June 8, 2016

MAC High on WSJ List of Ideas to Restore U.S. Manufacturing

Today's Wall Street Journal carries an excellent article by Bob Tita entitled "How to Revitalize U.S. Manufacturing.

The Market Access Charge (MAC) advocated by Americans Backing a Competitive Dollar appears high in his list of the nine policies that "could spark new growth in factory jobs and the economic benefits they bring." By giving US manufacturers a fair, trade-balancing exchange rate, the MAC would "keep a strong dollar from further swelling the trade deficit."

Tita's full list of ideas, along with the advocates for each that he mentions, includes:

  1. Make exports more valuable -- Warren Buffett's Import Certificates - ICs
  2. Impose a value-added tax -- Harry Moser of the Reshoring Initiative
  3. Deal with an overvalued currency -- John Hansen's Market Access Charge - MAC
  4. Look at the true cost of offshoring -- Moser's Reshoring Initiative, Frenando Assens of Argo
  5. Purge duplicate regulations -- NAM 
  6. Look beyond jobs to innovation -- Robert Atkinson and the Innovation Foundation 
  7. Turn community colleges into career factories -- US Departments of Labor and Commerce
  8. Spend more on manufacturing R&D -- National Network for Manufacturing Innovation
  9. Create regional centers of expertise -- Bruce Katz of the Brookings Institution
All of these ideas are well worth considering and should be regarded, not as competitive alternatives, but as complementary parts of an overall policy package for revitalizing US manufacturing.

However, a careful analysis of rising trade deficits and declining competitiveness of America's manufacturing over the past forty years indicates that the overvaluation of the US dollar has been a primal cause of these closely-related developments. This overvaluation, which according to the latest PIIE estimates by Fred Bergsten has reached about 25 percent today, imposes a 25 percent tax on the selling price of all US goods that can be exported or imported. 

This sharply reduces the incentives to invest in worker training, R&D, plant and equipment, automation, centers of expertise, and all the other measures listed above that are so urgently needed to make American manufacturing internationally competitive again. 

Hence the urgency of implementing a policy such as the Market Access Charge that will bring the US dollar back to its internationally competitive, trade-balancing exchange rate.

America Needs a Competitive Dollar - Now!

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