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U.S. Misfortunes “Made in America”

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Two crucial points need to be made about international trade: 1) The U.S. is far more interventionist than is commonly believed, and 2) our competitiveness problems are primarily made in America, not overseas.

When former president Bush visited Australia a few years ago, Australian farmers staged a very visible protest. They did us Americans a great public service. They pointed out that America’s agricultural export subsidies are effectively a form of “dumping” — the very practice our politicians like to rail about when Americans are the supposed “victims.” Australian farmers have lost markets because subsidized American grain is stealing away their customers.

The notion that America has wide open borders and that only nasty foreigners restrict imports is political poppycock — pure disinformation that self-serving special interests and their gullible allies in Washington are more than happy to promote. James Bovard, one of this country’s foremost trade experts, notes that Congress has imposed more than 8,000 different taxes on imports, with some as high as 458 percent.

In a December 9, 1991, article in Newsweek, Bovard pointed out that U.S. trade law effectively “means permitting each American citizen to consume the equivalent of only one teaspoon of foreign ice cream per year, two foreign peanuts per year and one pound of foreign cheese per year.” Furthermore, it is a fact that “Mexico may sell Americans only 35,292 bras a year, that Poland may ship us only 350 tons of alloy tool steel a year, and that Haiti is allowed to sell the United States only 7,730 tons of sugar.

These barriers don’t just hurt foreigners; they injure Americans who rely on low-cost imports for their very jobs or who must export less because they can’t keep their cost down by purchasing low-priced imports. To quote Bovard again:

American manufacturers have been forced to grovel before Commerce Department officials for each ton of specialty steel they are allowed to import. Restrictions on steel — crankshaft imports in 1987 hurt diesel-truck engine manufacturers, restrictions on ball-bearing imports in 1989 hurt scores of American industries and restrictions on flat-panel computer displays hurt computer makers in 1991. Thanks to economically perverse U.S. trade laws, the more inefficient and backward an American industry is, the more likely the U.S. government will blame foreign companies for its problems.

Japan has half the population of the U.S., yet some people think it should buy just as much from us as we buy from it. Even so, the average Japanese in 1990 bought $395 worth of American goods, while the average American bought $359 worth of products from Japan. Maybe that’s why protectionists never express the balance of trade on a per-capita basis; they prefer to confuse people with raw, almost meaningless numbers.

Another revealing way to look at the picture, according to The Detroit News, is in these terms: About 1.7 percent of Japan’s GNP went for purchasing American products in 1990, compared with 1.6 percent of our GNP that went toward buying Japanese goods.

Lee Iacocca, shortly before departing with Mr. Bush for Asia, lamented that Americans sold just 15,000 cars to Japan in 1991, while they sold 3.8 million cars to us. But Honduras sold far more bananas to the U.S. than the U.S. sold to Honduras. And surely more soybeans left the U.S. for Denmark than Denmark sent here. If trade is supposed to be car for car, banana for banana, bean for bean, then what’s the point?

The cold, hard facts were expressed best by the comic-strip character Pogo years ago: “We have met the enemy and he is us.” Why has U.S. competitiveness suffered in recent years? Because our government monopoly schools have turned out functional illiterates by the millions; our federal government refuses to live within its means and sucks hundreds of billions of dollars from the capital market each year to pay its deficits; our capital gains tax, highest in the industrialized world, is decisively anti-investment; our bureaucracy imposes countless, costly regulations in the name of fuel economy, civil rights, and disabled people; and while Japan strongly encourages savings, we fritter them away with confiscatory taxation.

Clyde Prestowitz of the Economic Strategy Institute has shown that just the Tax Reform Act of 1986 alone jacked up the cost of capital in America by 40 percent. Add to that the fact that our overpaid auto executives still haven’t figured out where the steering wheel should be for cars bound for Japan, and you get the picture.

So don’t be suckered into bashing the rest of the world for misfortunes that originate here. Such distractions may elect politicians, but they don’t solve problems.

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    Lawrence W. Reed is President of The Foundation for Economic Education. Reed holds a B.A. degree in Economics from Grove City College (1975) and an M.A. degree in History from Slippery Rock State University (1978), both in Pennsylvania. He taught economics at Midland’s Northwood University from 1977 to 1984 and chaired the Department of Economics from 1982 to 1984. He has authored over 1,000 newspaper columns and articles, 200 radio commentaries, dozens of articles in magazines and journals in the U. S. and abroad, as well as five books. His articles have appeared in The Wall Street Journal, Christian Science Monitor, USA Today, Baltimore Sun, Detroit News and Detroit Free Press, among many others. Mr. Reed was previously president of the Mackinac Center for Public Policy in Midland, Michigan (www. mackinac.org), and chairman of the board of trustees of the Foundation for Economic Education in Irvington, New York. He also serves on the Board of Speakers of The Future of Freedom Foundation.