William S. Cohen, “Obama and the Politics of Outsourcing,” WSJ, 10/12/10

William S. Cohen cites the NBC/WSJ poll revealing that a majority of Americans (53%) now realize that free trade has been anything but “free.”  Mr. Cohen repeats the mantra of free traders: it is not a zero sum game, higher value jobs are created as a result of free trade.  The public, always wiser than our politicians, can now feel the results of the cannabalization of American jobs, and is angrily responding.

The truth is that our economy has been hollowed-out like swiss cheese, with the middle-class manufacturing jobs, and now call center (service) jobs being exported.  Great for corporate bottom lines, super for the CEO whose stock options will rise with the increase in the bottom line achieved at the expense of his displaced American workers, and also magical for politicians who have benefited from the contributions of the CEO’s to their campaigns.  This has not been a virtuous circle, and our politicians have made it all possible. “Free Trade” has been a spiral to the bottom, and we are well along the path.

The patient is in the emergency room, but not dead yet…but only if we act.  The country needs the stimulus of a value added tax , which (ret.) Sen. Fritz Hollings , and President Bill Clinton  and Warren Buffett  all back as a leveling influence in world trade.  The VAT, subtracted from exports and added to imports, is what all our trading partners and over 150 countries use to eliminate the burden of government from the price/value competition across borders.

Implementing a VAT would be a good first step towards reversing the damage of outsourcing.  The best implementaion of a VAT would be broad-based with no preferences, so Congress cannot be influenced by lobbyists looking for loopholes.  Another good step would be to encourage the voluntary labeling of American Value Added in manufacturing.  It would also be fair that we limit the protection of a U.S. Patent to those products which are at least 80% value-added in the U.S.

If the public wants its jobs back, we had better start telling our politicians that we are through with the gaming of the system.