create jobs now

Creating jobs in the American economy. Stop free trade. End NAFTA.
Decrease Imports and increase exports

“History shows that when great powers suffer

 financially, they cease to be great powers” 

Dr. Alan Greenspan

This website is about saving jobs in the United States; not in China, Mexico, India or any other country in the world.  I'm not interested in creating jobs and building economies in developing countries at the expense of losing jobs here. The premise is simple but "outside the box" of conventional, economic thinking: 

 IF YOU WANT TO SELL A PRODUCT IN THE UNITED

 STATES, THEN YOU SHOULD HAVE TO BUILD THE

 PRODUCT IN THE UNITED STATES.  

     Is this protectionism?  Protectionism is defined as "the system of imposing duties on imports into a country in order to protect domestic industries".  So Yes, and if this is the definition of protectionism, is protectionism a bad thing?  Or maybe this is "Isolationism."  Isolationism is difined as "A national policy of non-interaction with other nations (or groups)".  At this time in our country's history, it seems necessary and perhaps the only way to create real jobs and avoid an economic collapse.  How did we get here and what is the solution?  See our Free Trade New Updates Page for recent headlines about jobs leaving America.  Read on...

THE PROBLEM:

     To most economists the problem is obvious.  Since the inception of NAFTA (North American Free Trade Agreement) in 1994, the exporting of American-made products has declined while the importing of foreign-made products has increased.  NAFTA reduced or eliminated all tariffs, or taxes, on imported products.  The immediate effect of this was to reduce the cost of goods sold to American consumers.  This was seen as a good thing by our political leaders.

     (See our History page for a comprehensive history of the World Trade Organization and Most Favoured Nation status and how NAFTA has opened free trade to most countries of the world, not just Canada and Mexico).

     However, the other immediate effect of free trade was to begin eliminating American jobs at an alarming rate.  Large corporations (I will use General Electric, GE, as an example) realized they could manufacture goods in other countries, pay wages at ridiculously low rates, not have to comply with expensive U.S. environmental and safety regulations, avoid workman's compensation costs, and then import the products to the U.S. tariff free.

     Because of lower labor costs, etc., GE could manufacture a refrigerator in China at a fraction of the cost to manufacture the same refrigerator in the U.S.  Prior to NAFTA, import tariffs in this country would help offset the cost savings of overseas manufacturing.  When the tariffs were eliminated, there was no incentive left for GE to continue to manufacture it's refrigerator in the U.S.   In fact to compete, GE's only choice was to outsource manufacturing of most of it's products.

        Here is an actual scenario which illustrates the trend of outsourcing jobs and how companies that choose to stay viable, have no choice but to continue to outsource. 

     Four to five years ago GE approached Wal-Mart wanting to sell it’s light bulbs in Wal-Mart’s retail stores.  Wal-Mart said OK, but would only pay GE $.10 per bulb.  GE indicated that it cost them more than $.10 to produce each bulb.  Wal-Mart stated “we understand but if you want to sell bulbs to us, $.10 is what we will pay”.  Wal-Mart was already buying bulbs from Phillips Co. at $.10 per bulb.  The Phillips bulbs were manufactured in China.  The GE bulbs were manufactured in Cleveland, Ohio, USA.

     Within 18 months, GE had a plant in China producing light bulbs at a cost of about $.065 per bulb.  GE shut its Cleveland plant down, eliminating over 100 jobs and was able to sell millions of light bulbs to Wal-Mart.  

   GE now employs over 11,000 people in China and over 100,000 more in countries outside of the U.S.!  Per a GE executive, costs are approximated for illustration purposes.  see also GEreports.com

          This scenario is played out every day and affects nearly every product we use and buy. 

      More and more companies began building manufacturing plants overseas.  They also began closing plants here.  Closing plants resulted in loss of jobs.  This trend began with large U.S. companies but soon mid-size and even small manufactures found that they could only compete if they moved their manufacturing overseas. 

     Free trade has taken us to our current situation; near 17% real unemployment; extreme national debt; a growing welefare class which requires more and more government assistance; a reducing income tax base; an all-time high rate of foreclosures and bankruptcies.  If unchanged the collapse of the Dollar cannot be far away and with it the loss of our National sovereignty.

   According to the International Monetary Fund, China and other surplus economies (the largest exporters)  accumulated record reserves.  The United States and other deficit countries (the largest importers)  consumed more and financed their deficits by issuing more debt and equity.  

Trends for China, the largest surplus country, and the United States, the largest deficit country, illustrate the growing imbalances.   WorldBank.org

 

THE UGLY NUMBERS

Since entering the WTO in 2001, trade with China has resulted in the loss of 2.3 million jobs through 2007, according to the Economic Policy Institute. Those fortunate enough to retain their jobs witnessed their annual earnings decrease by roughly $1,400. American workers are put in direct competition with one another as more and more employers look to offshore production to nations with lower wage rates.

Jobs losses have affected every sector of the economy in both white and blue-collar occupations. Over that time we have lost:

  • 561,000 jobs in computer and electronic products
  • 153,000 jobs in apparel and accessories
  • 139,000 jobs in administrative support services
  • 128,000 jobs in professional, scientific and technical services

In all, those displaced workers lost an average of $8,146 annually – a total of $19.4 billion – as they moved into lower paying jobs.

$82 Billion in goods exported to China.

$334 Billion in goods imported from China.

2010, CNN

 

 

 

  TRADE DEFICIT

2010:

 $40.3

 BILLION

 

ACCOUNT BALANCES

 

China  +$390 Billion

Germany  +$250 Billion

Russian Federation  +$100 Billion

 

United States  -$675 Billion

 

US Foreign Assets and Liabilities Doubled from 2003 to 2007!

The World Bank

 

 

THE SOLUTION:

     We must require companies that want to sell products in this country to build the product in this county.  Essentially, close our borders to imports of any product than can be manufactured here.

     Again, I realize this is a radical departure from conventional thinking, that a free world market is good for the entire world.  But what is good for the rest of the world in not necesarily good for America.  Creating a free world market will only bring the U.S. down to the economic and standard-of-living levels of developing countries.  It will not bring their levels up to ours!

        Imagine the immediate impact of a law that required companies to build products in this country.  To start, companies would have to build new manufacturing plants, warehouses, distribution terminals and offices.  Well paying construction jobs would be abundant. There would be an immediate and significant reduction in the unemployment numbers.  This would also create jobs in real-estate, the manufacturing of building materials, and all other construction-related fields.

     Once the plants are built (companies would have 3 years to begin manufacturing) and manufacturing begins, unemployment would be reduced to near-zero.  These jobs would not be temporary, minimum wage jobs.  They would provide well paying, secure careers for Americans. 

     With unemployment at less than 2%, government subsidies would be almost nil.  Costs associated with supporting a welfare class (whose numbers would be reduced with the available new jobs) would be reduced to minimal numbers.  Income taxes collected would be enough that tax rates could be reduced across the board.  This would allow for more consumer spending and more corporate reinvesting.

     More and better jobs have a direct correlation to reducing crime and other negative societal problems which cause budget concerns at all levels of government.

        This is not a perfect solution and there will be problems.  But the problems will be far less than the ones existing now. 

 

ARGUMENTS AGAINST THIS THEORY:

1.  Why not just re-instate tariffs or pass a law requiring a balanced trade?

 1.   This would be a good start.  However, the goal is to create as many good jobs as possible and to maintain a high rate of employment.  Re-instating tariffs or requiring balanced trade would not guarantee a significant increase in manufacturing jobs.  Many companies would simply choose to pay the tariffs but continue to seek out cheaper and cheaper labor costs.  By continuing their manufacturing in other countries, they would avoid the regulations imposed on U.S. companies.  They would re-negotiate “deals” with corrupt dictatorships and governments.  (yes, I said "re-negotiate" meaning these deals already exist.  To think otherwise is to be mis-informed and/or naive.)   These deals would allow the companies to retain larger and larger profits in exchange for royalties paid to these governments.  The foreign governments will continue to allow these companies to exploit their citizens and operate without any labor, environmental or safety regulations.

     In addition, most American companies now have the large majority of their workforce and production sites over seas.  They would be more inclined to keep people and factories in place and pay the tariffs rather than rebuild and retrain here.  I don't want to give them the choice. 

     The bottom line is companies would find a way to remain overseas and continue to exploit foreign labor and governments and reap the huge profits that go with it. 

     Therefore, without enacting the "Build Here, Sell Here" policy, there would be no guarantee that jobs return to the states.

 

2.  Companies may not want to build in the U.S. and therefore some products would become unavailable to Americans.

2.   Seriously?  Even at the current economic conditions We are the largest and strongest product market on earth. Imagine if we were at less-than 2% unemployment!

     Companies around the world will be jumping over each other to purchase land or manufacturing plants in the U.S.  Do you really think BMW will choose not to sell cars here?  Do you really think Sony or Toshiba or Phillips will choose not to sell their products in the American market? 

     Getting the products you want will not be a problem.

 

3.   What about products that can only be made in other countries?

3.   I agree.  I would love to be able to smoke a Cuban cigar!  “Oh my god, they are a communist nation.  We can’t trade with them!!”

          Well guess what, China is a communist nation and they are considered a “Most Favoured Nation” (see the History page)  for trade purposes and therefore pay little or no tariff, and, therefore most American companies look to outsource jobs to China.   So let’s open the trade door to one of our closest neighbors.  Besides, you know the saying, “keep your friends close and your enemies closer”, Sun-tzu 

          Sorry, I got sidetracked.   The issue is French wine, Italian olive oil, Swiss chocolate, Brazilian coffee, South African diamonds, Canadian and Middle Eastern oil, etc.

          There would have to be exceptions for any product which could not be produced in the United States.  This would mostly include food products or products made with natural resources found only in other countries.

          A governing board would need to be established to consider and approve any foreign product wishing to be imported to this country.

          So, when can I get my Cuban cigar?

 

 4.   What if other countries do the same and shut out American companies?

 4.   Other countries may consider enacting a similar policy; ie: requiring companies to build products in their country in order to sell in that country.  We certainly couldn’t hold it against them.  However, the reality is that very few countries have the resources to pull this off.  The European Nation as a whole, the Soviet Union, and China may be able to sustain themselves. 

    Probably none of the European countries individually, Japan, or any African, South American or Central American country could afford to enact this policy.  They simply do not have the natural resources, the workforce, the knowledge or the infrastructure to survive without imports.

      In the same sense, no company is going to manufacture light bulbs in small, developing countries because those markets will not support the required corporate investment.  Therefore, if Gahna wants light bulbs, they will allow them to be imported; either from a GE plant in Cleveland or China; either way, GE profits. 

      The other, and most probable option is that many countries would outlaw imports from the U.S.  GE would then simply maintain their plants in China and Europe and perhaps build other plants as needed, and export their products from those locations to the rest of the world.  Let's face it, if another country can be a viable, profitable market for a GE refrigerator or light bulb, then GE would be more than willing to build and sell products in that country.

     American companies will continue to sell their products to desirable markets around the world.  They will either export from within the U.S., export from their already existing overseas plants or build in countries with profitable finacial markets. Regardless of the scenario, American companies will continue to find ways to sell products around the world.

     Some argue that small American companies who currently export their products will suffer if other countries outlaw US imports.  Possibly, but if current trends of outsourcing continue, our small companies won’t have to worry about loss of income from reduced exports, they won’t be in business because they can not compete with over seas manufacturers now.  And again, they can build plants in other countries if the market supports their product.  Many have been forced to do this already.  The ones that have not moved overseas are suffering greatly and will not survive the next 10 years of "free trade".

5.   The cost of products to Americans will be increased and therefore unaffordable.

5.   I believe there will be a slight increase in the cost of goods to American consumers.  Labor costs will clearly be higher than those in China or Taiwan.  US regulations on industry also increase the cost of manufacturing.  But again, GE and others are very resourceful when it comes to reducing manufacturing costs.  They understand that in order to survive and prosper, they must keep their products affordable for the average American consumer.  If GE wants to sell refrigerators then GE will find a way to make the refrigerators affordable.  What good are cheap products imported from China if we don't have jobs?  No job=no refrigerator.  Let's create jobs and pay a little more for American products.

       More importantly, near zero unemployment will mean more income taxes collected and less money spent on entitlement programs.   This will eventually create a budget surplus, allowing for tax cuts.  This means more disposable income for all Americans.   And although consumer costs may be slightly higher, with the majority of Americans gainfully employed, we will be able to afford a more expensive refrigerator.    

        Granted, this policy will not be without compromise and sacrifice on the part of both consumers and corporations.  With the increased cost of a refrigerator we may have to settle for the model without the water and ice on the outside of the door.  We may have to do without the 72" plasma with surround sound and flat screens in every room.

     Of course, we can always get higher limits on our credit cards and continue to buy lap tops and designer jeans for our 5 year olds.   GE will have to learn to live with less of a profit margin and top executives may not make the kind of unimaginable salaries they now enjoy.

        Will the cost of goods increase?  Probably, but for the most part they would not increase enough to become unaffordable to a re-energized consumer market. 

6. Let's allow the current trend to continue and eventually China's wages will meet ours, creating a balanced world economy.

 6.  This is clearly the hope of those who wish to continue with Free Trade.  However, this path has two problems.

        A.  I would agree that eventually wages in China will rise.  They were at $70.00 per month a few years ago and are now approaching $200.00 per month.  Wages in China are clearly rising, but at this pace, our current generation of workers (and probably the next two) will not live to see China’s wages come up to our level.   Unless, of course, our level of wages continue to reduce as well.   If that is the case, our wages will be equal to China’s in a much shorter time, but will be at a much lower level than what currently exits.  Neither scenario is good for American workers.

        B.  The second problem is that companies will eventually move from China to other, 3rd world, countries.   This is supported by an article in The American Interest.  (June 23,2010), which states in part,

       "Chinese wages are still very low by western standards and in most cases remain well under $200 per month, but it is already becoming economical to outsource to cheaper countries (or cheaper places in China) or replace those workers with sophisticated machines.    The ability of investors to shift from country to country in search of cheap labor to  exacerbate social and economic problems both in China and in the rest of the world.... As China moves up the economic food chain, countries like Vietnam and Bangladesh (to say nothing of the countries of sub-Saharan Africa who would like to taste more of Asia’s success) will have more opportunities to lure away industries that become less economic in China."  

     Hence, the problem of outsourcing continues for many generations.  Our economy suffers until we fall to a level of other nations. 

   

 

Is Free Trade Good for America?

Is Free Trade Good for America?

Imagine if Congress decided that a single state, such as California or Michigan, was in desperate need of jobs and investment and made dramatic changes to boost that state’s economy.

Imagine Congress did the following for only one American state:

  • Dropped the minimum wage to $3 per hour
  • Exempted them from child labor laws
  • Expanded the work week
  • Reduced health and work place safety laws
  • Banned unions
  • Reduced protection for the environment

On top of this, the companies residing in this state would still have free duty-free access to all of the others states. In other words, companies in this state could produce at a fraction of the cost of other states, yet would be able to sell directly to all other 49 states and compete at no additional cost.

What would you think of that? You and the other 49 states might agree that this was absolutely ridiculous!

But this is exactly what is happening right now with NAFTA (North American Free Trade Agreement). Not with California or Michigan, but with Mexico and Canada from the time NAFTA was passed. Why would any company manufacture in the U.S. now when it can produce next-door in Mexico with all these unfair advantages?

When NAFTA was passed, many people feared the worst. The results have indeed been disastrous:

  • The trade deficit with Mexico has exploded
  • Mexican wages remain nearly as low as they were prior to NAFTA and are still a small fraction of our average wages
  • Wealth and power has not filtered to the people. Most of Mexico is still controlled by less than 100 corporations in Mexico
  • Many of our other trading partners have relocated facilities to Mexico to circumvent other trade agreements with the us
  • American manufacturing has lost 3 Million jobs in the past 10 years as U.S. companies have also moved to Mexico for lower wages and lax regulations

On the basis of the one-sided disastrous results over the past 15 years, whoever advocated NAFTA seems to be either grossly negligent of their duty of representing their constituents or is simply working contrary to the best interest of this country.

http://economyincrisis.org/nafta

Not Just Manufacturing

FLOWER POWER

                Did you know that the country of Columbia, South America, commands about 70% of the US flower market? If you buy a bouquet in a supermarket, it probably came from Bogota.  Why? Because in 1991 the US government suspended import duties on Columbian flowers. The results were dramatic, though disastrous for US growers.

                                                                                  

In 1971 the US produced 1.2 billion blooms of the major flowers and imported only 100 million. By 2003, the trade balance had reversed; the United States imported two billion major blooms and grew only 200 million!

The World Bank calls this “a textbook story of how a market economy works”.  Tell that to the 100,000 American growers who lost their jobs in the 1990’s. Thank you Free Trade and thank you World Bank for encouraging this type of jobs outsourcing.      The Smithsonian

                              WHERE ARE THE JOBS?

In 1950, 50% of all jobs were classified as “unskilled” and available to those with high school diplomas or less.   Now more than 80% of jobs are skilled, requiring education and training beyond high school.   Nearly all workers will need to compete on the world stage.      Brookings Institution

 This makes no sense for US workers!

 

 

An Example of Media Spin and Misunderstanding

This appeared in The Kansas City Star July 17, 2010:

Trade Report is a Healthy Sign

The U.S. trade deficit was up again in May to about $42 billion. There are always those who worry when we buy more than we sell, but the latest report is a reflection of strength.

When imports are rising, it means the economy is growing, displaying the vitality needed to draw in goods and services from around the world.

Also, the May report showed exports actually rose a bit more than imports. International trade as a whole — exports plus imports — is booming. In May, it reached a 19-month high of $314 billion, more than 27 percent above the low set in April of last year.

And while we have a trade deficit with China, we’re running a surplus with that country in farm products — $4 billion for the first four months of 2010. A hefty chunk of that is in soybeans, an important crop in Missouri.

Given the worries these days that the economy may suffer another relapse, the most recent trade report is an encouraging sign of continued economic health.

____________________________________________________

The misunderstanding or spin is this:  “Americans are buying more imports therefore the economy is good.”

The reality is that Americans are buying more imports because there are less American-made products to purchase.  Less American-made products mean fewer jobs for Americans.   This is the real measure of our economy.

Here’s a simplistic example:  Americans purchase 1,000 refrigerators every month.  If 10% of all refrigerators are manufactured in the United States, then 900 refrigerators are imported but Americans are employed to make the 100 refrigerators made and purchased here.

If 100% of refrigerators are imported then purchases of imported goods are up, but now we have lost all the jobs associated with the manufacturing of refrigerators in the US.

  

This is the spin our media and government, both parties, put on the current economic downturn.  “Things must be better, we are buying more imports.”  No, things are worse because there are fewer American-made products.