Obama, Romney miss the elephant in the room

Trade PolicyBusinessChinaJapanServices and ShoppingTelecommunication EquipmentMitt Romney

The unemployment rate has been stuck above 8 percent for months. President Barack Obama continues to blame the moribund economy on President George W. Bush while claiming that he has created 4.5 million jobs. Republican challenger Mitt Romney announces that he will create 12 million jobs in his first term. The president has proven that he has no solutions for our sick economy, and Mr. Romney's promises are ludicrous.

Neither ever discusses the root cause of our current economic distress — our policy of signing free trade agreements with the third world as well as the Asian powers who practice mercantilism. After November we will find ourselves exactly where we are today with the existing failed strategy or a new, useless policy unless there is a drastic change in our foreign trade practices.

It is not as though the problems with our trade policy are a sudden revelation. The economic miracles of Japan, Taiwan, Korea, Singapore and Hong Kong were built on the backs of highly skilled but unemployed U.S. manufacturing employees starting in the 1970s and accelerating through the 1990s.

In 50 years, China moved from Confucianism to communism to mercantilism. Western companies, salivating at the potential of the Chinese consumer markets eagerly, transferred 200 years of technical development to China since 1990 as a price of entry. China has now become a larger version of Japan and the Little Tigers. Now India has joined the mix as a low cost source for high end computer systems design as well as services for U.S. companies.

In China, Huawei has 140,000 employees and is the world's second largest supplier of mobile telecommunications equipment, and BYD, with 130,000 employees, supplies half the world's batteries for mobile phones. China's Foxconn has 900,000 employees and is the world's largest manufacturer of consumer electronics as a subcontractor for Apple, Dell, HP, Sony and Nokia.

In India, Tata, Wipro and Infosys have decimated U.S. custom software development companies and have grown to about 400,000 employees with $10,000 per year software engineers working primarily for U.S. companies. Those firms' first success was in using $3,000 per year call center employees in India to serve U.S. markets. But American English is difficult to master for Indians, so the companies now employ an additional 400,000 workers at $5,000 per year in the Philippines because they speak English with American idioms.

U.S. TV manufacturers Magnavox, Zenith and Motorola were destroyed by low cost imports from Japan's Panasonic and Sony, followed by Samsung and LG from Korea. The Asians have moved up from cheap textiles, clothing and toys to high end commercial and consumer products.

The 2 million jobs listed above were stripped from the U.S. and are the tip of the iceberg. We now run a massive foreign exchange deficit with the Asian countries, purchasing low cost goods built with the technology that we exported. As a frantic move to stave off a total collapse of our economy, the Obama administration has borrowed and will continue to run trillion-dollar annual deficits in a futile attempt to jumpstart U.S. industries with $20 per hour labor without addressing the reason for our dilemma — $2 per hour Asian manufacturing labor and easy access to our markets.

Legendary U.S. business leaders have railed against America's unequal trade policies for 20 years. Ross Perot, the founder of EDS, opposed NAFTA — a disaster for U.S. jobs, as companies relocated to Mexico. Andy Grove, the founder of Intel, and Warren Buffet, America's most successful investor, have both offered proposals to end the ill-conceived trade practices which have caused our current economic distress.

Throughout history countries that run a positive balance of trade have strong and vibrant economies. Those with negative exchange balances don't last very long. Countries that debase their currencies to cover their internal costs collapse. We can wait for a violent correction or start to discuss solutions to our unequal trade agreements.

The president and Mitt Romney have yet to grasp the simple truth or are unwilling to propose new trade policies. Any election results which do not relate our jobs problem to unequal trade relationships will exacerbate the stagnant economy and turn the nation into a larger version of Greece.

Charles Campbell of Woodstock is a retired executive with Gulf Oil Corporation. His email is lochawe@verizon.net.

Copyright © 2014, Los Angeles Times
Comments
Loading