Recently on the McLaughlin Group, Pat Buchanan coined a new term for a faction of the Republican party: Toyota Republicans. The phrase is an odd one because it is far more subtle and complicated than it seems. Under the watch of the Bush administration we saw outsourcing become the norm. We didn’t slowly lose a difficult battle to China, we eagerly gave them the plans and asked them to take over our manufacturing. The Alabama foreign car manufacturers Pat referred to are an interesting case. When we can’t even lead in our own industry in our own country selling to our own people, we have failed. It isn’t about patriotism and buying American. I’ll buy American when faced with a tough choice, but in the end I’m going with the better product, as should we all. We don’t need to bail out the failures, we need to create successes. These foreign plants on U.S. soil aren’t entirely a bad thing, although they are still sending our money overseas.
An interesting point has been made about who pays the cost of medical care. If the American auto makers are saddled with responsibility for the health care of their workers, and the foreign competitors aren’t, because the government takes care of that, then we didn’t fire the first shot in the coming Cold War Race to Socialism, they did.
As Pat puts it: “America faces nationalistic trade rivals who manipulate currencies, employ nontariff barriers, subsidize their manufacturers, rebate value-added taxes on exports to us and impose value-added taxes on imports from us, all to capture our markets and kill our great companies.“
How should we respond? Pat wants us to “produce ourselves the guns and ships to defend the republic and the necessities of our national life so we could stand alone against the world.“Â He suggests we do this by putting tariffs on imports in order to level the playing field. This isn’t a wise step forward in the new global economy; it leads to foreign retaliation, reducing our exports. Â When you are only selling things to yourself, you don’t earn any money. It would work well here in the U.S. Until the industries got lazy and corrupt. We already can see the results of such tactics in the corn industry. The reason everything we eat is packed with corn syrup is that we tax the import of sugar and subsidize the growing of corn. What we need is to be lighter on our feet. We need small specialized manufacturers.
Pat Buchanan puts the blame on neocons for removing tariffs imposed by Reagan:
“When an icon of American industry, Harley-Davidson, was being run out of business by cutthroat Japanese dumping of big bikes to kill the “Harley Hog,” Reagan slapped 50 percent tariffs on their motorcycles and imposed quotas on imported Japanese cars. Message to Tokyo. If you folks want to keep selling cars here, start building them here.“
Alabama is now home to several automotive plants:
- Mercedes-Benz: Headquarted in Germany
- Honda: Headquartered in Japan
- Hyundai: Headquartered in South Korea
- Toyota: headquartered in Japan
These U.S. plants make a total of more than 700,000 vehicles a year and employ over 11,000 workers. Â This would all be a good thing if these vehicles were being shipped out, but they are built here to be sold here. To follow the money: You buy a Toyota. Part of that money goes to the workers in the Toyota plants in Alabama and elsewhere in the US; another part goes to Japan. To some extent it is nice to have foreign industry in our country; it gives them incentive to be nice to us so they can retain their factory. On the other hand, if we are making the product in our country with our labor and selling it to our people, we could do without sending the profits to Japan.
Pat is afraid that if we don’t do whatever it takes to keep the big three in business, that these foreign owned manufacturers will take over their market share.
Agreements like NAFTA aren’t really free trade, they are managed trade. In the end, under NAFTA, manufactuuring and agriculture find advantage in moving to Mexico. This includes companies like Toyota. The question is, are these Toyota republicans opposing the bailout on strong free trade principles, or are southern politicians trying to remove the competing U.S. manufacturers in Detroit to better their own foreign owned manufacturing?
From here on I will be using the term ‘Toyota Republican’ to describe the NAFTA loving portion of the party that is partially responsible for outsourcing and the exodus of Â industry.
Update: Leo Gerard, the president of the United Steelworkers Union, went on Bill Moyers Joural with his take on the auto bailout and the Toyota Republicans.
It iis absolutely amazing how few people recognize that coins have two sides.
1 Brazilian manufacturing in the U.S.: Earlier in the month, Embraer broke ground on a plant to produce business jets in Melbourne, Florida. The factory will be approximately 150,000 square feet and will employ more than 200,.
2. Italian manufacturing in U.S.: In November, Brevini Spa, an Italian company, announced that it will invest $50 million in the U.S. and employee 500 in Indiana to manufacture gearboxes for wind turbines.
3. Solon AG, German, invested $30 million earlier in the year at its Global Solar Plant in Tucson. This will employ 250 people.
The fact is that foreign businesses invest in manufacturing in the U.S. as much as U.S. companies invest outside of the U.S.
Put on your glasses and take a look at both sides of the coin.
Steel Phoenix says
From my first paragraph: “These foreign plants on U.S. soil arenâ€™t entirely a bad thing, although they are still sending our money overseas.”
Am I missing a side of the coin?
I’m not sure what your point is. Most of the post is about foreign manufacturing in the US, and I listed the job creation.
To summarize my points:
Under NAFTA, manufactuuring and agriculture find advantage in moving to Mexico. This includes companies like Toyota.
I would be sorry to see them move to Mexico.
I would much rather see our own auto manufacturers thrive than Toyota, but they need heavy restructuring to be competitive, not subsidizing by bailout or tariff.
I don’t know… there are industrious little beavers all over the world producing and shipping pretty neat toys to us, and all we offer them in return is worthless little pieces of green paper… and they are TAKING them… shhhh, don’t mess up a good thing!
Seriously, look at our trade deficit. What else are they supposed to do with these green IOUs, besides bring them back over here to invest them? â—„Daveâ–º
Steel Phoenix says
Yeah, I’m really impressed that so far our entire debt is in dollars (suckers). We have to keep an eye on that though. Those pork pushers in Washington will be looking for collateral now that foreign nations are cutting up their credit cards.
I just got back here through your funnel site. Pretty slick! â—„Daveâ–º
The Paleo Conservatist says
Steve, your assertion that “The fact is that foreign businesses invest in manufacturing in the U.S. as much as U.S. companies invest outside of the U.S.” is patently false as our trade imbalance demonstrates by definition.
The facts are that the United States has posted a trade deficit since the late 1960s (and trade deficits in the late 1960s forced the US off the so-called gold standard in 1971), and it has been rapidly increasing since 1997. The US trade deficit hit a record high of 817.3 billion dollars in 2006.
Now yes it’s come down some since then due to our devaluing dollar and lowering energy prices; however, at -614.703 billion we are far from having any kind of a favorable balance.
By the way, if done correctly controlled currency devaluation can help a troubled nation reduce their debt and stimulate an economy (makes a country’s exports relatively less expensive for foreigners and makes foreign products relatively more expensive for domestic consumers, discouraging imports) actually reducing a country’s trade deficit as we have seen recently (assuming manufacturing is occurring materially in the domestic country to fill the gap of reducing imports).
However, it has a dark downside which includes reducing the value of savings, lowering living standards for those on a fixed incomes (about 1 in 4 Americans are seniors or boomers entering seniorhood, the disabled, etc…), etc… and swift currency devaluation leads to economic crisis.
Better than seeking to devalue our currency is returning to an economic paradigm which yields the desirable results without the downside. EOM.