Memo to Leaders Meeting with China: Time for U.S. Policy that Aids Our Economy

by Tula Connell, Jul 27, 2009

Here in Washington, D.C.,  President Obama, Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner are taking part in a big-time summit with China. Let’s hope they have substantive discussions on economic policies that aid U.S. workers. Over the past few days, several great pieces on trade and manufacturing have been published that should feed into the discussions of U.S. participants in what is officially called the “sixth Strategic and Economic Dialogue with China.” Here’s a summary.

**U.S. “protectionism” is a myth. There’s an “untold story of protectionism,” say United Steelworkers (USW) President Leo Gerard and Scott Paul, executive director of the Alliance for American Manufacturing. That is, the set of barriers other governments erect to block American goods and the mercantilist measures they utilize to gain market share in the United States.

These practices range from China’s currency misalignment and massive industrial subsidies to non-tariff barriers in Korea and Japan. All these impediments have been well documented by U.S. trade officials, but the mere act of identifying these practices is now viewed as protectionism, even though taking action to eliminate them would expand world trade, reduce global imbalances and preserve the free market.

**Buy American is not protectionism. The Buy American provision in the economic stimulus package does not abrogate any provisions in the nation’s trade treaties. It’s a key part of returning the U.S. economy to solid footing—and has worked well in the past, as Gerard and Paul point out.

Buy America has served as an effective jobs generator and a smart economic policy for decades. It applied to materials used in the construction of the Interstate highway system in the 1950s. In the midst of a recession during the early 1980s, President Reagan signed legislation that strengthened Buy America requirements. Some sort of domestic sourcing requirement has applied to most major infrastructure expenditures passed by Congress since World War II….

As Campaign for America’s Future writer Dave Johnson sums up: Buy America is important “because we need to concentrate American economic stimulus on the American economy or it will be so diluted as to be useless.”

**Green jobs don’t just happen. Talking about the United States leading the world in green industries—new energy, more efficient appliances, more sophisticated building efficiencies and the supply chains associated with windmills, solar cells, batteries, fast trains, electric cars—is great, except for a not-so-small detail: The United States must establish a policy to ensure the United States is the leader. Robert Borosage, co-founder of the Campaign for America’s Future, says China already has done so.

China has determined that new energy will be one of its strategic industries. It is now the largest manufacturer of solar panels—exporting 95 percent of its production, largely to Europe and the U.S.

**Bottom line: The United States needs an industrial policy. Buy American and other individual efforts are necessary but are not enough to shore up the nation’s economic future. They must be part of a long-term, strategic industrial policy. As Johnson writes, manufacturing must be central to the nation’s plan for restoring and reinventing the economy because it is “the root of economic power.” Such thinking flies in the face of the “New Economy” hype sold to us in the 1990s—a bill of goods far too many policy makers still believe. If the current economic disaster proved anything, it showed that the nation cannot rely on the financial services industry as the generator of its ecomomy. If we don’t make things, if, that is, U.S. manufacturing is not revived, we will have nothing to export and no job creation.

So, for our leaders meeting now with the China economic delegation, the last word goes to Ohio Democrat Sen. Sherrod Brown (h/t to Manufacture This):

Some people believe that actively enforcing trade rules is protectionism. I believe that not enforcing those rules is defeatism. If our nation’s leaders stand down as China stacks the deck against American business, the downward trade spiral will continue.

It’s time for actions that benefit American workers and businesses and that protect consumers.

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