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The American Prospect: The Cost of Free Trade

Author: Michael Lind
December 1, 2011

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Every president asserts that the next trade treaty will turn America into an export powerhouse, but that's just not true, claims Michael Lind.

Any renaissance of American manufacturing must begin by fundamentally reversing our trade policies—both in general and in particular toward China. Over the past two decades, leading U.S. manufacturers, both the venerable (like General Electric) and the new (like Apple), have offshored millions of jobs—by one recent estimate, 2.9 million—to China to take advantage of the cheap labor, generous state subsidies, and low currency valuation that are linchpins of China's mercantilist development strategy. Other factors, including increasingly automated production, have also taken a toll on America's manufacturing workforce, but it's the mass exodus of American production to China and, more recently, the rise of indigenous, state-subsidized Chinese production that have decimated American industry and reduced the incomes of American workers.

The United States government did not have to stand idly by while the nation's industrial base was disassembled. It could have preserved and promoted key industries and supply networks by creating favorable credit policies, tax incentives, local content rules, and tariffs to punish currency manipulation from countries like China. For that matter, the U.S. could have created more flexible trade rules when it helped to craft the World Trade Organization.

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