America has been in a trade war ever since the country started, retired U.S. Sen. Fritz Hollings reminded members of the Rotary Club of Charleston this week.
The problem, however, is America forgets it is in this war, a struggle that is costing jobs and our national backbone.
The result? China is cleaning our clocks by making stuff that we no longer make — everything from steel, textiles and computers to the cheap doodads and T-shirts found in abundance at beach-side shops. But soon, Hollings predicted, Mexico will become the next China for U.S. businesses due to Mexico’s proximity to the U.S., increasing stability and low wages.
Hollings, born in 1922 when the British Empire was at its largest, offered a history lesson.
The first substantive measure of the new United States was the Tariff Act of 1789, signed into law on July 4 by President George Washington. Congress enacted this protectionist tariff that included a 10 percent duty on imports carried here on ships “not of the United States.” Why? To encourage America to fend for itself by making things, not relying on Great Britain and others to do it.
By the time of the Civil War when America started building the Transcontinental Railroad, many wanted to import foreign steel because it would be cheaper. But President Abraham Lincoln said no. He wanted to country to build its own iron and steel industry so that when the railroad was finished, the country would then have steel capacity — along with jobs, capital and wealth — of its own.
Fast forward to World War II when America’s manufacturing machine muscled out tanks, planes and uniforms. The country was strong and the world — including a British Empire in decline — looked to America for strength. That continued until the 1960s, when foreign markets started to develop manufacturing capacities just as we had done.
Then American businesses, seeking to maximize the next quarter’s profits, started closing manufacturing plants, decimating domestic industry after industry. Manufacturing moved overseas to places like Japan, China, Korea, India and Pakistan.
These days, Washington politicians do nothing to keep American companies from offshoring their production, Hollings complained. All the while, China laps it up, wanting more and more of America’s market share while creating domestic needs to keep its factories going. What does the United States do? It keeps borrowing to pay the government bills — so much so that the nation is trillions of dollars in debt and pays annual interest fees of more than $400 billion — yes, billion — a year. Interest, as budget hawk Hollings pointed out, pays for nothing other than our past, irresponsible spending.
What’s interesting — and sad — about this tale of the rise and fall of American manufacturing is how history is actually repeating itself. China — certainly not a democracy — is doing nothing but a modern-day economic take on bulking up to make things at the expense of the United States, which did the same thing to Great Britain in the Industrial Age.
The only way to combat what’s happening to the United States is for us to start making lots of stuff again. To do that, we’ve got to make it more attractive for big multi-national industries to manufacture again in America.
Hollings often suggests a way to increase competitiveness is to replace the country’s 35 percent corporate income tax, which multi-nationals scurry to avoid by offshoring, with a 7 percent value-added tax added on at each stage of production. He says our competitors across the world — more than 150 countries — take this approach. But because we’re not, we’re being played as Uncle Sucker.
Hollings argues if Congress would get off its duff, enforce existing trade laws and enact a VAT, the country would actually experience a tax cut!
Fritz Hollings was born when Great Britain started its decline. Despite years of fighting the good fight to keep America strong, our nation is declining today because of what’s being done by China and other manufacturing tigers.
Let’s turn that around. Now would be a good time to start.
 
You can read periodic commentaries by Hollings online at: www.FritzHollings.comAndy Brack, a former Hollings staffer, is publisher of Statehouse Report. He can be reached at: brack@statehousereport.com     

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