Notes from the Trade War:

The State of the Union is Not Good 

George Bush, like his father before him, just doesn't get it. It's the economy, stupid. And the state of the economy is not good, and it is not likely to get better unless fundamental changes are made. The forecasts that the recession is over are erroneous: the numbers from the fourth quarter of 2001 were heavily distorted by subsidized financing by the auto industry and by huge government spending.

The president did not even mention our burgeoning trade deficit as a problem. The uncontrolled trade deficit is more likely to lead to the downfall of the United States as we know it than Al Qaeda. We have more than a $400 billion trade deficit with the rest of the world. Nearly a quarter of that is with China. This translates into six to eight million jobs lost, families torn apart and homes lost. And if you must think of military threats, keep in mind that billions of the dollars going to China are going directly to the coffers of the Peoples Liberation Army.

The American way of life, with a luxurious standard of living for working-class citizens, is being undermined by the exploding trade deficit. Millions of good-paying jobs have left this country in the past ten years and will never return.

President Bush offhandedly stated that we need more trade to improve our economy. One-sided trade, primarily imports from Third World nations, hurts rather than helps our economy. We need to make trade a two-way street. Most of our trade with China, Asia and Mexico is a one-way street, imports only.

On the same day that the president gave his state-of-the-union address, another American manufacturer, Black & Decker, announced thousands of job cuts and the movement of more production to Mexico and China. More than two thousand other American manufacturers have moved millions of jobs overseas during the past five years and this mass exodus will not stop until Washington does something about it.

What can we do about the unprecedented trade imbalance? I propose three new federal laws and initiatives that will turn around our dangerous trade deficit.

First, we should pass a law, the Manufacturing Community Bill of Rights (MCBR), that provides the right of a community to keep a manufacturing plant intact. The law would provide that a manufacturer planning to move overseas would first have to give notice to its community, its state and its workers of its plans. The local and state government, and workers of the plant, would then have the right to purchase the plant within six months. Current law requires this notification, but only provides for 60 days notice. The MCBR would also provide for loan guarantees so that the community would have a realistic chance of acquiring manufacturing facilities. Most factories that are relocated offshore are still making a profit. Just not enough profit to satisfy its multinational owners. Those not making a profit would have to develop a plan to return the plant to profitability, such as having the workers take less salary and receive more ownership.

The MCBR would keep factories humming in the USA. First, the law would make it more expensive and risky to relocate. The law would also discourage factories from moving overseas because most companies do not want to turn their plant over to their workers to compete with their other factories.

The second law we need to enact is the Import Disclosure and Education Act (IDEA). This law would require prominent disclosure in advertising and on the Internet of the country of origin of the products being promoted. Currently this information is nearly impossible to obtain. Americans want to buy US-made products and are entitled to this information so that they can make informed buying decisions.

And the third leg of my proposal is that we amend NAFTA or get rid of it altogether. NAFTA has been an abysmal failureòcausing the United States to lose 750,000 jobs without improving life in Mexico. Before NAFTA went into effect we had no trade deficit with Canada or Mexico. Now the deficit with our neighbors is approaching $100 billion annually. One reason for this is that both the peso and the Canadian dollar have weakened substantially. Europe has created a common currency for its free trade zone and we must do the same. The US dollar must be the legal currency for all of North America. Free trade without a common currency causes uncertainty, dislocations and the misallocation of resources.

A revised NAFTA would also require increases in the minimum wage in Mexico, strengthen workers' rights and raise Mexican environmental standards to our level so that NAFTA does not merely shift pollution and production south of the border to evade our environmental laws. The New River, which flows north from Mexico into California, is the most polluted river in North America, is a odiferous symbol of what NAFTA has wrought. No one can rationally argue that the pollution caused by NAFTA serves any greater purpose.

The recession that we are in may become permanent if we do not take serious action. This nation, which has been focused on the terrorist threat, must turn its attention to the economy. Japan has been in a recession for 10 years with little likelihood of recovery because that nation has failed to make the hard decisions. Argentina has also suffered from the ill effects of unfair trade. The United States will join Japan and Argentina as an economy in danger if the president and Congress don't address this substantial threat to our way of life.

Joel D. Joseph is chairman of the Made in the USA Foundation. Email

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