Is free-trade crushing U.S. manufacturers?
Schmald Tool & Die, an auto parts manufacturer in Burton, Michigan is losing business to foreign competitors and struggling to stay competitive. Do you think free trade is hurting U.S. manufacturers? Do you think technological advancement can help American businesses compete with foreign manufacturers? Post your thoughts.
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DiggFree Trade is and will ruin the American economy. We are now facing or are actually in a recession, and remember that bank forclosures of unpaid mortgages of American homes was the first sign of the great depression and cannot be ignored. We are headed for an economic failure in magnitude that has never been seen before due to free trade and globalization since the great depression. America cannot be strong without a strong manufacturing base, and we have already lost that.
You have many good answers and many that are obviously listening to politicians. We do not have free trade in both directions. It is only free to countries that are selling to the USA.
True free trade should require open markets as the USA is opened, EPA and OSHA standards. They also should be required to float their currency in the international market without influencing it. I do speak with some knowledge on this subject since I worked as international project manager and have sit in on tariff talks being reduced if we relocated part of the assembly operations to China. Since we were in a free trade zone in Shanhai our tariffs for products being shipped from the USA or Mexico were 30% plus a 17% value added tax. Explain to me where the free trade is in that.
There is a simple analogie for doubters to understand the benefit from free trade. If Florida was in an economic downturn, would it really make sense for their government to start taxing everything that crossed their state borders? Would that really help the people of Florida? Or would it cut them off as a vital part of supply chains? Would it cause their small businesses harm? If we have economic problems, trade isn’t where we should place the blame. In fact, this article shows the possibilities that exist for the Schmald Tool and Die. First thing they should do is get on the phone with ExIm bank and find out what kind of facility they can set up to help them export overseas.
The problem is no one in our government represents the American worker. Free trade in a country with a minimum wage, workers comp, social security, health care, etc, compared to China where up to 300 million work for $2 per day, is not a level playing field. That is flat out lowering the standard of living in 1 country to that of another. Welcome to the one world order. Your government has been bought!!
“There is a disconnect between Corporate America and working class America.”
No there is not. Corporations hire Americans and give them opportunities to grow and prosper. Their products make our lives easier and simpler. Just think if companies like Microsoft, GE, Procter & Gamble, Kellogg’s, Ford, and many other American companies did not exist. We would be living in the stone ages like billions of other people. Corporations give us jobs that allow us to pay for goods and services and invest. When corporations make a lot of money, they reinvest that money in the form of job opportunities and stock gains. If we did not have corporations and the stock market, America would be no better off than the Darfur region of Sudan. The middle class needs to be thanking Corporate America and Wall Street for providing a means of survival and prosperity. I bet that the billions of people living in abject poverty would have no problem with Corporate America and Wall Street.
If you hate Corporate America and Wall Street so much, move to Africa or Asia or the Middle East where you do not have to worry about the “evils” of capitalism!
God Bless America.
Seriously, people?? Educate yourselves on how the world economy works before you fire off opinions based on a tremendous lack of knowledge. I suggest you read The World Is Flat by Thomas L. Friedman. It gives a good look into what is actually happening in the US and how we can adapt to preserve our economic leadership. Whether you believe it or not….YOU CANT PROTECT YOUR WAY TO PROSPERITY!!
There is a disconnect between Corporate America and working class America. The former, is creaming off max dollars from the everyone else. If you read a CNN report “Rising rates threaten the buyout boom” by Grace Wong of CNNMoney.com staff writer, you will immediately realise what I am talking about. In case you miss out, it was written, Stephen Schwarzmann, CEO of Blackstone Group took home about USD400 million in pay last year ! He did not need to manufacture or provide any services ! Figure that out !
So, now Corporate America is lobbying your Senate to pile pressure on the Chinese, to revalue the Yuan. Let me refer to another commentary by Alan Greenspan: China growth can’t go on forever. CNNMoney.com June 12 2007; in that report he dimissed fear of China dumping U.S Treasurys.
As working class America is a large consumer of goods, services and credit, by having China revalue its Yuan, in one simple swipe, America’s debts are discounted - you only need to repay 50 cents to the dollar. All those U.S Treasury bonds held by the Chinese are worthless and they have no choice but to give you more credit, just as the Japanese did in the 1970’s to 1980’s.
So, what is fair trade and free trade ?
America is a nation of mindless consumers.
We have been conditioned to buy things no matter the long term costs or consequences. I think the real problem is access to easy credit and access to cheap goods. If credit wasn’t so easy to get and cheap goods did not exist, the economy would be in better condition.
But Americans are not going to stop buying things. Since we are going to continue to spend every dime we get and borrow when we run out of money, companies should continue to manufacture goods for cheap and sell them to Americans at inflated prices. Americans’ demand is not going to stop. We will continue to buy until we die.
So if you people are wise, you would stop complaining. You would do the smart thing and exploit the weak and gluttoness consumer base here in America. You have to come up with a worthless product that people will buy with debt. This will enable your company to make money. You can even come up with a financing arm for your company. Once the money is made, the company can find ways to reduce costs such as outsourcing labor, buying cheaper raw materials, cutting administrative costs, and fancy accounting practices. The only area that should require some real spending is advertising and marketing. Once the word is out, suckers…I mean consumers will line up to buy your product.
Some may say that this goes against everything that America stands for. But this is far from true. Americans are nice people but they are also self-obsessed and superficial. Americans define themselves not only by who they are but what they buy. We show our power through the money that we have to spend. Since Americans’ behavior will not change, it is better for a person to find a way to sell products to people. There is always someone out there who wants to buy something. A person can only be a snakeoil salesman if there are snakeoil buyers.
The horse and bugy theory does not hold water. China is making practically every thing we consume… from shoes to computers from cars (coming soon) to airplanes. Do you consider Boeing as a horse and buggy company? We traded our future for short term gain. We lost more than industy and jobs, we lost also lost skills and experince and the brain trust that made America great… most importantantly we lost direction. Pretty soon we will be asking ” how do we make that horse and buggy”.
My company make machines that are used in many many industries, most of these industries have moved off shore. We have just begun to out source componants from China, and we will do well but I don’t feel good about it. It feels like cheating.
Our largest free trade “partner” is socialist, communist China. How do you reconcile your statement? Speaking of government intervention, “free trade” agreements are thousands of pages of government intervention. The World Trade Organization is an unelected governing body (another layer of government intervention) with 146 members, 145 whose sole purpose is free access to the world’s largest consumer market. (That’s us genius).
What we have is NOT free trade. It is a massive transfer of productive capacity,knowledge,technology, and wealth to the country with the cheapest labor. To the country that will subsidize industry, create tax advantages, and manipulate its currency to the advantege of the scumbag multinational corporations. This does not remotely resemble Adam Smith’s free trade theory.
We make good jets.
We make bad cars that no one wants.
We need to relax the laws so there are incentives,new ideas and new people getting into building cars.
Most US Manufacturing Companies small
companies of 50 or less employees. The small machine shop/tool and die shop purchases the latest technological equipment and provides
jobs with good wages to those employees. Yet is competing with overseas companies that have every
advantage from thir home country.
When Honeywell, Boeing, Ford, GM or
anyother company puts in plant in
Singapore. They don’t put old obsolete technolgy equipment in those
countries.
American workers can compete with anybody in the world, but our government should help keep the
playing field level.
This ‘free trade’ garbage being shoved down our throats is eroding our industrial base, racing our middle class to bottom and making us a bunch of economic drug addicts of countries that will not be friendly to us when push comes to shove. All for the benefit of the Wall Streeters and corporate campaign sponsors who are the ones that ‘really’ matter to our corrupt suits in DC. Hell NO! to ‘free trade’, it should be ‘FAIR trade’!
We operate a very modern cnc machining company, and there is no way we can compete with over seas companies like the ones in china. I have quoted parts we make for one dollar each, and make almost zero percent profit. The chineese company can make them for .15 cents. that is cheaper than i can buy the raw material for. how can we compete with that. http://www.cnc-machining.com
of course free trade is hurting our economy. Businesses send there production overseas to avoid labor and environmental standards here. Those jobs are replaced by lower paying jobs at wal mart and star bucks. The goods are then sold to us here at a slight discount, but most of the profit goes to the executives of the company. American manufacturers cannot compete with pennies on the dollar labor and no environmental standards. That is why we NEED tariffs to level the playing field in our favor before we have no manufacturing base, our trade defecit is so massive, and our wal mart jobs can no longer sustain us from our minimum credit payments due.
I think that there is a really important point that is being missed. Our economy relies on diversity in employment.
When large occupational sectors are eliminated, the employees don’t disappear. They move on to other fields. As the number of workers in a given field increases and saturation occurs, pay declines. When external forces such as unions try to prop up wages for a particular company, non-union companies appear and undercut their prices. (think Wal-Mart).
The pressures in our economy are to reduce wages, not increase them. If it is economical for Citigroup to offshore call centers (a non-high paying position) what exactly makes you think that the high-paying positions will not be outsourced?
The vacuum tube reference was amusing. The implication was that the vacuum tube manufacturers did not wish to embrace the superior technology. They did. But at least they had a place to go. They remained manufacturers.
As for the buggy builders, they lobbied congress against Preston Tucker, and sank his company. Ag corps lobby congress every year for subsidies, as do the energy and pharmaceutical industries as well, to great success.
Manufacturers in the US are bound by numerous laws regarding wages, working conditions, and environmental protection. Our competitors in Asia are not. We’re not looking for a handout, but we do expect that our elected representatives look out for us as well.
Would it be fair if the the government allowed China to set up shopping centers, beauty salons, fast food joints, etc, locally, but not expect them to operate under existing law? What do you suppose the outcome would be if some stores were required to pay minimum wage, while others were not? Would that be fair? Who do think would remain employed?
Given the current trend, without governmental intervention, there is just no way that this will end well for the US worker, at least until after the bottom is found.
We are the only ones that are not protecting our manufacturers. This country has been going downhill for 30 years? Where are the great results promised from free trade? Why such massive trade and budget deficits?Some people have made a lot of money off selling off our country. They are in denial for obvious reasons. Don’t call the Midwest the rust belt. It was given away. You can call this magazine the fantasy belt.
Free trade is hurting small US manufacturers. Technological advancement won’t help. The Chineese buy the same advanced equipment that the we in the US do. I manufacture plastic injection molds in the Chicago area. I probably will be out of business in the near future. We were a valued extension of our customers, no more. We cannot compete with an endless supply of cheap labor. I do beleive in free trade, but the trade must be with like partners. We are well on the way to the bottom. The government needs to put controls in place. All the large multi-national manufacturers must move off shore or to Mexico to satisfy their never ending profit growth at the expense of all Americans under the current WTO and NAFTA rules
Some people are pointing out that the destruction of old and inefficient industries is A-Ok. I agree with this to an extent, but the question in my mind is where is the growth?
If old American industries are dying, and new ones can’t be created in scale in the U.S. because of the sure knowledge that as soon as someone overseas decides to compete it will be wiped out by lower costs, then we have a systemic competitiveness issue.
And if this systemic competitiveness issue has at its root foreign mercantilism or the systematic oppression of the poor throughout the world, then something is fundamentally wrong with our economy that we ought not to leave to the blind hand of free trade. Free trade will “solve” those imbalances eventually, but perhaps not in a way beneficial to us.
If some jobs and industries were not destroyed we would still be using type writers and buggy whips. If we want a growing economy creating better things we must accept change. Trade allows increase production of goods and services because of competition, economies of scale, and specialization. Increase in trade causes both creation and destruction of jobs, but results in more output, which is what you are working for right?
Several years back when Asia’s economies had a big downturn the South Korean government slapped an excessive tax on big imported American cars such as Buick. All there car’s sizes were conveniently below these so did not receive the penalty. Now that Hyundai has the Azera and the Koreans are going after Lexux, I wonder if our American made vehicles are still excluded.
Thanks for all the (mostly) great comments on my post about how free trade creates new wealth. I would like to point out that I don’t base my understanding of economics off of Wikipedia entries, but used that as an easy link for people looking for an explanation of what I was talking about.
Next. If you take your $5 and buy other goods, that’s fine too, because you’re stimulating the economy.
Also, this comment was very insightful without the author realizing it: “Free trade has destroyed industry after industry in the USA.” Yes that is correct and that is why America is great. Let me ask you a question: do you think it would have made sense for horse and buggy builders to lobby congress for protection against automobile makers back in the 1900s? Does anyone think that it would make sense for vacuum tube workers to have lobbied to tax transistors? So why then would we want to lobby congress to tax a cheaper way to obtain goods and services.
Look, reading an X-ray correctly is an important job, but its freeing up your doctor in the US to learn and develop new surgical techniques and invent cures. Yes, other nations will end up using this outsourcing to bootstrap itself toward more important tasks, and that’s fine. The extra money they have will find its way to the USA in the form of investments, purchases, tourism, you name it. It’s important to remember that money isn’t based on a gold standard, so it’s not a zero sum game.
Tariffs and currency manipulation does suck, and isn’t right, but you can’t fight foolishness with foolishness.
i’m old, and i have seen with my own eyes the difference in the last 70 years, we had steel mills an auto industry, a farming sector, a father who alone could support a family, now it takes the whole family to flop hamburgs to keep your nose above water and still not have yesterday’s standard of living, so a service economy is not the answer.
Adam Smith was noted for equating wealth to production from the land, be it agriculture or manufacturing.
We need only to contrast the rise in Chinese wealth (over 1.2 trillion is US securities) and the decline in US Wealth (over 8.8 trillion in debt).
Just because you have alot of things doesn’t mean you have a positive net worth.
laurie from schmald tool and die, we are screwed. If you have put more money in your company to support it than you have lost your mind. In short do like the rest of us and sell while you still can, if you can. I lost over 200,000.00 to a automotive company in on year. what a way to make a living.
Well Dale China has, despite some recent political window dressing, pegged its currency. That isn’t free trade. Most of the retail sector is built on China’s peg and we all know what happened to Wal-Mart recently. Once import prices start to rise, there isn’t any pricing power in the economy to pass those costs on. Why? Because wages are stagnant
Because China uses its surplus to fund the ridiculous amount of consumer and govt debt we have in the markets, interest rates remain low and stocks high.
That’s great for Wall Street but in the long run its not much good for anyone.
The peg is a tariff on US imports
The post at 719 by ed from MA was 100% correct. I am amused by some that state “if we get it cheaper offshore we save money that can be invested in usa” etc. I have yet to see that happen..We are working our way into a position where we are dependent on the world for all. I also can see most NEVER worked in MFG as you loose the mfg talent/experience and it is not a “Hey guys lets rent a barn and start a mfg plant” movie.. We are seeing a drop in real wages and real worth…and living off an increased debt.. and if you want to compete with third world or artfully “valued” currency…be careful for what you wish.. There is ONE simple solution to the “Free trade issue”.. make it a reciprocal “free trade”, we will use their trade laws, inspections, tariffs and such.. to the letter for imports. Now corp usa would freak..but citizen usa might benefit.. todays “forecasts or profits” are not only absurd in values..but destructive to the nation. Get real about “competing with China” WE CANNOT while they mess about with value on yuan.. simple as that..One giant area we could lead world is alternate and new energy.. but the greed will not allow any investments that cannot turn a profit by next quarter. HAS ANYONE SEEN A REAL 5-10 year business plan being done, much less followed in usa.. any CEO that tried such would be pillared.. Want to see the current reality of economics of usa.. read details of how the Robber Barons did their deeds from about 1850 to 1910 or so..and some believe they were the seeds of the great depression. A careful read of those crooks and their corrupted political buds is like a read of what is going on in usa now..sans some adjustment for technology.. the truth.. the Robbers are back..and same ole quick shuffles, corrupted gov, inflated useless paper and gutting of usa going on now as then…very scary stuff then and now.. or as one friend said…the Robber Barons working with Picken’s raiders on steroids.. describes us now..only this time the Barons are international and would sell out usa in a second..and are.
How long can we continue like this before every intelligent person in this country has been dummed down to working a retail job and the only innovation exists in productivity achievements. This country didn’t achieve greatness by selling clothes and flipping burgers. We claim to stress math and science in schools, but what are they going to do with that knowledge? Become accountants? Is that what we will be, burger flippers and bankers and teachers. Sounds like a stagnant economy to me destined for collapse. Just wait until we are no longer the number one superpower and we have to fight for ourselves and our freedom. Unfortunately we won’t know what to do when that time comes except make burgers and count the bribe money we pay out to protect ourselves.
It’s much simplier, Corperate salaries
and just how much where those salaries last year ?
What is the cost of living for the people ( known as middle class ) that make those un-believable salaries possible for those CEO’s, or sports players ( don’t forget excessive retirements packages). “O” ya who are the people that spend the money to make our country spin ( you would think it’s the CEO’s since they are paid the most— Wrong ) Yes the middle class, but they get less money to do so. so whats wrong with the world view.
Providing more opportunities for advancing technological skills for workers will go a long way toward making free trade equitable, but in my opinion there is other regulation that is necessary.
In my position as a trainer for computer-aided drafting, I meet workers from the manufacturing and building industries — mostly small business. They are paying to upgrade their skills for a better job. Some of them have jobs now. Some of their employers pay their way. Many are unemployed and paying for the training out of their own pockets. The state that I’m in has a program that reimburses companies to train employees to advance their technological skills.
With unregulated free trade, these people are competing against individuals working in the world market in which cost of living, wages, benefits, and training are all different. Corporations may pick and choose the cheapest labor in the best situation for their bottom line.
I have read of companies in India, for example, that pay to train all new hirelings who then work for probation wages for X months when the company then cuts the least productive trainees. Those that remain hired probably do not get health insurance or retirement packages. They are required to work as many hours as the company wants them to. If they get sick, someone else will take their job.
The global economy will suffer until some mechanism occurs that requires humane working conditions equalized worldwide. Corporations can do nothing but take advantage of the situation in order to use people up competing with each other, selling services and products to consumers based only on the required stockholder dividend and share value.
Henry Ford’s genius was to not only mass produce autos, but to envision his workers as wealthy enough to purchase them. We need to think like this on a global level.
One thing no one has mentioned is how US tax laws favor off shoring by multinationals. The IRS can’t possibly keep up with the multinationals and investigate all the ‘transfer pricing’ fraud.
How it works is this: A company off shores your white collar job to their Indian subsidiary. The 2 or 3 Indians that replace you are paid say a total of 15,000 in actual wages and other costs. But, the Indian subsidiary charges the US parent company 90% of your old salary, say, 75,000. So the Indian subsidiary has a 60,000 profit and the US company a 75,000 write off against US taxes. Then, every few years Congress will pass an ‘ offshore profit repatriation ammnesty’ where the US parent can finally move some of that cash back to the US without paying taxes if the money hasn’t simply been spent on a stock buyback already.
About 25% of the trade deficit is oil imports. Drive less and ask for a plug in electric car or plug in hybrid.
Yes unfair “free” trade laws are written for the benefit of the corporate few, at the expense of the American people. Get out and VOTE and be active in our democracy!!
What’s so fair about competing with manufacturers who don’t have the expenses of keeping their workers safe? “Made in the USA” in clothing doesn’t mean “Not made with slave labor” thanks to Tom Delay and the Marianas Islands. All you right to lifers, you ought to know that the Marianas workers are known to be forced to have abortions. “Made in the US” doesn’t mean squat as far as decent conditions. And when I make $5.35 an hour or whatever minimum wage is these days (no, I don’t make more, am in fact unemployed), you bet I’m going to buy the best quality car I can, and I know that ain’t a GM car!
I support free trade as freedom to make decisions without government interference. The alternative is a society where we have lower quality products at higher prices compared to societies that embrace free trade and this has negative carry-through effects. Sorry, but America does not make the best products, even ignoring cost, in every category. Compare our cheese to cheese from the Netherlands, for example. I’ll take the Gouda over the Kraft singles….
Also, I don’t see the mass unemployment people are talking about. Seems to me that Germany (with a trade surplus) has a much higher unemployment rate than the US does. I live in Wyoming, where there is a labor shortage. Need a job- move to Wyoming….
Every household wants a yacht, Two suburban SUV’s. Americans are not satisfied. The big paycheck! That is what is hurting manufacturing. Recommend that America Socialize so we don’t have disparity between rich and poor.
Two wise men, long ago, said a great deal about free trade. Their words are worth consideration today.
“The bourgeoisie [...] has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom — Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.” Karl Marx, _The Communist Manifesto_
“Adam Smith’s free trade has been pushed to the insane conclusions of the Malthusian theory of population and has produced nothing but a new, more civilised form of the old monopoly system.” Frederick Engels,
“Letters from London” Schweizerischer Republikaner_ May 16, 1843
“By Free Trade they mean the unfettered movement of capital, freed from all political, national and religious shackles. [...] There are, in short, not to be tolerated any political or social restrictions, regulations or monopolies, unless they proceed from “the eternal laws of political economy,” that is, from the conditions under which Capital produces and distributes.” Karl Marx “Free Trade and The Chartists” _New-York Daily Tribune_, August 25 1852.
Free trade has destroyed industry after industry in the USA. As pointed out by others free trade is not fair trade. Additionally, only international corporations live in a global environment, everyone else, everywere lives in a local economy.
Finally, Brian lives in an imaginary world. Historically people buy the $5.00 tee shirt and then spend another $5.00 on other products. Then they charge, spending money they don’t have yet.
I dont think free trade is as much of a problem. The problem is the US citizens dedication to this country. Sure you might be able to buy a foreighn t shirt for $5.00 or an American shirt for $10.00 you will pick the the cheaper shirt and probably will not put that $5.00 in the bank, you will instead buy two $5.00 shirts. The trade defecit is rediculous. We are putting so much money into other countries they will eventually own this country.
America is consuming country we like our stuff. But if we dont support our american manufactures how will we be able to continue to consume? I belive the Unions also have a big role in our ability to compeit. It protects alot of dead weight employees. I belive in the right to work. Work for your money or get replaced.
Last the American Auto workers need to sell AMERICAN cars. I think they are loosing market share because of loyalty issues not because of its products. A american care should be made in America not shipped back on a boat and assebled in America. just my 2 cents
High Productivity: That was the buzzword in economist-speak that allowed the massive money creation of the ’90s and ‘00s. It makes you feel kind of good doesn’t it? American workers are the most productive on the planet. Well pass the apple pie and give me a second job. I don’t know about you but I’ve never turned around to see Alan Greenspan behind me with a stopwatch, counting my keystrokes and then comparing that to my keystrokes of weeks past. No, what economists observe is money invested to produce a product or service compared to the money that a product or service could demand. For simplicity’s sake consider that you own a flashlight factory in the US, all parts and components are produced and assembled here. Then you start to buy the light bulbs from an inexpensive Chinese producer and fire your domestic workers at the light bulb assembly line. According to the way productivity is measured, the remaining workers are more productive, because the cost to produce a flashlight went down while the price stayed the same. Presto! A productivity miracle. More at http://fromthesnowbank.mysite.com/
Brian,
Nice analogy - however, how do you explain, the USA is now a debtor nation, not a very pretty situation. Well, the American Banks - they are taking deposits domestically, making money from off-shore accounts and moving these funds all over, including non-US deposits - not necessarily lending to US companies only. In fact, it does not pay to do corporate lending these days - better returns from all those escoteric deals in M&A, Off shore syndication et.el…..in the end, USA loses out, the multiplier effect you mentioned is not exclusive to the US.
The captains of industry along with our crooked politicians couldn’t care less what happens to the living standards of the average America – the group that traditionally fought its wars and build this country with his sweat. Now a harmful parasite called ‘free trade’, a euphemism for a feeding frenzy on cheap labor and raw materials, is touted as the savior of America. Parasites sap strength from their hosts and sometimes kill it.
‘Free trade’ is anything is anything but free. It was bought and paid for by corporate America. Remember the adage, “Those who cry loudest for war are usually making the greatest profits.” Perhaps we can rephrase this, “Those who cry loudest for ‘free trade’ are usually reaping the greatest profits.”
There are two policies that the US government must enact if we are to maintain any economic vitality in the USA.
1) Enact an explicit policy to drive the trade deficit to zero (allowed by WTO rules)
2) Rewrite tax policy to reward US companies that invest in domestic plant and personnel, and punish corporations that offshore same.
Either policy alone is not sufficient. Both must be enacted in tandem. Then and only then will we see economic recovery in the USA. If you are a CEO, this will displease you, but the rest of us need this kind of attention paid to our futures.
A recent post regarding the impact of the monetary multiplier effect makes perfect sense if American business creates more jobs in the US based on increases in M2 and M3 money supply…
Where it unfortunately falls flat is that mainstream business is currently outsourcing as many jobs as possible to India and China (including the R&D type of jobs the writer infers would create new opportunities in America). The number of unemployed in the US is probably between 13 to 16 million (includes those reported in the stats and those that have fallen ‘out’ of the reporting system). The number of underemployed individuals is a separate story all together…
And while the writer is also correct that lower tech jobs such as textile industries, etc., have moved to other shores, the writer chooses to ignores the level of “high tech” jobs that have also moved (both manufacturing and service sector) offshore… For example, computer components, chip manufacturing, software development, robotics manufacturing, heavy equip manufacturing, aircraft engine manufacturing, etc, the list goes on and on. It’s getting so bad that the CIA and Pentagon have drafted white papers noting the potential security risks to the country for sourcing constraints of required materials to maintain proper armed service defensive readiness. Also – the next time one has a series of standardized health tests run, see if you can confirm the location of the cardiologist reviewing your EKG, or the location of the radiologist reviewing your films – there’s a 15 – 25% chance they are based in India… If you want to see a real multiplier effect, do the math showing those 16 million unemployed Americans in the mix earning an income stream… Pops about $1.6 trillion into the US economy… Not bad
Lastly, the writer’s argument might also work if the US presented a superior, positive savings rate, but we all follow the news and know the U.S. savings rate is abysmal… Possibly before chastising those participating in the blog and relegating them to the status of “DUMB”, our writer might want to gain a better perspective and understanding of economics outside the realm of ‘ Wikipedia ‘ ! Efficient use of global capital requires unfettered market dynamics… I think that most people participating in the blog realize that major trading partners are actively directing their markets, and controlling capital optimization to their benefit via currency manipulation, trade barriers, etc. As I read the articles, all I see are folks asking to play the same game the trading partners are already following, and get us back to parity… That doesn’t sound so dumb to me…
Wow. I read every comment and I have to say this is one of the DUMBEST groups of people I have ever come across. The USA functions as a service economy, that is true, but this has no bearing on our success as a nation. For this website to run an article where a person actually says “hoping for trade restrictions that would give her business a lift” is really bad.
A simple example as to why free trade is excellent is best. Let us presume you need a plain white t-shirt, and there are two on the rack. One from Chinese T-shirt co. and one from American T-shirt co. Both shirts use the same machine to make them, and the same material. The Chinese shirt is $5 the American one, $10.
You only have 10 dollars, so you decide to spend $5 on a shirt, and SAVE the other five dollars. Excellent choice. You put that $5 in an AMERICAN bank, which makes loans to AMERICAN companies, and now you have effectively created much more than five dollars, because banks can lend much more than $5, because of a nice thing called the “multiplier effect.”
You have a shirt, and America has new capital for growth. You are a patriot already.
The model is simple mathematically, and you may read about it on wikipedia if you search “multiplier effect.”
1/(1-.50) where .50 = % saved
1/(1/2) = 2 or $5 x 2 = $10
So now, you have saved $5 and made $10 available to be reinvested into the economy because of the multiplier.
The money that you saved by buying a low tech (which make up most of the outsourced goods) shirt from China, enables our scientists and engineers to start companies that will employ all the people who used to work at the american t-shirt factory, as well as new workers, because there is more money from the multiplier.
So why not just buy the 10$ american shirt you’d ask. Well because then our capital (human, machine, and money) would not be at its highest and best use, which is its best rate of return. We don’t want to make t-shirts for $10 when we can buy them for $5 and use the extra money to invest in high tech companies.
This question has been debated over and over… Of course free trade can have its benefits but, Free Trade Is not FAIR trade… when unbalances occur problems arise… When trade is beneficial is when Countries specialize in certain areas… But I dont think All Manufacturers Feel Like Moving to be successful… economists call this comparitive advantage. I see our country losing its ability to manufacture products which will really limit growth.
Manufacturing productivity is at an all time high in the US thanks to efficiency gains. Our output has increased while total manufacturing employement has decreased. Looks like the person in this story should have more heavily invested in their business versus looking for the govt. to bail them out. If they can’t compete they should go under.
Yes!
Free trade as known today is a farce. We should get rid of NAFTA, return to bilateral trade agreements, remove all tax benefits corporatios receive from outsourcing their manufacturing facilities and/or service functions; and we should provide tax incentives to companies that keep their manufacturing plants and services in the United States. None of the above constitute protectionism—those benefiting from outsourcing are quick to accuse anyone advocating the above of “protectionism”. Such an accusation is total nonsense. As a look back in history would show, protectionism involved high tarrifs on imports and other import/export impediments. The things above that I and many more knowledgable than I advocate are not “protectionism” except in the totally different sense that they help PROTECT the United States from the outsourcing debacle.
Is “free-trade” crushing manufacturing in the US?
DUH! Old news. This has been happening since the 80s!
You can’t continue to buy that $100.00 TV from China and expect to make the same wages as before. Americans and our government need to take a stand. Why are we supporing a communist country? What happens when they gain all of our technology and no longer need the US.
High tech will not help working Americans, but no one cares about working Americans.
Free Trade is not killing US manufacturers, our government is Taxes, EPA, OSHA, and all other federally mandated requirements, combined with the “Minimum Wage” prevents manufactures from competing against other countries cheap labor and conditions.
Nothing is free. The more we outsource manufacturing activities, the need for American workers declines. If I loss my job, then I do not have money to buy goods. This results in more jobs being lost. When will the government and the people start to understand?
This off-shoring argument makes no sense. We are in a life and death struggle with our enemies but no seems to accept the fact that no manufacturing capacity destroys any hope for our security as a nation. We can not survive as service economy–quickly those jobs, too float overseas.
The only thing good about free trade is it works great for any place beyond our boarders. Between free trade, outsourcing and the mass corporate exit to China, pretty much leaves the American economy DOA. We can not servive as a nation on service oriented jobs only. It’s time to wake up and either tax American business’ that have exited to China for a cheaper labor market, claiming competition required it or force them to bring it back to our shores somehow. The same should happen to the companies that outsource. Unfortunately, we’ll never see any of that happen. To many politicians are getting their wallets filled by coporate.
It is almost impossible for any manufacturer to compete against companies located in countries where there are low wages,low taxes, no workman’s comp, no safety regulations, no enviromental regulations and no liability concerns. Add to this the quarterly reporting pressure that publically traded companies face and it is amazing that anything is manufactured in this country. The neocon politicians and economists do not recognize the importance of a nuts and bolts manufacturing sector. Without people that can do the basics of production, the high tech business that they covet will soon leave.
Free trade is unfair trade. It is desamating our ability to supply our own needs.It is imposable to compete with labor cost of $10 dollars a day as in China. We are digging our own economic grave and the Chinese are about to push us in!! This is CRITICAL !!!
There is no question that the U.S. is deindustrializing which is reflected in the diminishing percentage manufacturing makes up of total GDP. As large retailers such as Walmart insist and encourage suppliers to source products from China and elsewhere, you will have the pace of deindustrialization coupled with a continuing decline in the U.S. standard of living. No modern nation can survive with principally a service economy that can only produce services without production of goods.
Germany as an example with 85 million people out export the U.S. with 300 million people in part because of German Government and EU incentives to keep industry at home as much as economically possible. China on the other hand through state agencies, subsidizes industries that are not economically viable thereby undercutting the domestic markets of the countries they export to in violation of WTO rules that are regularly violated. Couple that to the average industrial wage in China of $60 per month and the question becomes how can an industrialized nation compete on a level playing field with this. America is presiding over our own demise by not providing proper credit facilities to our smaller exporters of manufactured goods nor do we support the domestic development and protection of the manufacturing sector comprised of so many of these small operators trying to make the American Dream come true.
Free trade is not the answer unless there is a level playing field and the nations that export to us are held to the requirement of the same environmental, monetary, social benefit expense and wage standards that we must operate by. Otherwise, by crisis we will have to begin imposing tariffs and other restrictions on exports to protect what is left of our deteriorating industrial a capacity.
Yes, free trade crushes small & medium enterprises in developed economies, not specific to only US manufacturers. The proponents of free trade undoubtly are global businesses as their only strategic interest is maximising profits. Foreign competitors need to tool up with state of the art technology - procured from the developed economies. Put in perspective - how many pieces of T-shirts and shoes do PRC companies need to sell in exchange for a B777 ?
The sad thing the ordinary Joe has been tormented with, is the need to yield higher productivity, lower labour rates, lower social security, etc… However, consider this - CEOs and senior management get paid to lose money for strategic mistakes that cost much more and a windfall in earnings should by some shear luck, makes some “book” profits. Just look at those Private equity buyouts - they are in $billions - where on earth can they justify these valuations, if not for the fact that these aren’t really their money. The small & medium enterprises shall inadvertently have to pay for these fiascos in time to come as they best prepared for the “buy” foreign solutions.
It is not free trade that is hurting the US economy, but unfair trade exemplified by the behavior (ie. currency manipulation) of the Chinese government and the American governments willingness to look the other way. The other issue is the tax credits our companies receive to offshore jobs. The impact of this is beginning to take its toll. Again, our government looks the other way while Americans are suffering.
Ever wonder why our free trade polices have produced rising, enormous trade deficits for the past 30 years, especially with China? US jobs are being off-shored to China and India for labor rate advantages. Wonder why given all this that everything in the US doesn’t cost the US consumer about 10% of what we pay for it today? Why is the standard of living for a 35 year old head of household family of 3 now behind the standard of living that their parents were able to obtain?
The Chinese and India centralized government directed trade policies are NOT aimed to develop ‘fair’ trade with their global partners, but their policies are very similar to the philosophy of becoming a category killer via subsidized government funding. The only difference is their aim is to become an industry killer, one industry at a time…
Why can’t Moncrieff break into the Japanese market (her labor rates are less than Japanese labor rates, and she’s using state of the art tooling / automation)? Or why can’t she break into the China market (automated tooling / production will always be less expensive than any labor cost advantage found in Chine other than slave labor)? The reason is there are barriers to market entry created by current trade polices. Her clients want her to offshore? Why? Better quality (like the lead laden children toys, X-mas incidentals, and anti-freeze laden toothpaste and food products we get from China)?
Global trading is a zero sum game… If you’re going to raise the boats of the Chinese and India populations, someone has to pay, and it appears it’s the US Citizen… It’s time for the US Gov (read Congress) to wake up and start acting in the interests of the country (citizens) instead of special multi-national business interest groups… Want to solve the trade issues and cure the deficit at the same time? Maybe it’s time to create the “Directed Access to US Consumer Market Tax“ , and the directed tax rate is based on reciprocal fair / balanced trade arrangements with our trading partners… All proceeds get used only to pay down the US deficit… Congress won’t act? Maybe we need to amend the Constitution allowing us to vote OUT incumbents, and hold special replacement run off elections? Moncrieff is correct in wanting help from the Fed Gov… Unfortunately, under this administration, she won’t get it…
On established technologies the US has no chance. I am not a US National, and I am certainly ammused by the lack of understanding by US Leadership about the fact that there is smart people around the world that when being thought a skill they are as good or better than the American worker…
To innovate the US need to manufacture things, as simpler tasks are outsourced more of the innovation will be created where things are made…
Sorry, brain power is not a US exclusive…
Technological advances won’t help because they can be easily replicated overseas where they will become even more effective with low labor cost. My solution: tax only offshore producers, remove all taxes, SS and health care expenses from local manufacturers.
This story is slanted toward Schmald. All we heard from her is how she can’t compete and she wants the government to protect her from foreign competition. Did we get the other side of the story in this 200 word “report”? Do we know how efficiently Schmald runs her business relative to even her domestic competitors? Just because Schmald WANTS to run a manufacturing business doesn’t means she SHOULD run a US manufacturing business. Maybe there are really good, clear-eyed reasons why her small business (eg, it lacks economies of scale - important in manufacturing) can’t compete? We don’t know this from the story. We just know Schmald is struggling and wants to block her competitors, not with a better product but gov’t regulation.
The United States has been a world trading nation since it’s inception.It was built without Free Trade and we prospered. With Free Trade we are losing one of the sources of our power and prosperity. I just hope we can find an entity in this country that will look out for the people of the USA.
Free Trade is a joke. The U.S. needs to leave the WTO and cancel NAFTA. We need to go back to single country trade agreements: “We will buy so much from you and you will buy so much from us.”
We can use our huge market as leverage over countries. Something we have been so loathe to do. Imaging being able to tell China to get its act together on human rights, toxic pollution, and spying on the U.S., or guess what? You can’t sell to the U.S.A anymore. Our Ace card is our market, yet this greatest negotiaton tool cannot be used so long as we are in the WTO. NAFTA should be cancelled immediately. Mexico has flooded our nation with its unwanted. We need to punish Mexico and save U.S. jobs at the same time. Free trade is poison. It is a race to the bottom born of cheap labor and cheap regulatons. A total crime against the American worker and the American based business. With an 800 billion dollar trade deficit any counter argument to my claims have no standing. In 1974 we had a trade surplus. The last time we had a trade surplus with Japan was in April, 1976. Our structural trade deficits began with Eurpoe around 1983. The global currency trading regime was supposed to create balance. This has been a farce. We now have structural inbalances with Japan at 100 billion per year and China at 250 billion per year.
If we do not get our trade deficit under control America will slip into economic hell. Trade deficits are the silent killer of the American way of life.
I believe in a diversified portfolio myself, why does not the Federal Government. Do not disregard what got us hear especially when our immigrant numbers are growing rapidly along with the number of unskilled labor. There needs to be more un-skilled labor besides fast food cooks, crop pickers, etc…. Lazy people do not come to America we should capitalize.
In theory, free trade makes sense. However, what we have is not free trade. To sell cars in China, a US manufacturer must partner with a select domestic company and promise to transfer valuable knowledge to the new partner. Japan did this and both China and Japan manipulate their currencies. The US government only cares about this country’s military might and doesn’t care that our country’s manufacturing base is disappearing. We our now at the point where we need them to finance our wars and our consumer driven economy and they need us to buy their stuff.
Restricting trade to help the common good is socialism. This woman clearly does not understand that our country was founded on capitalism. If your business can not cut it… learn to type. Government intervention is the last thing we need in free markets… wait is this article a joke?
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There is one piece of this puzzle that no one seems to mention…I worked as a Sr. Commodity Manager for a Fortune 100 company that was intent on moving suppliers overseas at an ever increasing rate. I was ranked at the top of my department and I left to start a consulting company to help small to mid-sized manufacturers change their processes to be more efficient, as well as utilize the vast wealth of technology we have available to us (Oracle, SAP, other ERP systems). I called on almost every small to mid-sized manufacturer in my city. When I asked about their operating systems, most did not have one (hey folks, MRP has been around since the 1970’s, this is not new technology!). They did not have skilled supply chain/operations employees, or supplier contracts in force, many had shop floors that were chaotic, and yet they did not want to hire anyone to help them get better! They didn’t need to hire me, but they sure as heck need to hire someone to help them. They don’t know what they don’t know!
I have been in factories all over the world, we are not just competing with lower salaries, we are competing with sometimes state of the art factories. I have managed to stay in business for 6 years as a consultant, but I am often hired by the bigger companies to manage projects for them (as in transition projects to off-shore suppliers) and supplier contracts (as in start reducing your costs Supplier A or we will be moving your business off-shore), not what I want to do but we all need to pay the bills. Not all companies are totally behind the times, but many, many companies are and not doing anything about it themselves. God helps those who help themselves…to wait for the government to come in and fix this for us will be the kiss of death to American manufacturing. Not only will America not be able to afford their products, neither will the rest of the world! I will feel more sympathy for our American companies when I see that they have done everything in their power to get as competitive as possible. That means spending some money and making some huge changes in the way they run their organizations. I love Thomas Friedman’s stand, and I am with him 100% when he says Change or Die. If you are not willing to change, you will not be here anymore, and you don’t deserve to be. We have the best workforce in the world, but we feel entitled and have given up the passion behind why we do business. If you are a manufacturing company, and you do not have a WORKING ERP system, Lean Manufacturing principles, skilled supply chain and production operations employees, and either a partner or a sister division in Mexico, Asia, or the Eastern Block to give you a global footprint, you will die. These are hard words, but it is time hard times. There is no more time left. This means getting back in the game and being the absolute best we can be before we cry uncle and beg our government to step in.
Change or die. Get whatever help you need, but get the help. How you did business 20 years ago will not keep you in business tomorrow. We cannot subsidize your inefficiencies.
The World is Flat, and American Manufacturing is Falling off the Edge.