And So, The Trade Wars Begin!

We already know that the Democrats and the Obama Administration have refused to sign free trade agreements with both Columbia and South Korea (See Full Story). As a result, we, as a minority manufacturer in the world, are limited in the amount of products that we can sell to those specific countries. It puts us at a cost disadvantage in trying to compete with other countries that already have free trade agreements in place with South Korea and with Columbia.

During last year's campaigning, Obama had mentioned that he might renege on and renegotiate the NAFTA trade agreement between us and Canada and Mexico. That resulted in both Canada and Mexico getting into a tizzy. Obama had to soften that stance by sending out a representative to say, in effect: "Not to worry...it's just politicking!" (See Full Story) Then, when the Stimulus Package was being rammed through Congress, it included a "buy American provision" that got the European Union in a lather. In both situations, the intent was to appease the labor unions. However, in both cases and only after seeing the backlash, Obama appeared to reluctantly back off.

I hardly think that all these stuttered attempts to block free trade are just "politicking". The Obama Administration is aiming to stifle free trade and create the kind of protectionist atmosphere that would provide a short-sighted and short-termed benefit to our labor unions. But, many economist think this would ultimately result in the same kind of trade wars that caused and sustained the Great Depression (See Full Story).

Since Obama has been in office, he and his gang of Democrats have consistently made every attempt to satisfy the wishes of the labor unions when it comes to international trade. One such attempt that has already seen blowback was done to satisfy the Teamsters Union by blocking Mexican trucks from entering our borders to bring products in from Mexico. Under the Bush Administration, this had been allowed on a limited basis. But, as a result of Obama's short-sightedness in rescinding that practice, we have now been slapped with trade-limiting and trade-preventing tariffs on 90 products that are being shipped into Mexico (See Full Story). At a time when this country is already in deep recession and when many of our companies have seen their international sales plummet, we are now unable to competitively sell many of our products to Mexico and we could easily see a loss of $2.4 billion in export sales.

Mark my words, this kind of thing is only going to set up a lot of distrust between ourselves and all of our other worldwide trading partners. Those countries that we trade with can't help but ask themselves: "Are we next?"

We are not in a position to start dictating trade. Americans buy more imported products than we sell overseas. That's why, for years, we have had billions of dollars a month in trade deficits. If protectionist trade barriers go up, the American consumer will be the only loser because we will have to pay more for all those imported things that we love to buy. That's inflationary and it will hurt the poor the hardest. On top of that, our products will be less attractive to foreign customers because they will be more expensive than products from other countries. That could result in lost American jobs.

Maybe that's the plan. Maybe Obama wants to force Americans to buy only American by causing the prices of imported goods to rise. But, if that is the plan it is definitely a dumb one and, believe me, one that will hurt us more than help us.

In my opinion, we have lost manufacturing jobs in this country because of a variety of reasons; and, high labor rates is just one of those reasons. But, more than anything, it is our system of taxation that is the most crippling. I still believe that, if we went to some form of consumption tax and not an income tax structure, we could be more competitive in the world because our American products wouldn't carry all the burden of employee and company income taxes that are being applied throughout the manufacturing, distribution, and sales processes. Additionally, a consumption tax would have a fairer and more equal effect because taxes will be applied to both domestic and imported goods, equally. Today, imported goods go untaxed by this country until they actually reach our shores and are finally sold.

Protectionism isn't the way to increase domestic manufacturing and regain manufacturing jobs that have been lost to other counties. But, a new tax structure might. I only wish that our politicians would come to that conclusion before all of our manufacturing jobs go overseas.