WTO Filing a Step Toward Enhancing Competitiveness

By / 9.19.2012

Are U.S. manufacturing jobs gone for good? Many so-called experts have mocked the Obama Administration’s latest trade action against China as being fundamentally useless, the economic equivalent of spitting into the wind. After all, factory job seem like a relic of the past.

Yet by our calculations, the U.S. could regain 4 million jobs in manufacturing at relatively low cost – if we follow the right policies. PPI does not advocate a trade war with China, or a tit-for-tat exchange of trade actions. But taking legitimate disputes to the WTO is the right way to enforce the rules – and in most cases to date with China the U.S. has had success. Such carefully targeted actions, back by accurate data, could make a big difference in boosting the economy.

That’s because we are fighting to recapture competitiveness that may have been disingenuously lost. When countries like China provide non-market financing or other subsidies to industries like automobiles, it gives their companies an advantage that wouldn’t be there absent government support. Such an advantage negatively impacts U.S. companies trying to compete, even if China does not export directly to the U.S. As the NYT explains, “While China exports virtually no fully assembled cars to the United States, it has rapidly expanded exports to developing countries, and those exports compete to some extent with cars exported from or designed in the United States.”

Monday’s WTO filing may be a small first step, but we must start somewhere. We are in a slow-growth economy with an anemic labor market. If we want U.S. companies to keep and increase production (and jobs) here, if we want to close the non-oil trade gap, we must be competitive. And it would help if we gave U.S. companies a level playing field to fight on instead of an uphill battle.

A good next step would be for Congress fund a Competitiveness Audit to determine just how competitive (or uncompetitive) we are. The fact is we don’t actually know how much a piece of furniture, or computer, costs to produce domestically compared other developing countries like China. If we could see where we were at or near-competitive, we could strategically investment in these sectors as a way to enhance the viability of U.S. production.

And our research suggests these 4 million production jobs could be generated at a potentially low cost: a one-time 2% increase to prices. Assuming this rebalancing – recapturing – effort takes several years, this price increase would be spread over time. That doesn’t seem unreasonable given the 12.5 million Americans currently unemployed.

That’s why this latest filing is not only welcome, but could also be the beginning of a major economic development.