The old saying, “The chicken has come home to roost” has happened to the United States manufacturing industry.
Ever since NAFTA (North American Free Trade Agreement) and the emergence of China and Korea as manufacturing competitors in the United States we have had a slow but true decline in our manufacturing capabilities.
President George H.W.Bush signed the NAFTA agreement in 1992 and it was ratified by congress in 1993. President Bill Clinton signed it into law on December 8, 1993. At the signing Clinton said, “NAFTA means jobs. American jobs, and good paying American jobs. If I didn’t believe that, I wouldn’t support this agreement.”
As of 2008 all tariffs between Canada and Mexico were eliminated. Between 1993 and 2007 trade between Canada, Mexico and the United States tripled from $297 billion to $1 trillion dollars.
It doesn’t take a rocket scientist to conclude that if there are no tariffs to keep the playing field equal, the United States is going to get the short end of the manufacturing stick.
Loren Thompson of “Forbes” reports that Last week, the federal government reported that the U.S. trade deficit grew by 33 percent in 2010 to nearly half a trillion dollars. Most of the gap resulted from an imbalance in trade with China, which shipped $365 billion in goods to America but only bought $92 billion in U.S. goods. The resulting U.S. deficit of $273 billion in bilateral trade with Beijing reflects a persistent feature of the Sino-American relationship since China joined the World Trade Organization in 2001. Over the last ten years, China has mounted the biggest challenge to the U.S. manufacturing sector ever seen, threatening producers of steel, chemicals, glass, paper, drugs and any number of other items with prices they cannot match. Not coincidentally, the United States has lost an average of 50,000 manufacturing jobs every month during the same period.
That trend has now progressed to a point where the U.S. intelligence community has become concerned. Richard McCormack reported in Manufacturing & Technology News on February 3 that the Director of National Intelligence has initiated preparation of a National Intelligence Estimate to assess the security implications of waning manufacturing activity in America. National Intelligence Estimates are the most authoritative analyses prepared by the intelligence community, definitive interagency products typically reserved for the most serious threats. So the fact that the nation’s top intelligence official thinks a National Intelligence Estimate is needed for manufacturing isn’t a good sign. It suggests that America’s industrial decline is approaching the status of a crisis.
Federal policymakers have been getting hints that all was not well in the industrial base for some time. For example, when Defense Secretary Robert Gates decided to surge production of armored trucks for the Iraq counter-insurgency campaign in 2007, it was discovered there was only one steel plant in the nation producing steel of sufficient strength to meet military needs. That plant — the old Lukens Steel Company facility in Coatesville, Pennsylvania — had been bought by European steel giant Arcelor Mittal, and already had weapons makers waiting in line for the output its limited capacity could support. Other items needed for the Iraq-bound trucks also were in short supply, such as oversized tires. The Pentagon had to cobble together an ad hoc network of domestic and foreign suppliers in order to ramp up production of the needed trucks, suggesting that the industrial complex FDR once called “the arsenal of democracy” had become a rather fragile affair.
China is now responsible for the bulk of the US trade gap in manufactured goods. Louis Uchitelle noted in the New York Times on February 12th that the last US manufacturer of flatware (Knives, forks and spoons) had closed its doors in upstate New York, a victim of lower priced Chinese products.
On March 16th at a news conference Rep. Jan Schakowsky (D-IL) said that the US Intelligence Community will prepare a National Intelligence Estimate on the implications of the continuing decline in U.S. manufacturing capacity because
“Our growing reliance on imports and lack of industrial infrastructure has become a national security concern. With 14 million Americans out of a job we should not be considering a trade deal that will ship additional jobs overseas.” She was referring to the U.S.-Korea Free Trade Agreement.