Money Pit

The leaves on the Japanese maple in my yard are a deep shade of red. Three locally grown pumpkins sit on my front porch. A bottle of wine sits in my refrigerator, chilled and ready for a Friday evening dinner. Life is good. But I keep thinking about what happened in Washington, D.C. yesterday. Perhaps you all are thinking about it, too.

Congress passed three long-delayed free-trade agreements with South Korea, Columbia, and Panama. The South Korea component represents the largest expansion of trade since 1993, when the North American Free Trade Agreement (NAFTA) was first signed. The Wall Street Journal called the passage of these agreements "a bipartisan triumph."

Hate to sound like a party pooper here, but I won't be doing the WSJ-led dance of joy. And no, I'm not some short-sighted protectionist nutcase intent on stopping globalization. I know we need free trade. I know we need to get our products to far-flung markets. And I'd like to believe that these trade agreements will open previously shut doors and increase orders for American-made goods off-shore, which in turn would mean increased manufacturing jobs in our country. But please. The trade door, once opened, swings both ways. These agreements will steal away still more U.S. manufacturing jobs. Out they will go. American corporations will improve their bottom lines, post record profits, and create thousands of jobs…in other countries.

Which brings me to the most troubling part of these agreements: the taxpayer-funded mandate attached to them. Called H.R. 2832, the Trade Adjustment Assistance Extension Act of 2011 will benefit groups of "workers who are laid off because of an increase in imports from, or a shift in production to, a country with which the United States has a free trade agreement in effect."

Say what? Laid off workers? Wait, I thought the trade agreements were supposed to create jobs, right? Isn’t that one of the justifications cited by those who supported the agreements? President Obama hailed the agreements as a "win for American workers." Why? Just guessing, but I'm pretty sure it has something to do with the nifty perks wrapped into the trade agreements via H.R. 2832.

H.R. 2832 is called an "extension" because it's an old perk that's now being remodeled / added onto. Reminds me of that movie The Money Pit. Once you begin remodeling an existing structure, watch out for out-of-control costs. Before you know it, the whole darn thing implodes on itself taking everyone with it. The Trade Adjustment Assistance Act has been around since 1962. It was expanded upon in 1974, then curtailed in 1982 by President Reagan. According to Wikipedia: "In 2002, the program was again expanded and combined with the trade adjustment program provided under the North American Free Trade Agreement." TAA was conceived "as a way to reduce the damaging impact of imports felt by certain sectors of the U.S. economy, even as consumers and other sectors benefit from imports." More Wikipedia info (I know it's Friday and we all just want a glass of Wente Vineyards Riva Ranch Chardonnay--well, I do--but stay with me here):

The current structure features four components of Trade Adjustment Assistance: for Workers, Firms, Farmers, and Communities. The program for workers is the largest, and administered by the U.S. Department of Labor. The program for Farmers as administered by the U.S. Department of Agriculture, and the Firms and Communities programs are administered by the U.S. Department of Commerce, Economic Development Administration.

Yikes. Layers and layers and layers of paybacks and favors and back-slapping, stretching across the decades, and we the powerless taxpayers fund it all. And apparently this latest "extension" is offered to workers in "groups," meaning if you are an individual (as opposed to a union member) who has lost out on a job due to offshoring, you're out of luck twice. No job. No help. So much for the rights of the individual.

It's all a big ol' mess, don't you think? And for what? If corporations want to offshore, they should be free to do so. But instead of requiring that Americans pay benefits to laid-off workers, Congress should get busy, earn their wages, and change this country's corporate tax structure, which is currently the highest in the world. Lower the repatriation tax on corporate profits made offshore. Encourage businesses to bring their profits home and stay here. Then the TAA--and NAFTA--would become irrelevant.

Let's end on a positive note: Last night I attended a panel discussion organized by the San Francisco Chapter of the Association for Corporate Growth (ACG) called "Re-Shoring: Is Manufacturing Coming Back to the United States?"

Three panelists discussed "re-shoring" from their unique perspectives as founders and heads of middle-sized companies involved in various types of manufacturing. Each panelist agreed: to guarantee top quality products, it's best to manufacture here. Period. Statistically, the cost benefits off-shoring continue to narrow. Labor costs, costs of materials, shipping costs in China, for example, all have risen dramatically. And of greatest concern to everyone on the panel is the inestimable cost when intellectual property is stolen. The bottom line: they all want to manufacture here. Two of the companies already do and will continue to do so, and the third has definite plans to return here in the coming year. Note to WSJ: That's what I call a "triumph."

Just for laughs, check out political cartoonist Bob Englehart's latest creation (his remarks that follow on Hartford Courant's website underscore points I made a couple of days ago about changing demographics and the need for more factory jobs).

Okay, time to open the Wente. Cheers, America.

PS: On Sunday Don / Richie C and I will begin a week-long CAMJ fact finding mission in Hawaii. Palm trees, white sandy beaches, Kona coffee. I know. Our dedication to the Buy American movement knows no bounds. I'll continue to post from time to time. Aloha!