Tuesday, October 11, 2011

The Role of Tariffs in the Civil War - Part 4

We conclude our series of posts on The Role of Tariffs in the Civil War by commenting on the current economic situation and the possible role of protective tariffs.

Do we need tariffs today?

My answer is a resounding Yes!

One of the greatest lies perpetrated on the American people is that we are operating on a level playing field as far as international trade.  Our leaders say we are exporting low skilled jobs so we can focus on high skilled positions for Americans.  I guess our public officials assume that we are stupid. 

The American educational system is not preparing our young people to compete for jobs with candidates from other countries.  Students in India, China, Japan and other countries are better equipped.  The Program for International Student Assessment (PISA) is a system of international assessments that measures 15-year-olds' performance in reading literacy, mathematics literacy, and science literacy every 3 years. On the 2009 PISA, U.S. 15-year-olds’ average score in reading literacy was 500, which was not measurably different from the OECD average of 493.   In mathematics literacy, U.S. 15-year-olds’ average score of 487 on the 2009 PISA was lower than the OECD average score of 496. The average mathematics literacy score in the United States was lower than the average score in 17 of the 33 other OECD countries.  In science literacy, the average score of 15-year-olds in the United States was not measurably different from the OECD average score. The U.S. average science literacy score was lower than the average score in 12 of the 33 other OECD countries.  The average scores for the US are 500 in reading, 487 in mathematics, and 502 in science.  Japan scores are 520, 546, and 538; Russia 459, 468, and 478; China 556, 600, and 575; and Singapore 526,562, and 541. 

The labor costs are, of course, much lower. The hourly compensation costs in manufacturing in 2009 were $33.53 for the US, $30.36 for Japan, $17.50 for Singapore, 14.20 for the Republic of Korea, and $7.76 for Taiwan. 

Taking these statistics at face value implies that companies can get higher skilled workers for lower pay in countries outside of the US.

If we include in these figures the added costs that US companies incur for government regulation, the level playing field tilts decidedly towards the Chinese and other non-US manufacturers.  We have regulations that protect the health and safety of workers, provide for equal hiring opportunities, guarantee a minimum wage, prohibit child and prison labor, protect the environment, and insure safe products.  Low cost foreign products are not produced under these constraints.  US corporations driven by the holy grail of shareholder value or return to investors, have little choice but to move operations to other countries.  US corporations unlike Chinese are not controlled by the government and are not an instrument of foreign policy.  Additionally, where government and industry are at loggerheads in the US, they work in concert in many parts of the world.  Foreign governments actually try to protect their growing industries much as the US did in the first half of the nineteenth (and perhaps the entire century).

Our politicians want us to wait until our foreign competitors enact legislation that protects workers, consumers, and the environment.  They don't want to upset foreign governments.  Waiting for China to enact legislation to level the playing field, is like waiting for the Dallas Cowboys to win a Supper Bowl.  It might happen, but don't write for game tickets this year.

What is needed is legislation to protect American workers and create a real level playing field.  Without it, our standard of living will continue to drop and the legacy to our children will be poverty.

I wrote to both major political parties today asking for their positions on tariffs.  I'll let you know if I receive an answer.  I did this three years ago on another issue facing the candidates and I'm still waiting for answers.  While waiting for answers, I found these "positions" on  2012 Presidential Candidates.

Romney advocates free trade with Columbia, Panama, and South Korea and sanctions on China for unfair trade practices.  The US should reach out to China and charter a course that is equivalent to a free economy and a free society. This goal should be at par with those of the US.

Perry is a firm believer in the power of the free market, and is convinced that excessive regulatory control stifles the ability of the private sector to grow.

Paul advocates free market but didn't specifically address tariffs and he believes that trade with China should not be tied to human rights. The US should reach out to China and charter a course that is equivalent to a free economy and a free society. This goal should be at par with those of the US.

On his 2009 visit to China Obama looked for concessions on climate, currency, trade and human rights but all he got was a bland statement promising no firm commitments without any mention of Internet censorship or Tibet.

No comments: