Fair Trade

by: Thomas Lee Abshier, ND
4/25/2004

Dear Thomas,

I have a great concern for the economic future of the United States. The source of all wealth is production. All other jobs service that production or service those who benefit from that production. The policies of our government have been forcing production out of this country with a double standard that is driving out industries and eliminating jobs. We will not have a strong economy unless we change those policies. The double standard I speak of is “Free Trade” on the one hand and “Reverse Tariffs” on the other hand. Many countries in the past have tried to use tariffs to protect their own industries against foreign competition. Because retaliatory tariffs and trade wars with other countries ended up hurting everyone, we in the United States have promoted free trade.

However, at the same time, the United States has imposed reverse tariffs on its own producers. A reverse tariff is one that imposes costs on producers who produce in this country and are not equally imposed on other countries. Reverse tariffs come in the form of ever-increasing minimum wage laws, Social Security, Medicare, Unemployment Insurance, Workers Compensation Insurance, OSHA, EPA, taxes, fees, bureaucratic red tape, and many other government regulations that significantly add to the cost of production. These costs make it impossible for American business to compete with foreign producers who have little to none of these liabilities. Add to that a justice system that encourages tort lawyer extortion and business has an impossible situation.

This double standard forces businesses to move out of this country or go out of business. It has happened to the textile industry (ever try to buy clothes made in America), the steel industry, home electronics, most of agriculture, and many other industries. The American people have adopted high standards for businesses and their products. If the American people really believe in those standards, they should not selectively impose them on just American producers and products. Any country should have the right to free trade with America when they have the same production standards that we do. Producers from countries with lower standards than ours should have a tariff equal to the cost we impose on our own producers until they have met our production standards. Only then is free trade fair trade. Here in Oregon, some people have argued that we don’t need production jobs, instead, we should leave production jobs to low wage foreign workers and we should concentrate on “High Tech”. Many local governments have been luring the High Tech industry here with tax exemptions. The result has been devastating for Oregon. The recent economic downturn has hurt High Tech industries especially hard. This has made our economy even more cyclical than when Agriculture, Fishing, and Timber were our main economic base. Oregon’s increased dependence on cyclical industries and our higher standards for our own producers, such as higher minimum wage requirements, give Oregon the highest unemployment rate in the nation. A look at Oregon is a look into the future of the United States if we don’t change our policy of Reverse Tariffs into one of a universal standard for all products sold in America.
Some fear no one will trade with us if we require others to meet our standards. Not true. Japan has higher standards than we do for wheat that they import from us, and we meet those standards. Our auto emission standards must be met by foreign auto manufacturers and it certainly hasn’t stopped them from exporting to us. Is it “right” to have unsafe working conditions or pollute the environment in other countries just so we don’t have to pay the cost of standards that we claim to believe in and require of our own producers? Should our Government condone and even encourage such practices in the name of “Free Trade”? It is time we made trade in this country both “free” and “fair” with universal standards for all products that the American Consumer buys. Then more production will stay in this country and we will have a strong, stable economy.

Thank you,
Sincerely,
Brian

4/25/2004 7:05 PM

Dear Brian,

Thank you for that very lucid and erudite analysis of the problem we currently face regarding our unemployment problem and its relationship to the Free Trade and Reverse Tariff double standard. I totally understand and agree with your assessment. You have exposed the heart of a problem of our own creation.

I would categorize this problem under the heading of “sequela associated with a country’s moral demise.” I believe it reflects the fact that we have lost our sense of fairness on a number of levels. We want a high-quality environment, and good working conditions for ourselves, but we don’t appear to have equal concern about the working conditions and environment of the less fortunate nameless faceless foreign masses. We want high-quality products at low prices, so our companies are forced to move offshore to produce those products in an environment of low wages and minimal “regulation overhead”. We then complain that we have no jobs. Truly, there is no one forcing the exodus of jobs; it occurs as a result of a multitude of unintentional unrelated decisions. We have fallen victim to shortsighted micro-management of other issues.

As a result of the export of our manufacturing base, we have a relatively small amount of desirable products which we can sell to the world and end up purchasing more from the world than we export. The result is a trade deficit, making us a debtor nation, with little productive capacity left to pay off our loans. Thus, we place ourselves at risk of experiencing being owned by those who have bought our debt. We could be owned by another economy if our debt appears in jeopardy of default.

I support your approach to solving the problem by instituting fairness on the playing field of international trade.

In addition to fair trade, we need to increase the productivity of the world. To this end, I have developed the concept of nation-building as a long term investment for holding the instruments that could finance the currently fictitious “Social Security Trust Fund.” In short, the concept involves establishing an infrastructure that could support industry into a poor nation, which would include the establishment of an alternative energy base, water from desalinization if needed, and ultimately a manufacturing base.

Our nation should continue toward establishing our own alternative energy generation and manufacturing base, which will eventually happen due to air quality emission regulations, or the market place dictating the need to change by price or political considerations. Stopping the use of oil will be difficult given our debt load to the Middle East; if we precipitously drop our consumption, they could retaliate by calling in our debt. Our current tendency is to manufacture nothing at home and contract out the work to emerging economies such as China. But, for the purposes of the nation-building project, we must install renewable energy generating capacity to the undeveloped nations of the world which have contracted with us for infrastructure development.

There are many elements which must be supplied to create a totally viable national infrastructure, including energy, transportation, communication, ports, water, sanitation, education, law, etc. As the infrastructure becomes more mature, private industry, financial markets, and entrepreneurship will do the work of bringing the nation up to full first world status. The character of that nation’s people is the most defining predictor of that nation’s success. This program is truly a loan that we expect will pay dividends based on future productivity it will generate. Debt should be used to increase productivity, not to finance lifestyle.

America has become accustomed to a lifestyle of excessive consumption. This is unfair since who supply our consumption produce without adequate compensation.

I believe the idle workforce of Oregon would be a perfect resource to meet the labor demand that would suddenly arise if this proposal were to reach a critical level of support. A project of this size will probably enroll the labor pool reserves from the whole of America. As these nations mature, the ultimate payoff for this worldwide plethora of productivity will be a broad spectrum of middle-class affluence. The productive engine of the world economy should likewise be able to produce sufficient goods and services to supply the needs of those who cannot contribute to the economy (e.g. the aged, the unwell, the young, and the unskilled). Industrialization can be multiplied almost indefinitely because of the minimal environmental impact from clean energy and the application of energy-intensive measures to treat effluents; thereby air, water, and land pollution are minimized. All these benefits will be available because of the multiplicative power of energy and machines. This entire litany of benefits rests on the possibility of tapping the near-limitless energy from the various forms of clean Solar Energy (photovoltaic, wind, biomass).

Living in such a world could be very pleasant, but even then we still must tame each generation’s passions, civilize the brute within, and teach him the ways of Righteousness. But that is another discussion.

I thank you for your very stimulating letter.

Sincerely yours,
Thomas Abshier, ND