Sen. John McCain had it all wrong when he claimed while campaigning in Michigan that the American jobs lost overseas never were coming back. The examples of American jobs returning home are growing. A privately-held company that makes heaters to keep football players warm while on the sidelines recently moved production from China back to Kentucky. A family-owned foundry in Bremen, Ind., is being reactivated once again to manufacture pumps after moving work to China just two years ago. And Crown Battery Mfg. is shuttering a plant in Mexico and adding work to its Ohio factory
But if you’re John McCain, you need some sort of sound byte that attempts to justify your ongoing, mindless support of a trade policy that has resulted in the massive slaughter of American manufacturing jobs in this country.
States like the ones mentioned above have been absolutely hammered by globalization and free trade policies. Michigan, Ohio, Indiana, and Pennsylvania have collectively lost 200,000 manufacturing jobs in just the last two years. It doesn’t sound to me like John McCain’s claim that “free trade is the best thing that can happen to our nation” (Wall Street Journal, May 19, 2008) possibly could be true.
First we decided to unilaterally make blue-collar workers sacrificial lambs to the new global economy and replace them with workers in China and elsewhere who don’t pay a dime’s worth of taxes to America. Then the formerly-employed American workers who aren’t paying taxes anymore draw taxpayer-funded unemployment benefits while they look for another job. No wonder we have endless budget deficits.
What is John McCain’s answer to this massive loss-of-tax-revenue mess? Along with a Trade Adjustment Assistance program (TAA), which uses hundreds of millions more taxpayer dollars to retrain American workers for the privilege of putting them in unemployment lines, McCain wants massive tax cuts for all corporations (not just ones in manufacturing) to help us “compete.” If McCain really wants to do the sensible thing and level the playing field (it’s doubtful that he does) so all market participants play be the same set of rules, which would be consistent for any other competitive activity like baseball, badminton or blackjack, the right thing to do is increase the taxes on foreign producers for access to our markets and bring them in line with what our domestic producers are paying.
All that is needed is a simple application of tariffs that McCain’s mentor Teddy Roosevelt once said, “…should never be reduced below the point that will cover the difference between the labor cost here and abroad.” Increasing taxes (tariffs) on foreign producers is revenue-positive. Decreasing taxes on our domestic producers is revenue-negative. I’m not saying we should raise taxes on domestic producers. I’m saying they should be left alone and we should bring taxes paid by foreign producers up to the same level. That’s the best way to level the playing field and provide the U.S. Treasury with needed revenue at the same time to stem the tide of our growing national debt.
But for any jobs to be able to come back to American shores once again, capacity, supplier networks, and factories have to still be here to come back to. Christina Lampe-Onnerud of Boston-Power has a fast-charging, long-lasting notebook computer battery that she thinks just might revolutionize the industry, and she wanted to make it here in the United States. Trouble is that she couldn’t find anyone in America to even make a prototype, let alone do the manufacturing in the quantities she envisioned. As Belen, New Mexico-based CEMCO’s CFO put it, “American foundries now can compete head-to-head on cost, but there aren’t many foundries, welders, machinists, and quality-control engineers. What we had 10 years ago is gone.” CEMCO makes rock-crushing and farm equipment.
Of course we can’t expect to recapture all the production that has gone to China in years past. But the recent fall of the dollar and the rise in fuel and transportation costs might influence decisions in our favor in the future. The value of the dollar has decreased 30% since 2002 against many major currencies and wage rates in China are increasing 10% to 15% a year. The cost of shipping a 40-foot container to San Diego from Shanghai, for example, has increased 150% since 2000.
Iron castings manufacturer Donsco previously laid off hundreds of American workers as customers transferred production of oil rig parts, gear boxes, and more to Chinese competitors. Now, Donsco Chairman Art Mann Sr. says his company is flooded with orders from U.S.-based clients. “All of a sudden our customers are saying, ‘Whoops, it’s cheaper to buy in our backyard.'”
Another example is Tesla Motors, which transferred battery pack assembly work from Thailand back to San Carlos, Calif. The battery packs will be used in the production of Tesla’s electric-powered sports car which carries a price tag of $109,000. The low cost of Thailand’s factory wages weren’t enough to offset the costs of shipping heavy battery packs across the Pacific Ocean. Tesla’s marketing vice-president Darryl Siry said, “It was one of those things that became obvious all of a sudden, and you said, ‘Why are we doing this?'”
Hopefully soon most Americans and their legislators will wonder not only, “Why are we doing this?” but also, “Why did we ever start?” The answers to America’s economic problems are right in our own backyard. The answers are to truly level the playing field so all competitors play by the same rules and to buy American whenever possible.
I’m sure the workers of American and foreign companies alike would find it heartening and encouraging that all players in the world economy were playing by the same rules. Of course it’s alluring to win in a competition where you’re the underdog, swimming upstream against the tide and prevailing anyway, but there’s no sensible reason to intentionally stack the deck against ourselves to begin with like we have with our current trade policies. Everyday working Americans will continue to pay the price until the playing field is level and patriotic consumers have the option to buy American in any industry they choose to.