Saturday, June 4, 2011

80/20 Land of Plenty

The common political discussion over domestic production versus international competition tends to circle around the question of tariffs (or not) on imported merchandise.  The arguments against both sides tend to be true.

For example, suppose we placed a tariff of 25% on imported Chinese merchandise.  Lets assume for now that they can make the product for 25% less than they are selling it now...if so, then China can still control the market, and the price to the consumer would remain the same, but the government would extort itself into taking 25% of the action.

Not one job would be created.  Not one American company would receive an advantage.  Not one American would gain anything.

Now let's assume that China cannot produce the products for less than their current selling prices.  That would mean that the government would have succeeded in inflating the prices of all those Chinese products, so that the American consumer would have to pay 25% more for those products.

It may help some American companies and workers to be more competitive with foreign manufacturers, but at a huge cost to all consumers...and, there is no guarantee that American goods will remain competitive, unless the tariffs keep being raised higher and higher. 


Plus, the government would almost certainly have succeeded in setting off a trade war, resulting in higher tariffs on American-built products being sold abroad, and making an already difficult situation even more so.

In short, placing tariffs on imported products hurts American citizens and American companies.  But, if you allow completely free trade, then you are almost guaranteeing that American companies and workers will not be able to compete with the low labor costs and lack of regulations in other countries.

If the political argument is focused on tariffs, the American public loses, no matter who wins the argument.

Why not skip the argument on tariffs, and focus on the products that American companies can and should build?

Why not require the major institutions in America to use American owned and built products for at least 20% of what they build or sell?  Why not require construction projects or department stores or automobile manufacturers to use American owned and built products?

Allow 80% of the market to be open to foreign competition, but require large American businesses to make 20% of their purchases from domestically owned and built sources. 

I know this may strike you as an odd idea, but stop a minute and think about it.  The number one advantage is that it would provide jobs.  Numbers two and three, it would provide more jobs and yet more jobs.  Number four, it could revive heavy industries such as steel, which not only provide high-wage jobs, but can have national security implications.

It's hard to believe that the nation that was once known as the arsenal of democracy no longer has the capacity to provide the material to build the tanks and planes.  In addition to benefiting the steel industry, there would be tremendous opportunities in many fields;  electronics,  textiles, even such seemingly low-tech fields  as souvenirs, to name a few.  The opportunity for enterprise would be huge.

The first argument against such a program is that American companies cannot compete on price with the low price imports.  That is probably true, so there will be some price increases.  But, even if the American products cost twice as much as the imports, prices would not go up as much as that 25% tariff on imports would have imposed on the American people.

There may have to be an opt-out if  American companies are so expensive that it isn't economically feasible to use them, but 20% of the American market is a large enough segment that there would be many American companies battling against each other and keeping their prices competitive, even if they are somewhat more expensive than the imports.

Another objection to this program might be that it could lead to a trade war.  To counter that argument, we should be willing to accept the same 80% access limitation on our products in their markets.   We accept the same terms that we offer them.

It may be difficult to administer such a program, but the benefits far outweigh the difficulties.  

It's time that our government takes a stand to protect American workers and businesses.  It is time that we are willing to pay a little more to protect our own.  We can no longer afford to let our jobs and industries go overseas, leaving our people out of work and dependent.

It doesn't  matter whether the job is union or non-union.  It doesn't matter whether the industry is high-tech or low-tech.  What matters is our people are working in honest jobs, proud they are taking care of their families, independent in their lives...and, oh yes, paying taxes instead of receiving benefits.

Think about it.
   

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