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Defining “Fair Trade”
I read with interest Ralph Ruark’s recent column on “‘Fair Trade’ and the Demise of American Ceramics” (“Kiln Connection,” August 2003, p. 23). Whenever discussing free trade and globalization, the one question that should always be asked is, “Who else would you rather be?” Japan has been in a recession for 10 years. Their economy is much more closed than ours and has therefore become much less efficient. South Korea is still recovering from the financial meltdown of a few years ago, also a result, in large part, of a relatively closed economy that propped up inefficient industries through soft government loans until the whole thing fell apart. European economies average double-digit unemployment. If we are doing it wrong, who is doing it right?
The simple fact is that the world changes and economies change. We can’t stop poor countries from trying to pick themselves up from poverty and improve their lives. Everything Ruark mentioned regarding China is standard for developing countries. Wages are low but are increasing. Environmental performance is poor but getting better. Customs duties have been high but are coming down with China’s participation in the WTO, and will likely continue to do so. Compliance with intellectual property laws is a problem that will hopefully go away, albeit slowly.
While certain industries may suffer, it is hard to argue that America doesn’t benefit from importing cheaper products. The key is to maintain a flexible, energetic economy that takes the savings from cheaper products and invests them in new industries and new companies that provide new jobs and new products. America isn’t perfect in this regard, but we are better than just about everyone else.
For many companies in the ceramic industry, the only answer is to adapt or perish. I know of one American company that made flowerpots and were being decimated by low-cost Chinese competition. The company retooled its strategy and began to make more value-added ceramic products, particularly dental products. As a result, it has doubled its employment over the last three years. A valve manufacturer began to import components it could no longer manufacture cost-effectively. This company then broadened its product line and began to design and assemble more advanced products. It, too, has experienced a significant increase in revenue and employment. This kind of innovation and adaptability is the essence of competition and capitalism.
Whereas the tone of Ruark’s column suggests that the situation is unfair for American manufacturers, I would tend to describe the situation as being a result of the natural evolution of an economy. It is a problem only if we don’t evolve with it.
--Daniel R. Joseph, Founder Cultural Dragon Consulting, McMurray,Pa.
The free trade policies of the North American Free Trade Agreement (NAFTA) and World Trade Organization (WTO) are destroying American industries, including the ceramic industry.
Americans were led to believe that free trade would allow access to less expensive consumer goods and therefore improve our standard of living faster than our wages increase. We were also led to believe that the trade deficit would decrease. Neither has happened. Yet the elite politicians and economists in government and universities still believe in free trade.
We have lost complete industries to free trade, including entertainment, electronics, clothing, leather goods (shoes) and toys. The ceramic industry is declining and will be next if nothing is done.
The U.S. is in a recession that was not caused by the bursting of the Internet bubble, 9/11, or the wars against terrorism, Afghanistan or Iraq. The recent income tax cut will not turn the economy around. It is the flood of imports and the loss of jobs that is causing the recession.
We had a record trade deficit of $435 billion last year. Of this, $125 billion was with China and was mostly manufactured products. The deficit will be even greater this year. No U.S. manufacturer can compete with wage rates 90-95% lower than ours. China has 60 million unemployed workers willing to work for $1 per hour, and the Chinese communist government has said they want to be the world supplier of manufactured goods.
The real and present danger to the U.S. economy is the trade deficit, and the loss of industries and jobs. The current free trade policies are not working and must be changed in order to save our industry, our jobs and our present standard of living.
--Jack Davis, President, I Squared R Element Co., Inc., Akron, N.Y.
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