Today, the Bush administration is holding a National Summit on American Competitiveness with executives from global companies such as Wal-Mart, FedEx and General Motors, as well as academia.  Designed to boost American innovation and competitiveness, the conference will examine four key areas: “the role of the private sector; education and workforce issues; energy independence; and partnerships in innovation.”

While rising energy costs undoubtedly affect American manufacturing, the issues of innovation and competitiveness deserve serious scrutiny.

But U.S. manufacturing workers aren’t losing their jobs because of failed “education.”  In fact, they’ve known an important bottom line since they learned it in kindergarten—cheating isn’t fair. 

The U.S. is losing manufacturing jobs because countries like China employ illegal trade practices such as subsidies and currency manipulation.  And as long as China cheats, and the U.S. takes no forceful action in response, no improvement in “innovation” will make any difference. 

The attendees at today’s summit would be better served if they read Dr. Peter Navarro’s stinging rebuke of China apologists in today’s Wall Street Journal.  According to Navarro, China’s “gross currency manipulation” effectively imposes a “stiff tariff” on U.S. exports—exactly the sort of “protectionism” that Commerce Secretary Carlos Gutierrez decried when announcing today’s event.

So forget the highfalutin talk of “competition.”  By definition, competition requires that every participant sprint from the same starting line.  It’s not a fair 100-yard-dash if China starts each race on the 40-yard-line—as their currency pegging allows.

In other troubling news, the Economic Policy Institute (EPI) reported yesterday that a falling dollar may pose potentially serious long-term problems for the U.S. economy—not the least of which is inflation at a time of already surging gas prices. 

A weakened dollar could mean higher interest rates as the U.S. tries to attract further loans to subsidize its massive trade deficit.  It also means less investor confidence in the dollar.

In a sign that the dollar may well be losing its preeminence, EPI notes that U.S. private investment abroad has more than tripled over the past 18 months, raising “the chances of a rapid, disorderly dollar decline and a financial crisis that could cause domestic interest rates to spike and push the economy into recession.”  With the dollar falling in value, foreign central banks may also diversify their holdings and sell off U.S. assets, adding to concerns of looming inflation.

The question is whether the U.S. can simply keep borrowing enough money to stay in place.  Much better would be a situation where U.S. trade comes into balance.  A helpful start would be for the U.S. to get its trade policy right.  Strong enforcement of U.S. trade laws, both to reverse the decline of U.S. manufacturing and ease an ongoing accumulation of foreign debt, seems a logical starting point.

Too bad they’re not talking trade policy at the big innovation summit today.
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This entry was posted on Tuesday, September 18th, 2007 at 9:20 pm and is filed under Manufacturing in the U.S., Holding China Accountable, Currency Manipulation, Economic Security, Enforcing Trade Laws. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.