President Barack Obama has done little to close America’s trade deficit. With some countries, that deficit has grown. (Jewel Samad / Getty Images)
As a proud American, it's difficult to watch vital government programs cut mindlessly because of sequestration.
And as a proud Michiganian, it's painful to anticipate Detroit's emergency financial manager because of the city's troubles.
I'm afraid sequestration won't solve America's fiscal problems any more than a takeover will put an end to Detroit's difficulties.
The root cause of the nation's budget crisis is the same as Detroit's. In both cases, decades of misguided trade policy hollowed out our manufacturing base, caused wages to fall and starved our governments of revenue. In both cases, our trade imbalance is masquerading as a debt crisis.
Detroit and its people are suffering collateral damage from decades of bad trade deals and trade concessions. For decades, the Motor City was the greatest manufacturing city in the world. Then the U.S. government started to dismantle the nation's industrial base to achieve foreign policy objectives.
For Gov. Rick Snyder to turn the city's finances around, he'd have to single-handedly change U.S. trade policy, eliminate foreign export subsidies and overhaul the tax systems of our trading partners.
Detroit began to falter in the 1950s, when factories shut down with alarming frequency. Those were the years when the U.S. government rescued Toyota from bankruptcy by buying its trucks for the Korean War.
Those were also the years when the U.S. made trade concessions to Japan, looking the other way while Japan built up its auto industry behind massive trade barriers. There was a reason: After World War II, the U.S. wanted to control Japan's military and foreign policy and build bases on its territories. Our trade deficit with Japan in January was $6.1 billion.
NAFTA accelerated the move of our auto manufacturers to Mexico. In 2011, the growth of Mexican auto exports to the U.S. created 30,400 Mexican jobs, more than the entire U.S. auto industry created that year. Our trade deficit with Mexico in January was $3.6 billion.
Another big problem for U.S. manufacturing is discrimination by countries that impose the Value-Added Tax. The VAT is the reason a U.S. car that's almost the same as a German model will cost at least $12,000 more in Germany. German automakers get a rebate on every vehicle exported to the U.S. At the same time, U.S. automakers pay a tax on cars exported to Germany, plus a tax on the cost of transport, insurance, docking and duties. Our trade deficit with Germany in January was $4.2 billion.
Just last year, the U.S. signed another trade deal with South Korea. Our trade gap in January was $2 billion, the highest since November 2004.
The financial problems faced by both Detroit and the U.S. government won't be solved simply by cutting spending. They'll be solved by rebuilding our manufacturing base and creating good jobs. Only by retooling our flawed trade strategy will that happen.
James P. Hoffa is general president of the International Brotherhood of Teamsters.
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