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Di Leo: Trade Deficits and the Quest for Culprits



Oil tanker ship

By John F. Di Leo - 

The Trump Administration has announced its formal inquisition into America’s trade deficit, with a particularly loaded day of testimony scheduled for May 18, in which the administration hopes to learn the various causes for America’s huge import volume.

The administration conjures up an image of evil old foreign prime ministers and their assistants – grasping witches with candy-covered cottages in the forest, looking for sweet little American manufacturers – Hansel Inc. and Gretel LLC – tempting them with tasty morsels and sweet confections, luring them off the American path, moving them permanently into their distant foreign domains.

While the single-minded focus is new, this general conceptualization is not.  Protectionism goes back hundreds of years, and certainly, for at least a century now, a certain branch of American demagogues has chosen to blame evil foreign practices for America’s loss of manufacturing. 

They identify unfair trade practices such as a foreign government’s subsidy of a specific industry, and enact anti-dumping penalties that do little to help the protected industry, but impoverish its American consumers with crippling 200% and 300% duties. They see a few hot new foreign manufacturing sites in the trade publications or the shipping statistics – Manaus or Hong Kong, Bangalore or Singapore – and immediate blame that foreign country’s sneaky Special Economic Zone, as if a country that tries to encourage its own domestic job growth is somehow committing an international crime.

But is that fair?  

Blinding Ourselves

The United States has long been suffering from a Leftist tendency to “Blame America First” for the problems of the world.

  • We see a foreign civil war, and we’re tempted to wonder if our market for its oil contributed to their turmoil (the answer is No, it didn’t.)
  • Or we see foreign poverty, and we’re tempted to blame ourselves for not insisting on paying more for their rice or sugar cane than their dictators charge us (again, No, if we paid more, their dictators would just keep it for themselves).
  • We have even been told that when foreign children are sick, it’s somehow our fault, because we don’t share our medicine with the entire third world (again, blatantly False, as American pharmaceutical firms and pro-bono doctors are famous for traveling the world and donating their services to the poorest of the poor).

So it is usually No, the problems of the world are not our fault.  As conservatives (especially Rush Limbaugh, on his radio program) have always said, the problems of the world are not due to an insufficient distribution of resources, but to an insufficient adoption of capitalism.

That being said, however, the problems of our own country are our own responsibility.  Just as we should not take responsibility for foreign countries’ problems, we have no business blaming foreign countries for our own.

If the United States were fully welcoming and supportive of our manufacturing base, and companies still left for foreign shores anyway, then we would have reason to look outward for foreign places to affix the blame. 

But we are not.

For generations now, the United States has punished the manufacturing sector more than any other industry.  Education gets to be tax-free, manufacturers get taxed to pay for it.  Soup kitchens are tax-free non-profits occupying a city storefront, the real retail shop in the storefront next door to it pays twice the property taxes to make up the difference.  City halls and park district offices with huge buildings, parking lots and gardens are all tax-free; the factory right across the street, with building, garden and parking lot – taking up an equal square block of land – pays twice the taxes to cover the costs of roads, parks, police, and fire…

But the business community doesn’t complain.  It just works harder to get by. 

It works harder. And harder. And harder.

The Daily Analysis

Every single day, American companies analyze whether they can continue to manufacture their products where they are, or whether it’s become impossible, and they need to flee.

A wise nation would do everything it can to keep them from having to perform that analysis, because once the analysis begins, in the modern world, anything becomes possible. 

The inner city factory that flees because of crime, taxes, and regulations may just flee to the other side of the city… but it may also flee to the suburbs, or to the next county. 

But if a company is fleeing Chicago’s crime and taxes, it is also fleeing Cook County’s taxes, and that means it is also fleeing Illinois’s taxes, and overregulation, and workmen’s comp system, and a state budget and public pension terror that promise naught but ever higher taxes in the years to come… so it will move farther away, perhaps to Wisconsin, or Indiana, or Texas, or Louisiana.

And at some point, as the company’s eyes move farther away along the map of potential destinations, the company is sure to notice Ireland, and then Mexico, then China and India, and so many other countries with other reasons to recommend them for consideration.

Because what Americans forget is that our own manufacturers don’t just sell to US customers.  We export all over the world.

The Age of the Regional Manufacturing Hub

If a Chicago manufacturer sells half his goods to US customers and the other half to Asian customers, at some point, he’s bound to ask himself if it would make more sense to open his own South Korean or Japanese or Chinese or Indian factory and supply that region from a more local base.   It only makes sense.

It will start by the company operating both locations to support their respective regions – Asia for Asian customers, America for American customers. Perhaps Europe for European customers.

But then, eventually, there will be a recession, such as the ten-year long Obama recession from which we now hope to emerge.  When that comes, or when local taxes, crime or regulations get too onerous at one site or the other, the company will then face that choice that it never had to make before:  To save on costs, perhaps we should only make this part, or this product line, at once site instead of both.  Which makes more sense?

Well, with decades of almost continuous American tax increases and regulatory growth, the American site – through no fault of its own – has all-too-often been the loser in such comparisons.  Our efficient workforce, effective transportation network, and historical talent can’t compete when our own government is doing everything it can to shut down our entire private sector.

  • We have activists here who protest outside our factories, encouraging our workforce to demand salary increases, such as a ridiculously high minimum wage, or go on strike.
  • We have politicians in Washington – and in too many state capitals too – who either raise our taxes every year or promise to do so, if given the chance.
  • We have newspapers, television stations, even senior citizen groups like AARP, who campaign for crippling programs like Obamacare, mandatory family leave, mandatory daycare, and similar costly programs that stop companies from growing, even deter entrepreneurs from ever starting companies to begin with.
  • And we have candidates for high public office – candidates like Bernie Sanders and Hillary Clinton, who came so close to winning the presidency itself – who promise to identify all the most expensive things in life, from healthcare to college, and give them all away for free, because after all, we can just make “the fat cats of corporate America” pay for it.

Faced with such an environment – and that’s on top of the simpler local problems like traffic congestion and crime waves in our cities – and the only logical question to ask is, Why do we still have any manufacturing left at all?

The fact is, American businesses make things here because they want to.  They keep on manufacturing here because it IS still the right place to make many, many things.  

But thanks to the problems cited above, it’s the right place for fewer things every year.  And even so, America could still be the right place to make many more.

We just need to stop blaming the siren call of foreign shores for our problems, and admit the reality of America’s own entirely home-grown anti-business climate.

Nobody’s really luring away our businesses, we’re just driving them off.  We have been for generations.

For American manufacturing to survive and even thrive again, we only need to stop attacking our own employers with the ferocity of an enemy army in wartime, and instead – through tax reform and the cutting of red tape – just let them know they’re welcome, and appreciated, again!

Cut the corporate tax rates, slash the destructive, burdensome regulations, and watch America’s economy flourish again – especially in the manufacturing sector.

Copyright 2017 John F. Di Leo

John F. Di Leo is a Chicago-based international transportation manager, actor, writer, and Customs broker.  His columns are regularly found in Illinois Review.


Permission is hereby granted to forward freely, provided it is uncut and the IR URL and byline are included.


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  1. AWESOME article and it is true hope manufacturing has been attacked, devastated buy to much regulation high corporate taxes as well as labor disputes. I really hope the Trump Administration can turn things around for the good of our Nation.