales in America.  Why?  Because American companies have transferred millions of manufacturing jobs out of America.  Relatively few people still have reasonably stable and reasonably-paid jobs.  No wonder people are not buying.

The best course of action for American companies is to move their manufacturing back to America, helped by the lower U.S. dollar, efforts of Senate and House members as referred to above, and reasonable wage requests of American workers.  Message to American companies:  Give work to Americans and Americans will buy from you!

America has every justification to tear up trade agreements with China and other countries that don't buy from us.  Put on a tariff to protect manufacturing jobs returning from overseas, and start to re-build the American economy!

No comments:

Post a Comment