Border Enforcement Working

December 29, 2008

This linked article contains some interesting data about the success of enforcement efforts along our souther border.  Since 1993, the number of border agents has grown from 4,000 to 18,000 and 526 miles of fence have been erected.  The results are that border apprehensions are at their lowest level since 1976.  No doubt, work place enforcement is having an effect as well.  Let’s hope that the Obama administration keeps up the pressure.


Crackdown on China Trade Tactics: Will It Help?

December 24, 2008

Obama has promised to get tough on trade, cracking down on a wide range of practices ranging from subsidies to currency manipulation.  The linked article chronicles the challenges.  But will any of this really help reduce our trade deficit and bring manufacturing jobs back home, or will it initiate a global game of “whack-a-mole” where new trade offenders pop up as quickly as others are dispatched?

If the Obama administration attacks Chinese government subsidies, new trade barriers will pop up by the time the WTO has ruled against the old ones.  And by the time anti-dumping cases meander their way through the WTO bureaucracy, currency manipulation will have rendered the cases moot by restoring the profitability of the exports.  So then the focus turns to currency manipulation:

U.S. labor and trade groups will also browbeat the incoming administration to brand China a currency manipulator, potentially opening the door for other steps to pressure Beijing, including a possible complaint to the WTO.

China’s exchange rate with the United States is a festering complaint of many U.S. manufacturers who say Beijing deliberately undervalues its currency to boost exports.

“We are very committed to seeing some strong action on China’s currency,” said Thea Lee of the AFL-CIO labor group.

Obama, who said that China’s yawning trade surplus with the U.S. was “directly related to its manipulation of its currency value,” had backed legislation that would designate currency manipulation as a subsidy under U.S. trade remedy laws, noted Gil Kaplan, chairman of the Committee to Support U.S. Trade Laws.

“That was important legislation and I hope Obama will push forward some kind of legislative solution on currency manipulation,” said Kaplan.

Branding China a “currency manipulator” opens the door to imposing tariffs on China.  While that sounds promising, it’s unlikely to have much effect on our overall trade deficit.  Manufacturers will simply flee China and head for someplace else where gross overpopulation has produced a bloated labor force – places like India and Bangladesh.  The trade deficit with China will surely decrease, but other deficits will grow as quickly.  And, by the way, why single out China?  Japan has been at it much longer and makes China look like a rank amateur when it comes to currency manipulation. 

Such a piece-meal approach to trade is ultimately doomed to failure because it tinkers with symptoms while ignoring the root cause – the huge disparity in population density between the U.S. and so many of our trading partners.  Without a global system of tariffs designed to address huge imbalances in the supply and demand of labor, the overall trade deficit will persist.  The focus needs to be on our overall trade deficit, not on one country or another.  When expressed in per capita terms, our deficit with China is no worse than that with many other densely populated countries.  It’s time to stop blaming the trade policies of other nations and turn the focus on ourselves.  Our own trade policies are the problem.  We need a policy that assures a balance of trade regardless of what other nations do.  Our trade deficit is our responsibility, not theirs. 

Before closing, there’s one statement in the article that merits comment:

Obama’s trade dispute task-list is likely to grow, as labor and industry groups push agendas that will place him on a delicate tight-rope — to be seen to be protecting U.S. jobs while avoiding a potentially disastrous trade war with Beijing.

First of all, it’s time to stop being “seen to be protecting U.S. jobs” and actually begin doing it.  Secondly, we’re already in a “disastrous trade war with Beijing” and we’re losing badly because we haven’t had the guts or common sense to even put up a fight.  If and when we do decide to engage, it’s impossible to lose the war when you’re the one who has the trade deficit.  It’s no different than if FDR responded to the attack on Pearl Harbor by saying, “let’s not fight back – that might really piss them off.”

Toyota “Dumping” Cars on U.S. Market

December 22, 2008

As the Bush administration chides the domestic auto industry and demands that they come up with a plan to be profitable by March 31st of next year, it stands idly by while Toyota “dumps” its cars on the U.S. market.  “Dumping” is the unfair trade practice of selling products at a loss in an export market.  By its own admission (see the linked article), Toyota is, in fact, operating at a loss and dumping vehicles. 

Toyota Motor Corp forecast a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen in what it said was an emergency unprecedented in its 70-year history.

Toyota, the world’s biggest automaker, had been expected to issue its second profit warning in less than seven weeks after domestic rival Honda Motor Co also cut its outlook again last week, but the downward revision was bigger than predicted.

Of course, this is a new development resulting from the rapid slide in the dollar vs. the yen but, nevertheless, it puts Toyota in violation of international trade rules.  If Toyota fails to immediately raise their prices, the U.S. should file a complaint with the WTO (World Trade Organization).  If that doesn’t yield swift results, the U.S. should quickly impose tariffs on imported Toyota cars and parts.  And it should take the same action if other Japanese exporters report operating losses. 

“This is very, very, very bad,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. “There’s a chance they could fall into the red in the next business year as well.

“This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy.”

Remember when the same was said of General Motors and the American economy?  It’s still true, regardless of what other economic segment du jour  the free trade cheerleaders offer up as our latest and greatest economic salvation.  One day it’s high tech.  The next day it’s services.  The day after that it’s health care, as though we can have a thriving economy by everyone getting sick and nursing each other back to health. 

The truth of the matter is that there is no way to gimmick an economy back to health that has been sickened by the loss of one of its key segments.  Naturally, giving away our manufacturing sector through misguided trade policy has helped the “global economy” but it has weakened our own.  For decades we have tried to prop it up by enhancing other segments – first “high tech,” then services and finally the construction segment of the economy – but it was all doomed to collapse.  An economy needs all segments to remain healthy, including manufacturing.  It’s time to reclaim that segment and it’s time for nations like Japan to stand on their own two feet instead of scavenging the economy of the U.S.

Obama Raises Jobs Target

December 22, 2008

Earlier this month, when Obama announced his jobs creation program, I asked, “Is that all there is?”  (See “Obama Jobs Plan: Please Tell Us There’s More.)  Well, it seems that the Obama team has already recognized that it’s inadequate, raising the target from 2-1/2 to 3 million jobs.  In addition, he’s created a task force focused on helping the middle class. 

WASHINGTON (Reuters) – U.S. President-elect Barack Obama unveiled a new task force on Sunday charged with helping struggling working families, as an aide said Obama’s economic recovery plan would be expanded to try to save 3 million jobs.

The White House Task Force on Working Families, to be headed by Vice President-elect Joe Biden, would aim to boost education and training and protect incomes and retirement security of middle-class and working families whose plight Obama had made a central issue of his campaign.

I’ll point out again, all of this is woefully inadequate.  The U.S. is short 20 million jobs, not 3 million.  Since America’s labor force grows by 150,000 per month (due to population growth), creating 3 million jobs over two years means that unemployment will grow worse by 600,000 jobs instead of improving. 

Obama’s infrastructure spending will help in the short term, but that can’t be sustained for long.  In the end, the only way to put this economy back on sound footing is to restore its manufacturing base, bringing 6 million high-paying manufacturing jobs back home.  In addition, the administration has got to stop flooding our labor supply with immigrant labor.  Immigration intensifies the over-supply of labor faster than it contributes to consumer demand.

Biden said the economy was in worse shape than he and Obama had thought it was.

“President-elect Obama and I know the economic health of working families has eroded, and we intend to turn that around,” Biden told ABC’s “This Week.”

I have news for the Vice President-Elect.  The economy is in much worse shape than they realize even now.  The “economic health of working families” can only be restored by shifting the balance in the supply vs. demand equation of labor in favor of demand, driving incomes higher.  It cannot be done with more lending and debt.  The only way to stimulate a lasting demand for labor is by bringing home the jobs we’ve exported through misguided trade policy.

Holdren to be Nominated as Obama’s Science Advisor

December 20, 2008

As of the time of this writing, it’s not official yet, but it’s being reported that John Holdren will be named Obama’s Science Advisor.  From what I can gather about Holdren, this is a terrific pick.  Holdren has been an outspoken advocate of strong action to address climate change and, earlier in his career, co-wrote papers with Paul Ehrlich, author of The Population Bomb.  (Here’s a sample:

As I’ve said before, although Obama has never directly addressed the problem of population growth, nor has he given any indication at all that he sees it as a problem, you have to believe that someone as intelligent as Obama who is truly concerned about climate change and our dependence on foreign oil will eventually come to the realization that fueling population growth with high rates of immigration will be counter-productive to his environmental and energy objectives.  An advisor like Holdren can surely expedite that day of reckoning.

Obama’s Pick of Solis for Labor Worrisome

December 20, 2008

The following comment was posted by Robert in response to my post about Obama’s pick of Kirk for U.S. Trade Representative.  (See “Obama’s Selection of Kirk for USTR Disappointing.”)  As a member of FAIR myself, I find this nomination of Hilda Solis disturbing.  For someone who sold himself as a champion of working Americans, the picks of Kirk and Solis indicate that Obama doesn’t understand the roles of trade and immigration in stoking the supply of labor and contributing to falling incomes and benefits and the overall rise in unemployment. 

Obama’s selection of Hilda Solis is not a good sign for our future. Below is a statement from FAIR regarding Hilda which reinforces my reasons for not voting for Senator Obama. I hope you were right in supporting the Senator but if I were to predict the weather from his cabinet picks I would be leaning towards stormy weather:

Statement by the Federation for American Immigration Reform (FAIR) on the Selection of Hilda Solis for Secretary of Labor

Last update: 6:17 p.m. EST Dec. 18, 2008
WASHINGTON, Dec 18, 2008 /PRNewswire-USNewswire via COMTEX/ — In response to the selection of Rep. Hilda Solis (D-Calif.) as Secretary of Labor in the Obama administration, Dan Stein, president of FAIR, issued the following statement:
“President-elect Obama’s selection of a labor secretary who has steadfastly opposed protecting American workers from the impact of millions of illegal aliens in our labor force is yet another blow to hard-working families who desperately need those jobs. Both in Congress and as a member of the California Legislature, Hilda Solis has vigorously opposed efforts to institute and enforce laws against employing illegal aliens.
“If confirmed, Rep. Solis will assume the helm of the Department of Labor at a time when American workers face the worst crisis in generations. The U.S. economy has lost 1.25 million jobs during the last three months, and that crisis is likely to be exacerbated as the effects of the announced Chrysler shut-down ripple across the economy.
“The Department of Labor has a critical role to play in developing and enforcing a system that holds all employers accountable for ensuring that the workers they hire are legally entitled to work in the U.S., in addition to ensuring that wage and safety standards are enforced. At a time when the nation is facing an unemployment crisis, we need a Labor secretary who is prepared to defend the interests of American workers, not an advocate for the rights of illegal aliens. Sadly, Rep. Solis’s record does not indicate that she will be the strong advocate desperate American workers need in their corner.
“We hope that as president, Mr. Obama will uphold the trust the voters placed in him and make protecting the jobs of American workers a top priority. With more than 10 million Americans unemployed and millions more underemployed, it is essential that the new president direct all cabinet officers to use the authority of the federal government to ensure that American jobs are filled by legal U.S. workers.”
Rep. Solis’s Record in Congress
Rep. Solis was a cosponsor in 2007 of H.R. 1645, the STRIVE Act. The STRIVE Act would have granted amnesty to an estimated 12 million illegal aliens and severely undermined the interests of U.S. workers. H.R. 1645 would have:

— Created a new H-2C guest worker visa, adding between 400,000 and 600,000
new foreign guest workers. These workers would have been permitted to
apply for permanent residency.
— Allowed employers to layoff American workers in order to hire H-2C
— Doubled the number of employment-based immigration visas.

Other key votes relating to the interests of American workers included:

— Support for allowing illegal aliens to collect Social Security benefits.
— Opposition to REAL ID Act necessary to prevent illegal aliens from using
fake IDs to gain employment.
— Opposition to a measure to increase funding for E-Verify program.
— Support, as a member of the California Legislature, for driver’s
licenses for illegal aliens.

About FAIR
Founded in 1979, FAIR is the country’s largest and oldest immigration reform group. With over 250,000 members nationwide, FAIR fights for immigration policies that serve national interests, not special interests. FAIR believes that immigration reform must enhance national security, improve the economy, protect jobs, preserve our environment, and establish a rule of law that is recognized and enforced.

Copyright (C) 2008 PR Newswire. All rights reserved End of Story

Obama’s Selection of Kirk for USTR Disappointing

December 19, 2008

Obama has announced his selection of Ron Kirk, a former mayor of Dallas and a supporter of NAFTA, as his U.S. Trade Representative – America’s head trade negotiator.  Earlier, he offered the job to Xavier Becerra, congressman from California, but it seems that Becerra declined, unwilling to give up his new leadership role in Congress. 

Based upon the information provided in this linked article, I find the selection of Kirk to be very disappointing.  Kirk will be just another in a long line of Trade Representatives who foolishly believes that he can open markets for American products in a way that benefits America. 

 President-elect Barack Obama will name former mayor Ron Kirk the post of U.S. trade representative on Friday, thrusting the pro-trade former Dallas mayor into a sensitive balancing act between unions and business interests.

John Murphy, vice president for international affairs at the U.S. Chamber of Commerce, lauded Mr. Kirk’s record of support for free trade and its benefits in Texas, though he isn’t known nationally.

“Trade has been one of the only bright spots for the U.S. economy, and the Obama team is going to need every tool in its tool box,” he said.

Anyone who believes that trade has been a bright spot for the U.S. is easily identifiable as a free trade cheerleader – someone who ballyhooes exports while sweeping imports under the rug – all in an effort to obscure the damage that’s been done by the enormous trade deficit.  That such a person would think highly of the Kirk nomination is a bad sign. 

If confirmed by the Senate, Mr. Kirk would probably spend much of his time overseas hammering out trade deals and persuading foreign leaders to drop trade barriers, curb movie piracy and open new markets for U.S. goods.

This is exactly the approach to trade that has yielded a $9.2 trillion trade deficit since 1975.  Trade barriers never, ever get dropped and “opening new markets” always begins with opening America’s market first.  And that’s as far as the trade deal ever gets.  Our trading partners aren’t fools and have suckered us into horrible deals for decades. 

More reason for concern:

As Dallas mayor from 1995 to 2001, Mr. Kirk touted free trade. In a series of overseas trips, he pitched the Dallas area as an ideal trading partner.

This is one Obama appointment that I hope isn’t confirmed:

The top Republican on the Senate panel that will confirm the next trade representative, Iowa Sen. Charles Grassley, questioned Mr. Kirk’s qualifications. Aides noted that while most of Mr. Obama’s Cabinet picks have deep experience in their fields, Mr. Kirk has little background on trade issues.

Kirk seems like an odd pick, since Becerra, Obama’s first choice, was more in line with Obama’s espoused concerns about the role of trade in the demise of our economy.  Obama had promised an overhaul of NAFTA.  Is he backing away from that commitment by nominating Kirk? 

Mr. Kirk’s chances for the job got a boost Tuesday when the top contender, Rep. Xavier Becerra of Los Angeles, said he would stay in Congress.

Mr. Obama reportedly offered the Californian the job two weeks ago. But Mr. Becerra recently won a House Democratic leadership post, and was apparently loath to give that up after concluding – as he told Los Angeles-based La Opinion –that trade “would not be priority No. 1, and perhaps, not even priority No. 2 or 3” for Mr. Obama.

This is all terribly disappointing.  Kirk looks like just one more free trade stooge who will leave trade negotiators in China, Japan, Korea and Germany rolling in the aisles with laughter when he leaves.

Obama’s Opportunity to Kill Three Birds with One Stone

December 19, 2008

The inextricably linked issues of global warming and energy (eliminating our dependence on oil from the Middle East and Venezuela) have been elevated to national security issues by the Obama administration.  So, while consumers have welcomed the plunge in gas prices, they couldn’t have come at a worse time for this administration, for there is nothing that drives down the consumption of fossil fuels (the burning of which contributes directly to global warming) like high prices.  Without high prices, there is no profit potential to provide the motivation for a switch to more expensive alternative energy sources. 

So what is the Obama administration to do?  I see a unique opportunity for Obama to actually kill three birds with one stone here.  “Wait,” you’re thinking.  “You’ve only identified two birds – global warming and energy.”  Stick with me.  We’ll get to the third. 

The key is to drive fuel prices higher, restoring the impetus for improving energy efficiency and for converting to alternative energy sources, without hurting the consumer.  Here’s how that can be done.  It begins with imposing a large federal tax on fuels – oil, natural gas and coal.  Now I can just see your eyes rolling already, so hear me out.  Every penny of this tax should then be rebated to consumers in the form of a tax reduction of some kind – either a reduction in the tax rates or through a tax deduction or tax credit.  This tax reduction should be applied evenly to all individual taxpayers, but not to businesses.  (More on that later.) 

For example, let’s suppose that this tax drives the cost of gasoline back to $4 or $5 per gallon, and that a total of $600 billion is collected from this tax.  And let’s say that there are 150 million taxpayers.  Doing the math, each taxpayer would get back $4,000 at the end of the year.  If, on average, each taxpayer burns 2,000 gallons during  the year, and the tax added $2 per gallon to the price of gas, then that taxpayer comes out even. 

So how does this accomplish anything?  The tax rebate isn’t based upon how much you consume.  It’s based on total consumption by the American public.  So, if you do a better job than average of cutting your consumption, you’re going to come out ahead.  If you cut your consumption to 1,000 gallons for the year while the average remains 2,000 gallons, you’re going to come out ahead by $2,000 at tax time.  In other words, you have an incentive to slash your spending on gas.  At $4 per gallon, we’ve already seen how quickly people begin to use it more efficiently.  The tax rebate at the end of the year is just gravy.  Everyone is going to be highly motivated to cut their spending on gas, just as they were this past summer.  And now the profit potential is still there to motivate a switch to alternative energy sources. 

Why not extend the tax rebate to businesses?  Because, unlike consumers, businesses use vastly different quantities of fuel, depending on the nature of the business.  It’d be an accounting nightmare to try to keep them “whole” in terms of fuel cost vs. tax rebate.  Besides, their products are all consumed by individual taxpayers, so if the fuel tax collected from businesses is also rebated to individual taxpayers, then the latter are kept “whole” in terms of the tax rebate off-setting the higher cost of products.  In addition, with higher fuel costs and no tax rebate, businesses will be super-motivated to improve their energy efficiency. 

But, since businesses will have to add this fuel tax to the cost of their products, won’t this make American-made products uncompetitive with imports?  Ah, this is where the “third bird” comes in!  Imports would also be taxed at a rate that would eliminate this cost discrepancy.  But isn’t that a tariff that violates WTO (World Trade Organization) rules?  Yup!  And this is where it gets really good!  The global community, led by the UN, has been beating us over the head to come up with a plan to address global warming.  So, UN, here’s the plan.  Do you have a better one?  If not, then the global community, led by the UN, needs to sit down with the WTO and demand changes to trade rules that accommodate nations’ efforts to address global warming.  After all, everyone acknowledges that one of the keys to cutting fuel consumption and CO2 emissions is to produce more products locally.  And no one can argue that trade policy takes precedent over the need to fight global warming. 

In fact, that brings up another issue.  Billions of gallons of fuel are burned every year in ships delivering products all over the world.  That’s a lot of oil consumption and a lot of CO2 emissions.  It has to be factored into the equation by someone, in some way, because the cost of dealing with global warming is going to be astonomical.  A good way to account for this is to require each nation to include in its emissions the fuel burned by ships delivering imports, beginning with their point of origin.  What I’m saying is that imports should be taxed based upon the fuel that was burned to deliver them. 

For example, let’s suppose that a ship delivering cars from Japan burns about five million gallons of fuel and delivers 5,000 cars (fairly typical figures).  That fuel should be taxed at the same rate as fuel burned in the U.S.  Again, assuming that the tax adds $2 per gallon to the cost of fuel, then that delivery of cars should be assessed a tax of $10 million.  That would add $2,000 to the cost of each imported vehicle.  In fact, even the delivery of oil in tankers should be taxed in the same way, to mitigate the cost of dealing with the emissions from the oil burned in the ship’s engines.   

This means that imports would have to be taxed twice, or in two ways:  one tax to offset the higher cost of domestically produced products (unless the exporting nation has implemented a similar system of fuel taxes, making the imports equal in cost to domestic products), and a second to offset the cost of mitigating the carbon emissions that came from the ship delivering them.  Of course, all of these taxes or tariffs, whatever you choose to call them, would also be rebated to American taxpayers.  The goal is not to collect revenue, although some additional revenue could go a long way toward balancing the federal budget, but that’s a whole can of worms I won’t open here.  Rather, the goal is to provide incentive for cutting the use of fossil fuels and switching to alternative energy sources. 

The beauty of this is that the higher cost of imports would also go a long way toward restoring a balance of trade, an issue that many experts now agree is at the heart of the global economic melt-down. 

So, with one stone – a tax on fuels – the Obama administration could kill three birds:  reduce oil consumption and greenhouse gas emissions, and even restore a balance of trade, all with minimal impact on American consumers.  He can use the climate change issue to drive a wedge between the UN and the WTO and effect a badly-needed overhaul in WTO rules that would restore some balance to global trade.

UN Climate Conference Notes Role of Population Growth

December 17, 2008

This linked article offers one more glimmer of hope that the subject of overpopulation is getting more attention.  Although the article reports that the UN is unwilling to take on the issue of population growth as it grapples with global warming, experts in attendance at the UN climate conference in Poland recognize the role of population growth in worsening the problem and see a need to address it on a national level.

“Population is the unmentioned elephant in the living room when it comes to climate change,” said Bill Ryerson, president and founder of the Vermont-based Population Media Center.

“A lot of people say population pressure is a major driving force behind the increase in emissions, and that’s absolutely true,” the U.N.’s top climate official Yvo de Boer said.

“If we don’t address the population issue and population continues to grow the way it is, … we will fail to solve the climate crisis,” Ryerson said.

Brian O’Neill, a population expert with the National Center for Atmospheric Research, said there is substantial evidence showing a strong correlation between a country’s economic growth and its emissions.

Even if it doesn’t come up in Poznan, the Worldwatch Institute’s Robert Engelman said policies to slow population growth will eventually find their way into the climate toolbox for many countries.

“Population doesn’t need to be part (of) international negotiations on mitigation. You don’t have (to) say country X will cap its emissions and population,” he said.

“But countries will begin to see that a more rapidly rising population will make it hard for them to curb emissions,” said Engelman, the author of “More: Population, Nature and What Women Want.”

With the heavy emphasis that Obama has placed upon the issue of climate change, elevating it to a national security issue, how could it possibly escape his attention that it is exacerbated by population growth?  To hope for some kind of national policy aimed at stabilizing our population may be a stretch but, at the very least, one would hope that it will make Obama reluctant to liberalize immigration policy.

Is Toyota Guilty of “Dumping?”

December 13, 2008

The linked article reports that Toyota is likely to report a loss in their 2nd half (the October 2008 – March 2009 time frame).  This begs the question:  if Toyota is selling cars at a loss, isn’t it guilty of “dumping,” the practice defined by the World Trade Organization as selling products below cost?  Shouldn’t the U.S. immediately file a complaint with the WTO?  Shouldn’t the WTO immediately either force Toyota to raise their prices or authorize the U.S. to impose tariffs on Toyota vehicles? 

Some may protest that the domestic automakers are also operating at a loss.  True, but that doesn’t violate any international trade agreements.  No other nation can take a case against the Big Three to the WTO because no one imports American-made cars, for all intents and purposes. 

But none of this will happen.  WTO rules are for the U.S. to follow and no one else.  We’ll simply give Japan time to dump yen and buy dollars, manipulating the dollar-yen exchange rate back to where they can easily make a profit.