Have you heard of the U.S.-China Economic and Security Review Commission? Their job is to assess the national security implications of the trade and economic relationship between the United States and the People's Republic of China. Actually, that’s a big deal, especially now.
I joined a conference call today as the Commission today released its 2009 report to Congress. Here is a link to the audio of today's conference call.
Eric Lotke summarizes the report, in the post, Obama’s Home And The Report Is Out: China Takes Us To School
One thing that came up in the call—featuring Carolyn Bartholomew, the chair of the U.S.-China Economic and Security Review Commission, and Clyde Prestowitz, the president of the Economic Strategy Institute—is that there is always an excuse not to do something about China's protectionism and the resulting trade imbalances. Today the excuse is that they loan us so much money (because of the Reagan/Bush debt and because we don't make things we used to make, and have to borrow money to buy them from China now) and if we make them mad they will stop loaning us money.
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The idea that we need to develop a national policy or strategy or whatever you want to call it is essential to our future. And this is something that we aren't doing for ourselves, not something that someone else is doing to us. The first part of this is the language problem. If we try to call it an "industrial policy," the idea is immediately attacked as "the government shouldn't be picking winners and losers." This is, of course, just the usual anti-government nonsense, because by doing nothing the government is currently picking China as the winner and the people of the United States as the losers.
Unfortunately, name-calling seems to be an effective tactic for blocking government action. Some have suggested variations on the wording "economic strategy" or "innovation strategy." Whatever you want to call it, we need to do it. need to have some sort of national economic and innovation policy and strategy that helps Americans organize and helps us figure out how to respond to some of these things," Bartholomew said.
Listen to the call and read the report. We are losing manufacturing, and with it we are losing our ability to compete in the future! We are putting our national security at risk. By losing manufacturing we also lose the supply chain that supplies the manufacturers. And of course we lose the ability to make things which we then sell in order to obtain the money with which to buy things. If you don't make things to trade with you have to borrow.
The worst thing, though, that we lose is the research and development capability that drives the manufacturing. This is the very thing the right and the free-traders said we would keep if we let the outsourcers have their way. They said outsource what someone else does cheaper, and keep the intellectual property. But as Bartholomew points out, we are losing the research and development, and the high-tech, and the manufacturing processes -- the things that people with enough education and skill would be able to do, which are the drivers of the supposed information economy. Right.
"As China is moving up the value-added chain, it's luring r&d, so the research and development is following the manufacturing, and once you've lost your research and development capacity as well as your manufacturing capacity, you lose your innovation capability, you lose your innovative edge," Bartholomew said. "So I think how we talk about this issue moving forward is going to be very important."
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