New Deal For U.S. Manufacturers

In July, our trade deficit hit yet another all-time
record, $68 billion, an annual rate of $816 billion.
Imports surged to $188 billion for the month, as our
dependency on foreigners for the vital necessities of
our national life ever deepens.


trade surplus
with us was $19.6 billion for July
alone, moving toward an all-time record of $235 billion
for 2006—the largest trade deficit one country has ever
run with another. Our deficit with Mexico is running at
an annual rate of $60 billion. With Canada, it is $70
billion. So much for

. With the European Union, it is running at
$160 billion.

America as the most self-sufficient republic in
history is

. For decades, U.S. factories have been
closing. Three million manufacturing jobs have
disappeared since Bush arrived. Ford and GM are fighting
for their lives.

Bushites boast of all the

new jobs
created, but Business Week tells the
inconvenient truth: "Since 2001, 1.7 million new jobs
have been created in the health care sector. …
Meanwhile, the number of private sector jobs outside of
health care is no higher than it was five years ago."

"Perhaps most surprising," writes BW,
"information technology, the great electronic promise of
the 1990s, has turned into one of the biggest job-growth
disappointments of all time. … (B)usinesses at the
core of the information economy—software,
semiconductors, telecom and the whole gamut of Web
companies—have lost more than 1.1 million jobs in the
past five years. Those businesses employ fewer Americans
than they did in 1998, when the Internet economy kicked
into high gear." [What`s
Really Propping Up The Economy
, September 25,

Where did the high-tech go? China. Beijing`s No. 1
export to the United States in 2005, $50 billion worth,
was computers and electronics.

If Americans are the most efficient workers on earth
and work longer hours than almost any other advanced
nation, why are we getting our clocks cleaned? Answer:
While American workers are world-class, our elites are
mentally challenged. So rhapsodic are they about the
Global Economy they have forgotten their own country.
Europeans, Japanese, Canadians and Chinese sell us so
much more than they buy from us, because they have
rigged the rules of world trade.

While the United States has a corporate income tax,
our trade rivals use a value-added tax. At each level of
production, a tax is imposed on the value added to the
product. Under the rules of global trade, nations may
rebate VAT levies on exports, and impose the equivalent
of a VAT on imports.

Assume a VAT that adds up to 15 percent of the cost
of a new car in Japan. If Toyota ships 1 million cars to
the United States valued at $20,000 each, $20 billion
worth of Toyotas, they can claim a rebate of the VAT of
$3,000 on each car, or $3 billion—a powerful incentive
to export. But each U.S. car arriving at the Yokohama
docks will have 15 percent added to its sticker price to
make up for Japan`s VAT.

This amounts to a foreign subsidy on exports to the
United States and a foreign tax on imports from America.
Uncle Sam gets hit coming and going. It is as though,
after firing a round of 66 in the Masters, Tiger Woods
has five strokes added to his score for a 71, and five
strokes are subtracted from the scores of his rivals.
Even Tiger would bring home few trophies with those kind
of ground rules.

The total tax disadvantage to U.S. producers—of VAT
rebates and VAT equivalents imposed on U.S. products—is
estimated at $294 billion.

Exported U.S services face the same double whammy. A
VAT equivalent is imposed on them, while the exported
services of foreign providers get the VAT rebate.
Disadvantage to U.S. services: $85 billion annually.

Why do our politicians not level the playing field
for U.S. companies?

First, ignorance of how world trade works. Second,
ideology. These

robotic free-traders
recoil from any suggestion that
they aid U.S. producers against unfair foreign tactics
as interfering with

Adam Smith`s "invisible hand,"
which they
equate with the hand of the Almighty.

Third, they are hauling water for transnational
companies that want to

move production overseas
and shed their U.S.

How could we level the playing field? Simple. Impose
an "equalizing fee" on imports equal to the
rebates. Take the billions raised, and cut taxes on U.S.
companies, especially in production. Create a level
playing field for U.S. goods and services in foreign
markets, and increase the competitiveness of U.S.
companies in our own home market by reducing their tax

U.S. trade deficits would shrivel overnight. And jobs
and factories lately sent abroad would start coming

Isn`t it time we put America first—even ahead of




Patrick J. Buchanan

no introduction
readers; his book

State of Emergency: The Third World Invasion and
Conquest of America

can be ordered from