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Making trade war less secret
By ERNEST F. HOLLINGS, former U. S. senator

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JULY 27, 2010 -- Summarizing my response to Vice President Biden at the Library Dedication, I noted that the Vice President was totally familiar with the trade war and that we were losing more jobs to off-shoring than the recession. The media and the pundits give "top secret" treatment to the trade war and I used the occasion to get the trade war into the public domain.


Hollings

We are engaged in globalization, which is nothing more than a raging trade war with production looking for a cheaper country to produce. Japan started the trade war for market share by closing its market, subsidizing its manufacture, selling its export at cost, and making up the profit in the closed market. My 2005 Lexus that sold for $35,000 has a similar car selling in Tokyo the same week for $48,000. Now, Toyota is #1 with GM bankrupt. China enlarged the trade war to investment, research, technology, development, production, jobs - to the total economy. The best of research, Microsoft, is now in China. The best of technology, Intel, is being developed in China. GM produces more cars in China than in the United States, and the recent Fortune 500 listing of the largest corporations has two in the first ten from the United States, Wal-Mart and Exxon Mobile, but four in China. The listing of largest banks includes four in China, with U. S. banks in bailout. China is the superpower in the economy war but the United States arrogantly acts like we are in charge, calling for "free trade," "protectionism."

President Obama constantly brags that he is moving in the right direction, but he is squatting - not moving at all on trade; failing to enforce our trade laws, and cautioning against "protectionism." The United States was founded in a trade war. The Mother Country forbade manufacturing in the colony and required all exports to be carried in English bottoms. The Revolution was definitely for freedom, but the forefathers were interested in trade more than freedom. Article I, Section 8, of the Constitution of 1787 called on Congress to regulate both domestic and foreign commerce. It wasn't until six years later that we amended the Constitution to provide for freedom of speech, religion, press and assembly. After adopting a seal, the first bill to pass the Congress in its history on July 4, 1789, was a protectionist tariff. And we financed and built these United States into an industrial power with "protectionism." We didn't pass the income tax until 1913. In 1900 the colony was richer than the Mother Country by $25 billion and had a GDP double the GDP of Germany and Russia combined, causing Teddy Roosevelt to exclaim: "Thank God I'm not a Free Trader."

"Now, they're blaming President Obama for being anti-business and for not paying down deficits. He should eliminate the corporate tax and replace it with a 2% VAT. This will make him pro-business; bring in more revenues to pay down deficits, and promote exports."

-- Ernest F. Hollings

Last week at a battery plant President Obama was emphasizing the need to go to green jobs. Germany this minute is building a windmill plant in Charleston. Manufacturing the parts in Germany, they'll be shipped to Charleston at a cost of 3% with a 19% German VAT rebated. Highballing the cost of producing parts in Germany, the Charleston plant will pay no more than 1% corporate tax. Producing windmills in Charleston 15% cheaper than any domestic production, Germany is already coppering the green jobs that the President calls for.

The Obama Administration says the solution for jobs is educate, educate. We in South Carolina need a lot more education, but we have enough to create jobs --producing the "ultimate driving machine" for BMW and the most advanced aircraft, the "Dreamliner," for Boeing. It's Washington that needs education.

Last week, as the Vice President was explaining the spy swap with Russia, the Pentagon was begging for Russian helicopters. We can't defend this nation save the favor of some foreign country. The Vice President and I provided the black program in the United States Senate for the stingers that shot down the Russian helicopters to win Charlie Wilson's war. Now we expect to win the hearts and minds in Afghanistan with Russian helicopters. All we need to do is enforce the War Production Act of 1950 like President Kennedy did in 1961. We brought the witnesses to a Cabinet hearing that found textiles as the second most important to our security than steel. Kennedy saved the textile industry. Globalization can't be stopped, and there's no chance of saving the entire industry. But we've got to produce those items necessary to our national security, like winter wear, camouflage, composites for body armor, etc.

Step in with tariffs or import quotas under Section 201 of the Trade Act when a vital industry is endangered. Don't wait for General Motors to go bankrupt.

Now, they're blaming President Obama for being anti-business and for not paying down deficits. He should eliminate the corporate tax and replace it with a 2% VAT. This will make him pro-business; bring in more revenues to pay down deficits, and promote exports. The vote in the Senate against McCain's VAT was an increase in taxes. The corporate tax beginning at 39% averages at 27%. A 2% VAT cuts corporate taxes for production 25%. And please call it for a vote. Now! Don't worry about a filibuster. Any voting against a 2% VAT to replace the corporate tax will be voting against the major reason to off-shore jobs; be voting against jobs; against cutting taxes; against promoting exports, against paying down the deficit, and against business.

Business Week states: "It's time for policymakers to … give some certainty to businesspeople." Obama can give them certainty, save the nation, and save himself with a 2% VAT to replace the corporate tax. It's time to give Larry Summers a rest so that the rest of us can go back to work.

Senator Hollings of South Carolina served 38 years in the United States Senate, and for many years was Chairman of the Commerce, Space, Science & Transportation Committee. He is the author of the recently published book, Making Government Work (University of South Carolina Press, 2008).

© 2010, Ernest F. Hollings. All rights reserved. Contact us for republication permission.

About Fritz Hollings

Ernest F. Hollings served the public for 56 years -- 38 years in the United States Senate and as South Carolina's governor, lieutenant governor and a member of the S.C. House of Representatives.

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