Thursday, December 17, 2009

Our Disposable Society

Thesis Statement

Although open trade with the Peoples Republic of China has provided better access to products at lower prices from wholesalers, the Unites States trade deficit with China impacts the US economy as a whole and is a large part of the current economic crisis.


Introduction

The goal of this essay is to present tangible evidence that will show that the downturn in the United States (US) economy can be halted and reversed in 7 days. This is a bold statement, but I believe that the fix is very simple and can be achieved without spending even a single tax payer dollar. The US economy can return to a thriving state once again in as little as 90 days. Furthermore, without the need to bail out banks and automotive manufacturing companies, neither does it require imposing additional taxes on US citizens or cutting government spending programs.

The US-China Relationship

China has become an economic superpower in the last quarter century largely due to its trade relationship with the United States which began in the 1970s (U.S. Department of State). Since the beginning of trading between the United States and China, China has experienced an average of 10% economic growth per year and increased its gross domestic product (GDP) by an impressive 400% (Bureau of Transportation Statistics). United States exports to China over the last 25 years have steadily declined in comparison. The relationship has increased wealth and revenue within the United States retail industries but at a price. China has spent the last quarter century increasing its manufacturing capabilities and perfecting its export processes to meet the supply and demand requirements of a global economy. China is a fine tuned machine and their manufacturing capabilities have expanded to include those export commodities that were once flagship exports of the United States.

American machinery, electrical equipment, garments, textiles, high-tech products, footwear, toys, plastics, furniture and steel were at one time heralded as the best in the world. The quality of those products manufactured and engineered in the United States were desirable, envied by the entire the world and in some cases were built to last for generations. It has been many years since I have found a tag in my Levi jeans or any other product for that matter, that stated “Made in U.S.A.” As a personal challenge I recently went on a search of my home and tried to find any item bearing the “Made in U.S.A.” trademark. My search resulted in null. What was even more alarming to me was that 98% of the items I searched were clearly marked “Made in China.”

Having lived in North Carolina for a few years now, I have heard the cries of those who grew up in this state about the textile mills that sit empty because those products are now being produced in China. I have given much thought to the fact that much of what I use and consume every day of my life is imported from China. What happens to this country, the United States of America, if relations between the US and China turn sour? I assume that the US Government has some checks and balances in place to ensure that this does not occur but are there? I do not believe that this is a good position for any free country to be in and maintain its freedom.

The table below illustrates the fiscal implications of trade relations between the United States and China from 1985 to 2008. In creating this table, two things became clear to me. First, the United States and China established a trade agreement with the help of the World Trade Organization (WTO) that began with a fair and lucrative playing field. This is apparent when I look at the trade deficit in the first year (1985). Although the United States did have a deficit in 1985, China was an emerging Ally and so concessions would be expected. My second observation was that in 25 years the United States never exported to China more than it imported from China. The United States has transacted business with China with no hope of matching their GDP since the beginning and continues to allow this exchange to continue unchanged.

SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D.C. 20233

So why does the United States government allow this to continue year after year? Why do the very people American citizens elect to improve our economy and watch out for our best interests stand by and idle while this occurs? I believe they do so for two reasons. The first reason that change has not been implemented thus far is greed. In the case of greed the explanation comes in various forms and is not very simple. But consider the large entity retail companies like Wal-Mart and Home Depot before they put their smaller competitors out of business. They were able to under price their competitors by importing the same products that US consumers purchase every day at remarkably lower cost from China. These large entities wanted to be number one and employed the best minds to create the processes that would forge a global economy and ensure their success.

The second reason that the United States government allows this deficit to continue can be categorized under fear. Having an ally like China that will invest billions of dollars into the US economy during difficult times is very convenient for politicians. Having such an ally means that the core problem of lop-sided trade agreements never has to be dealt with. Instead, the US government borrows more money from the ally and raises the taxes of its citizens in hopes of someday repaying the debt that it has incurred. Does the debt ever get repaid? No it never does, they just alter trade agreements and allow that ally the freedom to export more of its product to the United States and bolster their economy off of the American people. I will save the rest of that thought for another paper.
Conclusion

So how does the United States deal with the current deficit and halt the downturn in the economy in seven days? The solution is simple and to sum it up in one word, I will recant a word touted by a recently elected President in his election campaign and that word is “Change.” The best change that American citizen can make is to buy locally. Begin doing business with local merchants, farmer’s markets and meat butcher’s. This change in purchasing will cost a few pennies on a dollar more but send a clear message to those in power at the same time.

Of course, the United States cannot simply take its ball and bat and go home but one thing is for certain, these God blessed United States of America must begin to manufacture and export gross domestic product from its own backyard again. These textile mills, steel mills and automobile plants have to have electricity running through their walls again and put Americans back to work. This cannot be done overnight and I understand this much. Putting Americans back to work in these roles will take time but not much time. In 90 days congress can easily pass legislation that would impose new tariffs on products imported from China to begin leveling the playing field immediately. Moreover, Congress can set limitations on the ratio of product import versus export with its allies, not just China.

Every American can make an impact by contacting their local US Representative and requesting that change be brought about expediently. I can do this. America can do this. Buy American.

REFERENCES

The U.S. Census Bureau (1985-2008). FTD - Statistics - Country Data - U.S. Trade Balance with China. Retrieved on June 16, 2009 from http://www.census.gov/foreign-trade/balance/c5700.html.

Bureau of Transportation Statistics (1998-2006). BTS
Table 1 - Top 10 Commodities Traded Between the United States and China in 2006 Compared to 1998 Trade in Those Commodities. Retrieved on June 16, 2009 from http://www.bts.gov/publications/bts_special_report/2008_007/html/table_01.html.

The U.S. Department of State; Bureau of East Asian and Pacific Affairs (January 2009). China (01/09). Retrieved on June 16, 2009 from http://www.state.gov/r/pa/ei/bgn/18902.htm.

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