The Emerging Overcapacity Narrative

The following article originally appeared on TradeReform.org

For years, the media has stated that the U.S. has overcapacity in agricultural production. This was an untrue narrative. Any so-called overcapacity in, for example, corn should have been called "reserves". It is good to have reserves because you don't want to not have reserves. You don't want to live hand to mouth, unprepared for drought or pestilence.

Now the cause of so-called overcapacity is imports. If you hear that beef production exceeds demand, it is untrue. We don't produce enough beef to feed our country. Any alleged overcapacity comes from imports. Ditto milk products.

We are now hearing about overcapacity in the auto supplier industry and perhaps others. Consolidation is needed, some have said. But would this be true if we fixed the trade problem thereby balancing the trade deficit? No. We would have undercapacity.

The overcapacity argument is a capitulation to an ongoing trade deficit and the predatory foreign export strategies that cause the deficit. If we fixed the trade deficit, there would be billions in new demand for domestic production each year. We are not equipped to produce to fill that need, but we can certainly get equipped in a hurry.