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http://vdare.com/roberts/trade2.htm

An Economist Rethinks Free Trade
by Paul Craig Roberts

February 12, 2002

A belief in free trade is part of being an economist, and a belief in
America’s competitiveness is part of the economist’s commitment to the
global economy.

Economists note that no other country has the depth and breadth of our
capital markets, political stability, rule of law protecting contracts and
property rights, strong currency, and accumulation of scientific and
technological knowledge that makes the U.S. the high tech leader.

All of this stability and leadership causes foreigners to send their money
here for safe haven and secure investments. The inflow of money keeps the
dollar strong, which encourages imports from abroad and a trade deficit year
after year after year.

These arguments are reassuring and make sense. Still it comes as something
of a shock to discover that the U.S., the world’s high tech leader, has the
export profile of a 19th century third world colony.

Twenty years ago when I was a U.S. Treasury official, the U.S. trade deficit
came mainly from oil imports. Today our trade deficit is driven by imports
of energy, consumer goods, and manufactured goods.

A table prepared by MBG Information Services in Washington, D.C., from U.S.
Dept. of Commerce data shows the U.S. trade balance for 85 separate
industrial and commodity classifications. The only high tech goods of which
the U.S. is a net exporter are airplanes and airplane parts, military
technology and specialized machine tools. In 2000 the U.S. was a net
importer even of spacecraft.

What does the high tech U.S. economy export? Are you ready for this? Hides
and skins, metal ores and scrap, pulp and waste paper, tobacco and
cigarettes, rice, cotton, coal, meat, wheat, gold, animal feeds, soybeans
and corn.

We can’t even make our own clothes. Clothing is the third largest
contributor to our trade deficit, after vehicles and crude oil.

Even our agricultural exports are declining as the “green revolution” takes
hold abroad and U.S. farming shuts down.

The case for free trade rests on comparative advantage. Each country is
supposed to specialize in what it does best. Where does the U.S. have a
comparative advantage? Apparently, our comparative advantage lies in a
political system that doesn’t mind if foreigners buy up our assets.

Very little of the foreign money flowing into the U.S. is for the purpose of
building Toyota and BMW plants. Eighty to eighty-five percent of direct
investment by foreigners in the U.S. economy goes into mergers and
acquisitions. In 2000, 97 percent of direct investment by foreigners went
for the purchase of existing U.S. Assets.

We are not only losing industrial jobs, we are losing ownership of our
companies.

This is bad news for Americans training for engineering and high tech
occupations. The jobs are moving out. Recently, Motorola announced the
company was moving more of its manufacturing and research and development
jobs to China.

The jobs that remain in the U.S. are being filled with engineers imported
from India at half the salary.

As capital and technology are now completely mobile, the only comparative
advantage lies in labor costs. Companies are chasing the lowest labor costs.
For awhile, the move was to Mexico, but before Mexico could get on its feet,
the move shifted to China.

Propagandists call the move to China “free trade” and “globalization.” But
the Chinese don’t see it that way. They say, “you can’t sell here unless you
produce here.” That’s blackmail, not free trade.

Few companies are making money in China, but the hype is that with 1.5
billion consumers China is the market of the future. If it doesn’t work out
that way, equity shares will suffer another pricked bubble.

The U.S. is on its way to becoming a country whose corporations are
foreign-owned and foreign-based. The U.S. will decline as a consumer market
as there will be no high productivity jobs to support consumer demand.

The U.S. is importing a new population that will help it on its way to third
worldism. Every year millions of poor and uneducated immigrants, both legal
and illegal, pour into the U.S. from alien lands that have never been part
of the rational scientific culture of the West. Today 20 percent of the U.S.
population is foreign born or children of foreign born.

This massive influx drives up the demand for income support programs while
driving down the taxable wages in retail and service sector jobs, where
Americans are forced to seek employment as higher paying automotive,
electronic, textile and manufacturing jobs leave the country.

The U.S. is still a superpower, but it is a country with very little, if
any, control over its future and its destiny, a country whose time is
running out.

--------

Paul Craig Roberts is the author of The Tyranny of Good Intentions : How
Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of
Justice.



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