U.S. Trade Policy and Declining Manufacturing: Where do we go from here?

Written by admin on May 14th, 2011

discrimination against U.S. imports (negotiations should work to remove non-tariff barriers, using a carrot and stick approach).
The deficit with Mexico stems from wage and consumer demand differentials, and proximity to the U.S. market.  A regional “Marshall Plan” to assist economic development in Mexico and the Western Hemisphere is long overdue. Economic development and poverty reduction in Latin America would address the twin problems of resistance to labor and environmental standards, and over-reliance on U.S. consumers as the market of first and last resort.[6]

The U.S., in coordination with other advanced economies, must gradually reduce the value of the dollar. As noted earlier, the surest, most sustainable way to do this is to gradually replace the dollar as the world’s reserve currency.

Advanced economies must develop new incentives for developing countries to raise labor and environmental standards, and to adopt alternatives to export-led growth.  Too many countries are competing for access to the only open market in the world, and the U.S. can no longer afford to be the market of first and last resort.

For the global marketplace to benefit the broadest possible number of stakeholders, cooperation and coordination among global policymakers, business, and workers is essential.  The genie is out of the bottle, so to speak, and retreat from globalization is neither an option nor desirable.  The market has outgrown the bounds of the domestic regulatory state in important ways.  Issues that are causing significant frictions, imbalances, and inequities must be resolved soon, and the way forward must be based on inclusion and broad participation in decision making, implementation, and benefits. 




[1] Financialization can be defined as an economy that increasingly depends on financial transactions to support GDP growth, while manufacturing and industry moves to low-cost overseas markets.  The British Empire in the second half of the 19th century is a prime example.  London became increasingly a financial and trading center, while manufacturing moved increasingly to the British colonies.  By the early 20th century, the empire was substantially weakened.

[2] A misnomer, since our economy is by no means free and unfettered, but is in fact skewed to support the owners of capital in subtle and profound ways.

[3] Financial sector profits accounted for 25% of all corporate profits, even in the recession year of 2009. In 2008, finance, insurance, real estate, rental, and leasing accounted for 21% of the entire private economy. Some would argue that these percentages are too high for an economic sector that “doesn’t really make anything except money.”  That may be an unfair mischaracterization of the financial sector, but it bears considering what percentage of the economy we think ought to be centered on finance and financial services.

[4] “Picking winners” has long been opposed by U.S. political leaders, who believe that the market can better allocate resources to the most competitive technology innovations, but there is evidence that in capital-intensive, high technology industries, it can lead to long-term economic benefits.  The European aerospace consortium that builds Airbus commercial airliners grew from a conscious decision to enter the market and subsidize the industry until it became profitable.

[5] The measures adopted by governments to attract and regulate foreign investment, including fiscal incentives, tax rebates and the provision of land and other services on preferential terms. In addition, governments impose conditions to encourage or compel the use of investment according to certain national priorities. Local content requirements, which require the investor to undertake to utilize a certain amount of local inputs in production, are an example of such conditions. Export performance requirements are another example; they compel the investor to undertake to export a certain proportion of its output. Such conditions, which can have adverse effects on trade, are known as trade-related investment measures or TRIMs.

[6] Such a plan would involve development aid targeting key institutional capacity building, debt relief where called for, and would require meeting benchmarks in key social standards. Japan and China could do the same in Asia, and Africa would need broad, multilateral assistance. A U.S.-led hemispheric “Marshall Plan” would foster regional integration, stimulating demand for high-wage, high-skilled exports from North America, which can be used to help the rest of the hemisphere grow develop more rapidly.  U.S. policy must foster global growth, because slow global growth will pull imports to the U.S. while reducing demand for U.S. exports.

Pages: 1 2 3 4

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply