Hendrickson: Is the trade deficit significant?
A few recent headlines have passed without much attention. First, our national debt reached $30 trillion, and second, the trade deficit for 2021 reached a record high of $859.1 billion. Both have received little attention because the American people have grown numb to a massive national debt and trade deficit. Policy makers have ignored both of these issues. This is unfortunate because the national debt and trade deficit are serious issues that will affect the national economy. It should be pointed out that the national debt and the trade deficit share a similarity in that both political parties are responsible.
The trade deficit receives less attention than the national debt. One of the reasons for this is that it is complicated and most policy makers on both sides of the philosophical divide view it as meaningless. A trade deficit is simply defined as imports into the United States far exceed what we export as a nation. The trade deficit of $859 billion represents a 27% increase over the previous year.
Another factor in the 27% increase in the trade deficit was that consumers were buying more imported goods combined with higher prices due to inflation. Some of the main imported goods included computers, cell phones, toys, furniture, automobiles and medical supplies.
The trade deficit with China was $355 billion, marking a decade of deficit reaching over $300 billion. The United States also ran a sizable trade deficit with the European Union, among other nations.
Since 2001, the nation “has racked up more than $12 trillion in cumulative global deficits.” China’s exports to the United States have increased by 31% since 2018. An estimated 3.7 million American jobs were lost to China between 2001 and 2018. This does not include manufacturing which was lost to other countries.
“Isn’t the case now conclusive that we made a historic mistake when we outsourced our economic independence to rely for necessities on nations that never had America’s best interests at heart” , asked columnist Patrick J. Buchanan?
The question must be asked whether the United States has outsourced too much and become too dependent on countries like China? The COVID-19 health emergency has demonstrated that globalization has not only drained our manufacturing base, but made us dangerously dependent on other nations for our necessities. This was the result of numerous so-called free trade agreements as well as China’s admission to the World Trade Organization. The consequence has resulted in the loss of manufacturing jobs, which has decimated the middle class.
Ambassador Robert Lighthizer, who served as President Trump’s U.S. Trade Representative (USTR), says “trade agreements of that era, such as the North American Free Trade Agreement, removed tariffs on imports from low-wage countries, exacerbating job losses in the manufacturing sector”. .” It impacted communities across the country, especially in the Midwest. Ambassador Lighthizer noted that the United States had lost 5 million manufacturing jobs.
“This, in turn, has devastated cities and contributed to broken families, an opioid epidemic and despair,” Ambassador Lighthizer wrote. The “blue-collar workers” became the “forgotten men” and were often told by the political elite that they should either abandon their communities and move or learn another skill like computer programming. This “creative destruction” had consequences. Consumers were able to get cheaper products, but the loss of manufacturing jobs led to lower wages, greater reliance on welfare programs, and economic decline for many communities.
Columnist Terry Jeffery reviewed data from the Bureau of Labor Statistics and found that in January more than 22 million people were employed by government, while just over 12 million were employed in manufacturing. “Government employees now outnumber manufacturing employees by 76.3%,” Jeffery noted.
The United States has become dangerously dependent on foreign nations, even potentially hostile nations like China, for essential goods. This even includes documents related to our national security and defense. Currently, a shortage of semiconductors exists. “Why are semiconductors so important? Because computer chips are the “brains” not only of computers, cars, and medical devices, but also of the weapon systems that support the US military. Being so dependent on imported computer chips makes US national security vulnerable to the whims of the global marketplace,” wrote Michael Stumo, CEO of the Coalition for a Prosperous America.
“What is worrying is the extent to which China dominates the global supply of these crucial resources. For example, China controls 70% of global lithium supplies, 80% of rare earth metals, and about 70% of global graphite. These materials are irreplaceable for producing everything from electric vehicle batteries to solar panels and semiconductors,” Stumo explained.
Many economists and policymakers will argue that globalization is a net positive. The consumer benefits from cheap goods and businesses can make more profit because they can save money by paying lower wages and fewer regulations in foreign countries. However, the result is not just a loss of manufacturing jobs and greater dependency, but also lower wages and more people relying on welfare programs to survive.
“We must do everything we can to restore a vibrant manufacturing sector in this country, capable of employing workers at decent wages, wages that can feed a family and sustain a community. And we can start by requiring that at least half of all goods and supplies critical to our national security be made in the United States,” said Senator Josh Hawley.
Whether it is pharmaceuticals, medical supplies, or other necessities, the United States has become overly dependent on foreign nations. This affects both our economy and our national security. Our steel industry was about to be decimated before President Trump imposed tariffs to protect this vital industry. Coupled with foreign dependence, there is a need to further exploit the precious metals that drive technology. Should we rely on China for the natural resources needed to advance both our national defense and our national economy?
Our founding fathers understood the danger of depending on a foreign power for necessities. Alexander Hamilton, who served as General George Washington’s secretary and aide-de-camp, led a charge in the Siege of Yorktown, which resulted in British defeat in the American Revolutionary War. Hamilton would later become Secretary of the Treasury in President George Washington’s administration and is considered the “father of American capitalism”. During the Revolutionary War, Hamilton saw firsthand the hardships the Continental Army endured. A significant difficulty was the lack of supplies and reliance on France for resources. In 1791 Hamilton published his Manufacturers Report and a main argument was the importance of national self-sufficiency. As Hamilton argued:
Not only wealth; but the independence and security of a country seem materially linked to the prosperity of manufactures. Each nation, in view of these great objects, must strive to possess within itself all the essential elements of national provisioning.
In his first message to Congress, President George Washington offered a similar argument when he said the nation should “promote factories that tend to make them independent of others for essential supplies, especially military.”
As a nation, how have we drifted so far from the sage advice of Washington and Hamilton? The answer is globalization and the consensus over the past decades between the two political parties to conclude so-called free trade agreements. Republicans and Democrats have embraced and worshiped at the altar of the golden calf of free markets and free trade. They also chastise critics as isolationists and protectionists.
Tariff policy (protectionism) is rooted in our history and economic nationalism, or patriotism, does not mean opposition to trade. As Patrick J. Buchanan explains:
Protectionism is the structuring of trade policy to protect national sovereignty, ensure economic self-reliance, and “prosper America first.” It was Republican Party policy from Abraham Lincoln to Calvin Coolidge. America began this era in 1860 with half the production of Britain and ended it producing more than all of Europe combined. Is this a record to be ashamed of?
“Conservative statesmen, from Alexander Hamilton to Ronald Reagan, have at times supported protectionism and at other times leaned toward lowering barriers. But they always understood that trade policy was just a tool to build a strong, independent country with a thriving middle class,” Ambassador Lighthizer wrote.
Senator Hawley is also correct that we need to rebalance trade and bring manufacturing back to the United States. Crafting offers higher wages and strengthens communities. President Donald Trump was the first to start rebalancing our trade policy and encouraging the growth of manufacturing.
The United States has become too dependent on foreign nations for its needs. Already in 2022, the trade deficit continues to increase. It would be wise to ignore the liberal globalists of both political parties and learn from the conservative nationalists and put the interests of the American people first. Both record trade deficits and the national debt pose serious threats to our economy and national security.