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"On doing stupid things the President and the NSC"

"Stupid is as stupid does"

Changing the disastrous trade policies of Clinton & Bush

March 2009

Abstract:
Over the past 16 years, the self-destructive trade policy of our last two Presidents has served the interests of the Chinese dictatorship by lending it legitimacy and making it a world economic power.  We could instead have directed our manufacture to Mexico and Central America, thereby raising their economic fortunes; something that would actually have served our national interest.  President Obama may still have the chance to rectify this blunder.
The fascination of American business with the idea of cheap manufacture in China gained legs during the first Clinton administration, and the effect was like that of a rolling snowball.  And the folks we had hired to look out for our national interests, Clinton & Co., looked at the snowball rolling and growing, smiled dully, and had no clue about the very predictable result.  As, one by one, U.S. firms tried to secure an economic advantage in the marketplace by finding cheaper labor overseas, other firms eventually most manufacturing firms were forced to follow suit.

At a point very early in this formative avalanche of jobs and dollars out of the country this became (in reality, if not in the mind of the President) a matter of national security concern.  A wiser President than the sex-distracted Mr.Clinton would have recognized the impact of this immense international transfer of American wealth.  He/she would have considered not only the massive trade imbalance and loss of employment which were in themselves sufficient reasons to act but also the geopolitical impact of propping up a totalitarian Chinese communist regime, while making that regime the chief creditor and financial guarantor of the U.S.Treasury.  He/she would have known that any such massive outpouring of national resources if permitted must operate in support of the national interest.  A national interest that did not and does not coincide with making China an economic superpower at the expense of the United States.

In contrast, the United States had (and has) a vital national interest in improving the economic stability of our nearest neighbors to the south, Mexico and Central America.  A competent President, quite unlike mssrs. Clinton and Bush "43", would have recognized that vital national interest.  A strong President, quite unlike these bunglers, would have, through incentives, regulation, the bully pulpit, and old-fashioned strong-arm politicking,channeled the massive flow of U.S. capital and labor to where it would serve our vital national interest.  But Clinton and Bush did nothing, or rather, they achieved the worst balance-of-payments deficits in our history, and indebted our grandchildren up to their ears to China.

But there's nothing inevitable or permanent in this mercantile arrangement between the U.S. and China.  I invite the President to consider these thoughts:  That our trading relationship with China serves their interests more than ours, and that we have a critical national interest in the social and economic success of Mexico and Central America.  A Congressional declaration to the effect that the economic development and stability of these countries constitutes a critical national interest would allow the administration to formulate tax and incentive policies that would significantly benefit U.S. firms that shift existing overseas manufacturing to Mexico and Central America, and that would carry strong disincentives for U.S. firms to move new manufacturing to countries other than those designated Latin-American countries.

It's a simple-sounding recipe, but it's clearly no simple matter.  China now holds a strong hand of cards vis-à-vis the U.S., and will not sit idly by and watch manufacturing jobs disappear.  China's trump card is the threat to stop purchasing U.S. treasury obligations, a threat that would send chills down political spines in Washington because Messrs Clinton and Bush made China our banker of last resort.  So in practice the policy outlined above could at first be limited to new manufacturing projects that do not directly impact China.  In time, even such a limited policy will, given the natural turnover of commercial projects, increase U.S. investment in Mexico and Central America relative to the rest of the world.

The innate good sense of U.S. investment in, and economic partnership with, our southern neighbor countries is so obvious that it's astounding that our political leaders have allowed this clear critical national interest to escape them.  I urge readers to communicate with our representatives in Washington to get this matter on the agenda:  What we have done for China we can do for Mexico and Central America, while at the same time safeguarding our national security, which is sorely compromised by having third-world conditions in our neighboring countries.  Our neighbors deserve better, and it's surely a corollary of the Monroe doctrine that the United States has taken on a special responsibility in the Western Hemisphere.  This responsibility, which we have shirked, must entail that we give priority to our neighbors.  It is here that our primary foreign policy interest should lie.  Not in Asia, not in Europe, though playing geopolitics with these power centers may appear to reflect a greater glory on our country.  But the true greater glory will come from beneficially assisting those who need help in our own back yard.

I would like to see the next quarter century half century if need be of American foreign policy directed primarily at bringing the economies of Mexico and Central America up to "western" standards.  How good would it feel to have a stable, modern, well-to-do Mexico next door!  Try the thought experiment.  It feels fine.

© 2009 H. Paul Lillebo

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