Thomas Jefferson recognized the important role that trade can play to benefit our nation’s economy, saying, “Commerce with other nations is not only necessary and beneficial to all parties, it is a right and a duty…” Yet, he also spoke clearly that trade must be fair, saying, “In order to function properly, however, free trade must be established on a reciprocal basis.”
Take a look at our economy today, and, in particular, our manufacturing sector, and one could easily imagine Jefferson shaking his head in disappointment at the record trade deficits we regularly amass. After all, Jefferson cited public debt as one of the “greatest dangers” to be feared, saying, “To preserve our independence, we must not let our rulers load us with perpetual debt.”
In 2015 alone, the United States amassed a record $367 billion goods trade deficit with China – hardly the reciprocity that Jefferson envisioned when touting a system of tade that “function[s] properly.” Make no mistake: This massive trade deficit saps our economy of wealth and jobs and increases our foreign debt.
Currently, China and its state-owned companies are exporting massive amounts of paper, steel, aluminum and other goods to our market at any cost to avoid the pains that come with a slowing economy. The consequences of selling at a loss are absorbed by the Chinese government in order to maintain production, employment, and, in turn, social stability. Here in America, where market forces have real impact, China’s aggressive actions have depressed prices, forced plant closures, and left 15,000 steel workers with layoff notices.
This trend is repeated throughout America in a number of vital industrial sectors. The Commonwealth of Virginia has lost nearly 130,000 manufacturing jobs since 2001 when China was granted permanent duty reductions to the U.S. market and entry into the World Trade Organization (WTO).
This massive decline is a direct result of the obstacles to legitimate commerce that Jefferson spoke of in his 1793 Report on Foreign Commerce when justifying what we today refer to as trade enforcement. “Should any nation, contrary to our wishes, suppose it may better find its advantage by continuing its system of prohibitions, duties and regulations, it behooves us to protect our citizens, their commerce and navigation, by counter prohibitions, duties and regulations also.”
Many U.S. companies are currently suffering from unfair foreign competition, including illegal subsidies granted to overseas producers, good dumped into our market at below market levels, and inequitable enforcement of regulation abroad to benefit their own exporters and impede our attempts to sell goods overseas.
As a result, many U.S. companies have been forced to take the extraordinary step of petitioning their government to stop the flow of illegally-traded goods into the American market. That’s often mislabeled as “protectionism,” but few companies anywhere can compete against the vast resources of a rival operating in a state-directed economy like China’s, home to many powerful state-owned companies.
Another hard truth: As domestic companies work to comply with unparalleled levels of government regulation, we are rewarding companies operating in China with access to our lucrative government procurement markets. Spending hard-earned American tax dollars on foreign made goods – produced free of environmental safeguards and other regulatory protections – for our roads, bridges, water system, and other needs flies in the face of the principles our country was built on. And, from Jefferson’s point of view, conflicts with the idea that “we should encourage home manufactures to the extent of our own consumption.”
Jefferson later came to the resolution that he would “never again…purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may.”
So, then, imagine his reaction to the concept of relying on a potential hostile trading partner like China (or Europe, as it was in his time) to equip our own military. “To make [arms] within ourselves… as well as the other implements of war, is as necessary as to make our bread within ourselves,” he said.
Yet, the United States is increasingly becoming reliant on countries like China and Russia for everything from steel to construct aircraft carriers (like those at Newport News) to the rare earth elements used in night-vision goggles to the communications systems used on the front lines of combat.
There is hope that we may be able to turn this manufacturing crisis around and back on better footing. The solutions are simple: stronger trade enforcement and more effective measures to ensure that trade is a beneficial, two-way street for all involved. And, we must spend Americans’ tax dollars on goods produced here at home.
As the presidential election continues and voters look toward selecting a new leader for our country, solid public policy solutions will be required to eliminate our surging trade deficit with China and put strong penalties in place for currency manipulation, cyber-spying, intellectual property theft and trade cheating.
Thomas Jefferson certainly would have had the will and strong leadership to help the American manufacturing sector get back on its feet.
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Mr. Boos is Senior Vice President, Government Affairs & Policy for the Alliance for American Manufacturing (AAM). Prior to joining AAM, Mr. Boos served as a senior policy adviser to Sen. Arlen Specter of Pennsylvania.