Today is the day I tried to warn the "Free-Trade" enthusiasts about.
When President Bill Clinton signed off on the North American Free Trade Agreement and the General Agreement on Trade & Tariffs in 1993, otherwise known as NAFTA/GATT, he quite literally slashed the economic throat of the United States. We've been hemorrhaging jobs to foreign nations like Communist China ever since.
Until 1993, the United States of America was the world's economic king, and our people enjoyed the highest standard of living in recorded history. But NAFTA/GATT changed all that by virtually removing all trade protections that ensured our general prosperity.
Compared to the United States, labor costs in China, Indonesia and similar nations were substantially lower than what U.S. workers earned. NAFTA/GATT allowed our corporations and U.S. entrepreneurs to move their manufacturing technology overseas and take advantage of the reduced costs of doing business, while avoiding our former trade protections that made such a move prior to NAFTA/GATT unprofitable. For those enterprises that made the move overseas right away, there was nothing but exorbitant profits to be made.
What could be better for a typical American manufacturer? You get to avoid all U.S. payroll taxes, worker's compensation costs and environmental regulations and hurdles. You no longer have to deal with unions and provide employee benefits like health insurance and retirement plans. You get to manufacture in China, Indonesia and similar foreign nations to your heart's content, and you still get to sell your products to the U.S. consumer at the same or nearly the same cost as before.
Those who benefited are the stockholders of these firms and their top CEOs and CFOs. If you had money to invest before NAFTA/GATT, your returns on the investments spiked. But if you are just the typical middle-class American family with an average $9,000.00 per month credit card balance and little or no savings except what's in your 401k, you didn't have the chance to participate in that gold rush. You were blind-sided and left behind, and the immediate effect of NAFTA/GATT was for around five million people who had high-paying, family wage paying manufacturing jobs to lose them to low-wage workers overseas.
The long-term effect of NAFTA/GATT just emerged in the form of Circuit City firing 3,400 of its highest paid employees for the publicly announced purpose of hiring replacements who will work for substantially less.
One of the major points I tried to drive home was that the standard of living in the United States would be drawn down by NAFTA/GATT, while the nations that now host those manufacturing jobs will see a modest gain. Where China is concerned, everything is relative, and relative to the standard of living China had before NAFTA/GATT, the Chinese people are experiencing a surge on par with the typical American family of the 50s, with a modest home and one car, but it represents a vast improvement over what they had before.
We've all heard stories of how people who once held higher-paying U.S. manufacturing jobs are now working two or three service jobs. Now we see that a major employer of service positions is forcing their highest paid workers out while bringing in people who will do the same job for less. Walmart has been doing that for years, although not blatantly. The shameless announcement by Circuit City is blatant, and there will be little if any backlash. The presently unemployed or under-paid employed will happily fill those Circuit City positions, and after a nice 10-week interlude, those former Circuit City employees can apply to get hired back at the reduced wage too.
What does that tell you? Now, service employers domiciled in the United States, who have no union entanglements, are embarking on a quest to force American wages down to increase corporate profits. So again we see the only beneficiaries will be those who can still make investments, and those employed at the top of the corporate ladders the very wealthiest Americans. The rest make up those often referred to now as, "The Shrinking Middle Class", but that's a misnomer. Considering a burgeoning debt level and a lack of personal savings not seen since the Great Depression, these people are the "New Poor" who just don't know it yet. They still have their expensive cars and nice homes for now, but they can't draw any more equity from their homes through refinancing, so they are adding to their credit card debt just to pay for basics like clothing and groceries.
In case you missed the latest report, it is common for average American families to spend 110% or more of their actual income, year after year, and that trend is impossible to sustain. At one point or another, those at-risk families are going to hit the wall and lose just about everything, and in many cases they will be denied the right to discharge their debts through Chapter 7 Bankruptcy, due to the Bankruptcy Reform Bill pushed by the credit card companies and signed into law by President Bush. You may be unaware that the largest single contributors to Bush 43's election campaigns were predatory credit card companies, who saw this day coming from long distance and made sure they were insulated from the fallout when it hit.
For Americans in general, the solution to this impending disaster is to reverse and cancel NAFTA/GATT immediately, restore our tariff and trade restrictions and set a rule that those manufacturers who want to sell to Americans had better plan on moving back to manufacture in America. The United States is still the most powerful consumer force in the world, so the incentive for cooperation is there.
Next, credit card companies should be regulated as they were before President Ronald Reagan removed usury restrictions and allowed them to charge any interest rate the market could bear. As I recall, credit card companies were allowed to charge 2% higher interest than the Prime Rate at the time, and no more than that.
Next, our returning manufacturers would get first dibs on raw materials produced in America, no matter what the Chinese would be willing to pay. That happens to be China's Achilles Heel, and it explains why our exports to China are largely raw commodities like wood, metals, chemicals, etc. China, as big as it is, doesn't have raw commodities to manufacture into desirable goods like the United States does, and if they don't have the raw materials, they can't produce the goods. Get it?
I know I sound mercenary, self-centered and all the other titles that go with those who oppose "free trade", but let me assure every one of you that what you see happening to the highest paid employees at Circuit City is just around the corner from happening to you or someone close. Free trade, as provided by NAFTA/GATT, is killing the American way of life and slashing our standard of living.
This once proud land of opportunity is no more. Just look at what happened to those United and Delta Airlines pilots who retired after 30 years service, only to see their former employers file bankruptcy and slash their pensions by one third or more. There's not a thing they can do about it. By carefully planned, long-term design, the corporations are now holding all the marbles, and We The People now hold none.
If you ask the average American on the street what issue is most pressing for this nation, most will tell you it is the war in Iraq. That is just how poorly informed Americans are. In truth, the most pressing issue facing Americans is our shrinking and collapsing economy due to NAFTA/GATT and our free trade policies.
So far, I haven't heard a single presidential candidate, other than Representative and presidential hopeful Ron Paul, mention the threat or what s/he would do about it. Hillary Clinton is married to the former president who signed NAFTA/GATT into law, so I wouldn't look in her direction for the solution, and since none of the other "major" candidates even mention the scourge of NAFTA/GATT, I wouldn't trust them either.
If nothing is done to correct this impending nightmare, just about every American family will suffer in one way or another, and most will find the experience immediately catastrophic, followed by a permanent reduction of living standard that cannot be recovered from in theirs, or even their children's lifetimes.
Carl F. Worden