http://www.economyincrisis.org/showarticle.asp?ID=1010

New US Treasury Secretary Paulson Concerned About Protectionism But Finds Nothing Wrong With The US Trade Deficit

Printed on: Thursday, September 21, 2006
Thomas Heffner
www.EconomyInCrisis.org
August 25, 2006
For Immediate Release

Unbelievably, the new US Treasury secretary in his first address to the country found nothing wrong that so-called “free trade” policies have created a massive trade deficit and funded a gutting of American industry through foreign acquisition and subsidized foreign-owned production. He even went so far as to advocate strongly that we continue to expand these completely failed policies. The alleged benefits of “free trade” and globalization are theoretical and have not been realized while the devastation is very real.
The facts on “free trade” policies are clear
• Since NAFTA went into effect in 1994, the United States has lost over $4.0 trillion to foreigners through its trade deficit. This figure is 4x larger than the previous 11.5 years and more than the cumulative trade deficits for this country’s entire history.
• During that 11.5 year period, foreign ownership of US assets skyrocketed an amazing 400% from $3 trillion to over $12 trillion.
• Foreign interests now own 46% of US Treasury debt, 26% of US corporate bonds, and 13% of US corporate equities. Now nearly 100% of on-going borrowings by the US government are funded by foreign interests.
• Foreign interests also control a majority of US domestic industries such as movies, music, publishing, metal ore mining, cement production, engine & power plant production, rubber & plastics and are major owners of US industries such as pharmaceuticals, chemical manufacturing, industrial machinery manufacturing, motor vehicles, and electronic equipment and components.
• In addition, now more than $1 in $4 that the US consumer spends on manufactured goods goes immediately to foreign hands in the form of imports.
• The US has lost 3 million manufacturing jobs over the last decade, real wage growth after inflation has been essentially zero, and job growth has not kept up anywhere close to that of population growth.
• Household wealth, which is at all time highs, is also at all-time highs in terms of debt and investment in illiquid unproductive assets such as our homes.
What did we expect?
The purchasing power of these countries with which these trade agreements were struck is essentially zero. Did we seriously expect Mexico – a country that pays pennies per hour for labor – to somehow purchase billions of American products produced at labor rates 10x higher?
By the way, Mexico’s labor rates, which were supposed to increase by virtue of the reduction of tariffs, are essentially unchanged or have gone down in some cases after these “free trade” agreements were enacted. Corporate profits have never been higher.
We still haven’t learned our lesson
CAFTA, which was adopted recently as a “free-trade” agreement between Central American countries and the US was truly amazing. After 10 years of data on NAFTA and the “free trade” experiment, CAFTA moved ahead with bipartisan support. The GDP of the combined CAFTA countries is equivalent to that of Hartford, Connecticut (about $85 billion). How can we possibly hope that such an agreement will be anything less than a ruse to get more cheap imports into this country and side-step American domestic production costs and domestic industry?
Meanwhile, US wages have experienced essentially zero real growth after inflation during this period while we have lost more than 3 million high-paying manufacturing jobs.
What about the consumer?
Supposedly, our “consumer-driven” economy was to benefit by these trade agreements. All anyone has to do is look at real wage growth, health care costs, costs of education, costs of gasoline, inflation of core commodity products, and the negative savings rates of Americans to realize that although we now have bigger TV’s and fancier cars, we have no productive industry to supply us with income and clearly no longer the means to sustain our standard of living.
Furthermore, those Americans without investments (houses, stock portfolios, bonds) have not participated in any of the recent so-called US economic “expansion.” Investment wealth increases have been a main driver of consumer spending – not income growth – as household wealth has increased 6x faster than wages over the past 5 years.
So why do we continue doing the same stupid things?
We have no choice. Secretary Paulson is presently on his way to China on a “mission” ostensibly to urge currency reform, but in reality to beg them to continue to buy our US government bonds. We owe foreign countries over $2 trillion alone in federal debt and they now buy nearly 100% of the new debt issued by this government.
The rest of the world wants to keep exporting to the US and they have the leverage now to restrict our policies through their loans to us. Furthermore, our economy is now driven by consumer spending on foreign goods. It is also driven by foreign employers operating here in this country through insourcing giving us low-tech assembly and distribution jobs that we formerly gave to Mexico.
They also have a major impact on the US media through the advertising dollars that foreign companies spend and the lobbying they do in government. Who do you think spends more precious ad dollars these days – General Motors & Ford, or Nissan, Honda, BMW, Toyota & Mercedes/Chrysler? From 1998 to 2004, foreign lobbyists spent more than $620 million to lobby the foreign governments according to the Center for Public Integrity.
Where to go from here
If you were to listen to our government, there is no problem. The country is “on track” and growth is brisk. There is nothing wrong with this incredible wealth transfer to foreign countries, the decimation of our domestic industries, and the near-total dependence we now have on foreign goods, loans, and employment. In fact, the government suggests we invite even more “free trade” agreements to further stimulate “competition” and “growth.” With this type of competition and growth we’ve had over the last decade, who needs enemies?
Decide for yourself
If you disagree please let us know why. If you agree, then you are in the company of millions of Americans, Nobel Prize-winning economists, former Federal Reserve and Treasury officers, industry leaders, and investment experts – most everyone except our elected officials. It is your obligation to help preserve and protect this country and its economic as well as national security.
Source: www.economyincrisis.org
Contact: editor@economyincrisis.org, (781)304-4711
About EconomyInCrisis.org
www.EconomyInCrisis.org is a website for educating legislators and the American public about the destruction of our country's industrial base, the impact on national and economic security, and the effect on our standard of living. We publish critical but overlooked facts and figures.

This article can be found at:
http://www.economyincrisis.org/articles ... sp?ID=1010