View From the Front Lines

To get a better idea of what has happened in the United States as a result of China’s mercantilist policies, read this op-ed at The Hill by Shalabh Kumar. Mr. Kumar proposed seven steps to heal the U. S. economy:

1. Place tariffs on all imports from China for six months to establish a new baseline and demonstrate America’s resolve — all means no exceptions, particularly finished goods.
2. After six months, invite them to rejoin negotiations.
3. President Trump should demonstrate his earnestness with a concession on 10 percent of the goods imported, a good-faith move to show Beijing that we will concede in some areas while retaining our right to protect long-term manufacturing.
4. All negotiations should include manufacturing experts. Our biggest mistake in trade negotiations is that we do not have these experts on the negotiating table. Lawyers are great, and are needed, but you can be assured that China has their best manufacturing minds on the table.
5. The manufacturing experts will know what makes sense for both parties to be happier.
6. Manufacturing experts will focus on how to bring back the high-tech manufacturing jobs by picking the proper Harmonized System codes to tariff — the standardized names and numbers to classify traded products — not for the benefit of Wall Street and their quarterly reports, but for long-term manufacturing renaissance in America. Some Silicon Valley CEOs will complain that their costs will go up, but that is quite minor compared to the overall growth of American economy. When America reduces its trade deficit and budget deficit, every American prospers.
7. The balance of 90 percent should be very carefully scrutinized, once again not solely by lawyers and economists but also by manufacturing experts.

I would add one more measure. I think that the purpose of the tax code should be to generate revenue rather than to change behavior or create a basis for granting political favors. If that’s how the tax code were viewed, we would abolish the corporate income tax. It is an inefficient tax.

As long as we’re committed to using the tax code for purposes other than generating revenue, at least it could be used to cultivate behaviors we want rather than those we don’t. The tax code should be changed to encourage businesses to modernize and/or expand facilities rather than encouraging them to consolidate.