Louie One-Note

By April 6, 2005Dobbs Watch

Dobbs WatchLou Dobbs has got to have the best gig on TV — or anywhere, for that matter. He not only has his own nightly show, but he’s managed to do the same story every night, “the outsourcing of America.” Every time we see it, it reminds us of Jim Glassman’s admonishment when he appeared on Dobbs’ show: “You went to Harvard, Lou — you should know better.”

Every night, he lays the blame for job loss (real or imagined) on…

cheap foreign labor or trade agreements. This shows either a fundamental disregard for or ignorance of the truth. The truth is that through boom and bust we have competed against “cheap foreign labor” for at least the last century, and won. This is because we are the best, most competitive manufacturers in the world. We lead the world in so many areas that make up a nation’s competitiveness, like innovation, infrastructure and a great workforce. If wages were the primary driver of a nation’s competitiveness, Haiti would be an economic powerhouse. A truer culprit would be the relative value of currencies. Even the AFL-CIO said that currencies — not labor costs — were to blame for the expanding trade deficit.

As for trade agreements, 80% of our trade deficit is with countries where we have no trade agreement. The truth is that trade agreements lower barriers to entry of US goods. The EU owned the lion’s share of the Chilean market until the US-Chile Free Trade Agreement, after which the US share soared. This is not a bilateral but a multi-lateral trading world — everybody’s in the game. US manufacturers locate facilities in Chile, Australia and yes, even in China primarily to play in those markets. Almost 90% of what US manufacturers make abroad stays abroad. Facts are stubborn things.

There is, however, one area that cries out for attention. At present, US manufacturers labor under a 22% non-wage cost disadvantage vs. our trading partners. This includes the world’s highest corporate tax burden, the world’s highest legal costs — by a factor of ten –, soaring energy and regulatory costs. These costs dwarf any labor advantage that any developing country might have. And, they are costs that we as a nation have the power to rein in. If Lou Dobbs wants to improve the climate for manufacturing in the US, he can start there, rather than taking cheap, repeated and misplaced shots at the wrong target.