Ford and GM plant closings

[Filius Nullius]

Ford and GM plant closings a strategic military problem, as well as economic catastrophe? Could "revenue sharing" tariffs be a solution?

Ford's new commercials say they want to "retake the American roadways." That's great. Let's all stand and syncro-clap. The only problem is they want to do it without American workers onboard. It is now quite obvious that Ford and other American manufacturers are hell-bent on continuing the trend toward closing traditional plants that employ large numbers of American workers. The ultimate goal is to build their new models abroad or use highly automated assembly plants in this country that use parts imported from China and other countries with low labor costs. I suggest that steps need to be taken immediately to prevent these plants from being closed and eventually dismantled. Once they are gone, the cost in future dollars to rebuild them may be prohibitively expensive. As the saying goes, "When they are gone, they're gone!"

The loss of so many high-paying jobs with hard-won benefits is obviously an extremely serious blow to the American middle class. However, it is also a strategic issue that the military experts in the Bush Administration, Pentagon, Congress and American universities and think-tanks need to ponder deeply.

During World War II, American industry was able to convert quickly from manufacturing aircraft and automobiles for the private sector to making military planes and vehicles. What will happen if a new global war over oil springs up and we are importing a large portion of the parts for our aircraft and vehicles from foreign producers, especially if the countries from which we are importing them are the same ones we are fighting? What if we have a war with, say, China at some not-too-distant time in the future and we no longer have the manufacturing capacity to build the military vehicles and other equipment that are needed? Will we simply be out of luck insofar as resupplying our military is concerned until American companies can rebuild and retool manufacturing plants from scratch? What if they can't do it in time to prevent our military from being overwhelmed? What if the companies themselves, having become enthusiastic proponents and members of the new global economy, are so heavily infiltrated with executives and managers from foreign countries that they lack the will to make the necessary changes or to make them rapidly enough?

What if all of WalMart's cheap foreign goods from China and other parts of southeast Asia are suddenly cut off at the outset of a military or economic war with China and there are insufficient numbers of domestic suppliers available to take up the slack in key consumer products? Will American consumers just do without? Will we be at the economic mercy of the Chinese?

Disparities between wages, benefits and tariffs in foreign countries and those in effect here are obviously at the root of this problem. The only solution is to find a way to level the playing field so that American industry can compete effectively with companies in countries where prevailing wages and benefits are far lower than in the U.S. American economic scholars, diplomats and tariff negotiators should move rapidly to build world-wide consensus that there is nothing wrong with efforts to preserve the gains that workers and unions in developed countries, such as the U.S., E.U., Canada, Australia and New Zealand, have achieved in recent decades and that, in the long run, doing so in a fair and enlightened way will help to "float the boats" of workers in more economically depressed countries, as well.

The solution I would propose involves "revenue sharing" in a manner reminiscent of the system adopted by Major League Baseball in this country to help teams in smaller markets compete with teams in larger metropolitan areas. Stop laughing and think about it for a moment. My suggestion would entail scrapping the existing tariff structure and creating one that looks at the prevailing wage-and-benefit structures in all countries. In each case, tariffs would be based on the difference between the average wages and benefits paid in the exporting country and those paid in the importing country. The tariff imposed on vehicles imported from a country with relatively low wages and benefits into one where wages and benefits are substantially higher would be split equally between the two countries. The revenue could be used to help improve the living standards of workers in the exporting country and to help lower the taxes of consumers in the importing country who are paying higher prices on imports because of the tariff. This would be fair, in accordance with the time-honored maxim of British courts of chancery and American courts of equity that "equity is equality."

If a similar system were to be imposed on the so-called "outsourcing" of service-industry jobs, such as technical-support jobs in the computer and electronics industries, it would have the same leveling tendency. After all, what is outsourcing, but the importation of foreign services by means of high-tech telecommunications and computer applications?

In this same spirit of equity, tariffs imposed by counties with lower wages and benefits on imports from more affluent counties should also be split equally. This would create a disincentive for less advanced countries to impose artificially high tariffs on imported goods. Nevertheless, once the basic mechanism is in place, the decision over whether to impose tariffs should be left to individual countries.

This new tariff structure would have the effect of creating a level playing field insofar as prices of vehicles, other trade goods and "outsourced" services are concerned. The goal is not to give American workers and businesses an unfair advantage. The intention is just to afford them an equal chance to survive and prosper.

Of course, all leveling effects are not the same. Some level by reducing the standard of living in more affluent countries to the prevailing level in poorer countries. Others level by promoting an increase in the standard of living in poorer countries to the prevailing level in more affluent countries. As matters now stand under the current system of tariffs, we are engaged in a race to the bottom, insofar as wage scales and benefits are concerned. In other words, everyone loses, except the largest shareholders of the greediest multinational companies.

I believe that the long-term tendency of the system I am proposing would be to raise the standards of living of manufacturing and service-industry workers throughout the world. Everyone wins. Workers in this country get to keep their jobs, wages and benefits. American manufacturers get to stay in business, generate profits and pay taxes to help support our country. The U.S. government receives a 50% share of the tariffs from imports into this country, which enables it to lower overall tax rates or begin to reduce the deficit. Workers in other countries get a higher standard of living from their countries' share of tariff receipts. Since the incentive to keep wages and benefits artificially low has been removed from developing countries, they begin to increase over time and eventually catch up with those in the developed world.

Under a system of revenue-sharing tariffs, the multi-nationals are permitted to prosper also, but will not do so on a playing field that encourages them to move all of their operations abroad. As matters now stand, many American corporations feel that they have no alternative if they want to survive but to cut the wages and benefits of their American workers and/or move their manufacturing and services abroad. Under the new system, the incentive to do this will no longer exist. They can prosper irrespective of where their operations are located and still feel good about what they are doing.

You may say, why would we want to give away half of the revenue from imports into this country? Well, are we not already giving away the richest consumer market in the world with the existing tariff laws that permit China to charge 25% duties on American products entering that country and the U.S. to charge only 2.5% on Chinese products imported into America? Instead of the norm being 25%/2.5% in China's favor, it would be flipped under a revenue-sharing tariff system. Yet China and other developing nations would receive fair percentages of the tariff revenues from products entering the United States, as would the U.S. government. Likewise, as our exports to developing countries increase, the U.S. will receive more tariff revenue from products shipped abroad, as will the governments of those countries.

If revenue-sharing tariffs have the effect of lowering American imports of products from developing countries below desired levels, tariffs based on the differentials between average wages and benefits in the developed vs. developing counties can be lowered temporarily. For example, an agreed fractional multiplier could be developed that lowers the tariff on goods imported into the U.S. and other developed counties somewhat, which would gradually be phased out as wages, benefits and living standards increase in developing countries. This would, in effect, give them the benefit of a slightly tilted playing field, rather than one that is completely akilter, and the imbalance would be self-correcting over time.

At the same time that a revenue-sharing tariff system provides benefits to American companies and workers around the world, it would be neutral in its effect on price differentials that are based solely on improved manufacturing efficiencies, gains in worker productivity and innovative product features. In other words, it would not stifle incentives to create improved products and find other ways to lower prices.

Revenues from the tariffs should, in the first instance, go directly to the respective countries to be spent for the benefit of their citizens. However, if it is found that a country is consistently diverting such funds for corrupt purposes, there should be an international commission empowered to use the monies on behalf of the people of that country. It would be nice if restrictions could also be implemented that prevent the local share from being used to fund warfare, human rights violations, etc. However, tracing the monies once they have been deposited in a county's general funds would probably present insurmountable administrative and political difficulties for international agencies charged with enforcement. In addition, most countries, including China and the U.S., would presumably object to measures of this sort on the ground that they constitute unacceptable abridgements of their sovereignty and would refuse to ratify a general tariff treaty with such restrictions. Consequently, they probably should not be included.

I fear that if something along the lines of this "revenue sharing" proposal is not implemented right away, we will soon be lamenting the near-complete loss of jobs paying a "living wage" to workers in this country. At that point, we will no longer have to worry about whether illegal immigrants entering this country across the "broken border" with Mexico are taking jobs that American citizens do not want. With few exceptions, there will be no jobs available, other than stocking the shelves and working the cash registers at large retailers; manning the drive-through window and flipping burgers, chicken fingers and fries at fast-food restaurants; filling low-skilled, low-paying and often dangerous construction jobs; collecting municipal garbage; and the like. Our once-proud middle class will have been reduced to the status of a permanent underclass subsisting on whatever employment crumbs it can find.

If other countries will not go along with fair and equitable changes like these, perhaps the U.S. government should do it unilaterally and require other countries to comply if they want to do business in this country. The Bush Administration has a history of unilateral military adventures. Why not chance a unilateral economic adventure that has the potential, with a few bumps along the way, to reverse the hemorrhaging caused by our enormous balance-of-payments problem and the transmigration of jobs and manufacturing facilities to overseas locations? In other words, do something for the American people for a change!

I urge those who don't like this plan, to develop another one, and do it quickly. Most fair-minded people in this country recognize that huge disparities continue to exist between the living standard in developed countries like the U.S. and developing nations like China. However, we cannot redress those inequalities in ways that destroy American manufacturing and service industries and decimate our middle class.

[Deja Q]

1. An unregulated market is not a free market.

But they want unregulated, and damn this country because it's not profitable enough for them; I didn't know that an exec 'earning' 600x the amount of the average worker was not profitable enough.

x(

Whatever they have planned to nix us (the ingrateful overpriced West) without destroying the world must be pretty juicy.

[jimshoes]

2. I don't think it's so much to nix us

but to buy us out and throw us the hell out. Probably someplace like the badlands in South Dakota or perhaps the deserts of Nevada.