Tom Gibson Tom Gibson, 6/4/2012 [Archive]

Flawed Leadership Thinking Led To Factory and Job Losses

Flawed Leadership Thinking Led To Factory and Job Losses

By Tom Gibson

During the last 35 years, more American factories have been closed and more jobs lost due to competition from countries in Asia than from any other part of the world.

The initial losses were to Japan and from there they spread to Korea, Taiwan, Malaysia, Hong Kong, Thailand and China.

Our political leaders in Washington approached global trade with idealistic assumptions and strategies and the Asian leaders took advantage of their flawed thinking. As Clyde Prestowitz and Jeff Faux wrote recently in The American Prospect, American leaders entered into global commerce with the belief that free-trade is always a win-win proposition.

"The premise was that all participants embraced the same free-trade philosophy and rules and that if the rules were set properly, the results would automatically be satisfactory for all.

"The American free-trade doctrine held that countries should not protect or subsidize favorite industries but should rather specialize in producing what they could do best and cheapest while trading for the rest."

Asian leaders rejected this reasoning. They didn't see trade with the United States as always win-win, and more often they strategized to make it win-lose.

"They imposed tariffs and other protective barriers, compelled a high rate of savings, and channeled the savings through state-controlled banking systems into capital-intensive industries such as steel, shipbuilding, autos, and later semi-conductors and consumer electronics. They intervened regularly in currency markets to keep their currencies cheap versus the dollar as both a subsidy to exports and as an extra tariff on imports."

By 1976 after more than 100 years of trade surpluses, the U.S. went into constant deficit.

By 1981, the deficit had grown to $16 billion; to $230 billion in 1998; and to $558 billion by the end of 2011 ($400 billion with Asia). Faced with these growing deficits and steady loss of factories and jobs, our political leaders have refused to acknowledge the need to change and to do what's good for our country.

Both Barack Obama and Mitt Romney talk about jobs-jobs-jobs, but never mention that 6 million American jobs could be created just by bringing our trade with the rest of the world into balance.

And weak trade agreements continue to be passed, one after the other.

"The script doesn't change. The president, congressional committee chairs, and lobbyists representing U.S. importers and foreign exporters announce that the proposed trade deal will create millions of new high-paying jobs for Americans. They assure the public that American workers will be protected from unfair competition from countries that exploit labor and/or subsidize exports.

"The agreement is approved by a lobbyist controlled Congress.

The trade deficit grows. Our foreign debt worsens. More U.S. jobs are offshored — not just low-wage jobs but engineering, research, and other high-wage occupations that can be performed anywhere in the world with a computer. As the bargaining position of American workers weakens, wages stagnate and fall."

Our leaders have developed a defensive line that goes like this: "American workers are the world's most efficient. Therefore, opening up more of our Markets to global competition benefits them, so long as the playing field is level."

So what are the odds of achieving a level playing field?

Examination of the U.S. trade agreements recently signed with Korea, Columbia and Panama doesn't yield much hope.

The agreements rely on the individual governments to protect their workers from exploitation.

Unfortunately, exploiting cheap labor is these countries major competitive advantage.

-----

Tom Gibson is a retired marketing manager from the DuPont Company. Contact Tom at tcolemangibson@yahoo.com.

This column has been edited by the author. Representations of fact and opinions are solely those of the author.




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