Why “Free Trade” Devastates America


At an individual level, our economy is driven by consumption (70 percent of GDP is consumer spending). Since most of this consumption is on foreign goods, to restrict that flow would have a devastating effect on many industries. Industries that would suffer include retailing, as most textiles are produced overseas, as well as electronics equipment and components; freight and shipping industries would suffer as trillions of dollars flow over transportation routes each year; and finally, marketing, advertising, law, and banking, are all tied directly to American consumption of foreign goods.

On the other side of free trade, encouraging foreign manufacturers to produce in the U.S. creates a big defeat for us. For example, Ohio and Indiana competed to get a new Honda auto factory. Indiana succeeded. They gave Honda an $81 million enticement gift and other intangibles. Honda said they would put up a $500 million facility to produce 200,000 cars per year. They did put up a facility, cost unknown. And 23,000 Americans applied for 2,000 jobs. Two thousand Americans are now turning out 200,000 Honda cars per year in Indiana which translates to one American supplying the labor to turn out 100 cars per year. One American can earn on average about $50,000 per year to turn out $2,000,000 worth of cars (Average car sale $20,000 x 100 cars = $2,000,000). This may be a simplification, but the American labor cost is approximately 3 percent. Almost nothing is made in that factory.

The sell-off of American companies is greatly rewarded by those doing the selling. Given record low capital gains taxes and other incentives, CEO’s and shareholders of major companies stand to gain more from the one-time bonus of selling their company at a massive premium to a foreign purchaser than from continuing to run them on a salary basis.

Countries like Japan, Germany and China take great pride in protecting their industries from foreign purchasers. They have government agencies devoted entirely to doing just that. In the U.S., we seemingly do everything to encourage foreign takeovers. Of course, no politician likes being the bearer of bad news. Most politicians are not willing to risk their political careers by saying we must take drastic action to the short-term detriment of many Americans, even though that is precisely what they are charged with doing.

“Free trade” is a convenient, well-packaged ideology that resonates well with consumers, and lines the pockets and ambitions of CEO’s and politicians. The result is that nearly 50 percent of all new cars now sold in this country are foreign. Our domestic auto manufacturers are consistently losing market share and teetering perpetually on default.

There exists in America, now, a stigma that buying American is cheap, undesirable, of poor quality, and in poor taste. Clearly, the group unquestionably damaged by “free trade” is the American industry in general. As a result the American middle-class that relies on American industry for employment and opportunity is being destroyed and falling further and further into debt.

No rational argument exists to continue policy that leads to “free trade” agreements. FTA’s are damaging America’s ability as a country to compete, even as the results of free trade continue to provide cheap goods to American consumers. If we do not reverse this path of selling our assets and borrowing from foreign sources to finance our lifestyle of imports, we will eventually receive a call on our debt and will find our cheap goods cost much more than we had ever imagined.

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