Trade Wars

Columnist : Frank Gamrat

The decline in manufacturing jobs in the United States has been rapid. Contrary to popular belief manufacturing employment was relatively stable in the 1960s and 1970s, however, the rate of decline has even been extraordinarily swift since 1979 when overall manufacturing jobs in the United States declined from 19.6 million jobs then to 13.7 million jobs in 2007.

Manufacturing’s decline has been exceptionally rapid due predominantly to trade imbalances such as measured by our balance of trade and trade as well as by trade barriers enacted by our partners.

There are significant national security implications of a weakened manufacturing sector to include the ability to defend oneself as well as strategically weaken our ability to withstand a armed conflict or economic trade war.

For instance, the ability of the United States to withstand World War II despite the relative isolation of the Soviet Union, Great Britain and the United States was due to America’s manufacturing prowess. The United States was the world’s arsenal.

After World War II, the United States embarked on the Marshall Plan to rebuild a devastated Europe. Similar but less structured efforts existed in Japan with Gen. MacArthur and his reconstruction efforts there.

Due to substantial destruction of worldwide manufacturing capability, the United States was well-positioned in steel, rail, shipbuilding, aircraft manufacturing, mining, and financial strength to maintain a position of world power post World War II.

As our trade partners rebuilt and adopted modern manufacturing techniques such as Dr. Deming and the Toyota system, many previously destroyed nations were able to rebuild and become effective trading partners with the United States.

The United States adopted an almost patriarchal type attitude towards those devastated by World War II and candidly, as someone who worked in the steel industry in the 1970s, the industry and industries in general adopted a rather cavalier approach in many cases to the competition. This lackadaisical approach at the senior leadership level hurt our nation and began a 20 year decline in our industry.

In the 1970s and 1980s, rail, steel, automobile, and tool and die making began a death spiral while at the same time our trading partners were growing rapidly. Many in industry felt that our international trading partners were offered unfair competitive advantages through tariffs and trade barriers putting US manufacturing in jeopardy.

Those of us in industry in the 1970s and 80s became increasingly alarmed when tool and die making capability in the United States became outsourced internationally. From a military perspective losing a nation’s tool and die making capability puts a nation great strategic vulnerability since we become dependent upon international sources for those materials necessary to survive in armed conflict.

The Defense Logistics Agency and the Joint Materials Priority Allocation Board (JMPAB) as well as other Department of Defense and CIA agencies would be concerned about strategic vulnerabilities in the nation’s ability to defend itself in the time of war.

During the Vietnam War, the nation fought a war of containment with an almost deliberate intent of constricting our military capabilities in a naïve attempt at “fighting fair.” In this way our nation did not commit its full capabilities to winning the war with a devastating impact on those who fought and died there. The strategy scarred our nation to this day.

In much the same way, our nation since the 1960s or thereabouts has been trading internationally with a policy of appeasement and containment. It seems as if our nation has been embarrassed by its wealth since early 2000. This apparent embarrassment has left us unprepared for a competitive environment in which the world was not concurrently embarrassed and willingly applied tariffs against our products.

The danger of the United States waging international trade with one hand tied behind its back or on an unlevel playing field is that we hurt the very citizens who are relying on the “mortgage paying jobs” that manufacturing provides.

I have often suggested that tariffs hold little value in any international trade but that any tariffs employed should reflect that tariffs that your trading partners enact against US products and services.

The tariffs on steel and aluminum that President Trump has proposed can be a dangerous precedent and should not be taken lightly. By the same token, from a negotiating perspective, such a tariff may be indicating to the world that we intend to level the playing field in international trade and let the most efficient producer win.

Interfering with markets is seldom a good idea but perhaps the President is signaling a major shift in U. S. policy relative to trade whereby we no longer believe that our trading partners are the economically devastated, war ravaged trading partners of World War II but that we are all equal partners on the world stage. Perhaps apologetics has died. Perhaps competition and free enterprise will win.

Frank Ryan, CPA, USMCR (Ret) represents the 101st District in the PA House of Representatives. He is a retired Marine Reserve Colonel, a CPA and specializes in corporate restructuring. He has served on numerous boards of publicly traded and non-profit organizations. He can be reached at [email protected]