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US Exec to France: "Keep Your So-Called Workers"
Source: CNBC
The head of U.S. tire maker Titan launched a vitriolic attack on French productivity after the country's socialist government suggested he buy a tire factory in the north of France.
"How stupid do you think we are?" wrote Maurice Taylor, in a letter to French Industry Minister Arnaud Montebourg, obtained by French business newspaper Les Echos on Wednesday.
... "I have visited that factory a couple of times. The French workforce gets paid high wages, but works only three hours. They get one hour for breaks and lunch, talk for three and work for three hours," he wrote. "I told this to the French union workers to their faces. They told me that's the French way!"
... "Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour wage and ship all the tires France needs," he wrote. "You can keep the so-called workers. Titan has no interest in the Amiens North factory."
Read more: http://finance.yahoo.com/news/us-exec-france-keep-called-153817339.html
29 replies
= new reply since forum marked as read
= new reply since forum marked as read
Last edited Wed Feb 20, 2013, 09:51 PM - Edit history (1)
http://blogs.wsj.com/corporate-intelligence/2013/02/20/u-s-ceo-to-france-how-stupid-do-you-think-we-are/Here is page one of the letter, the last two paragraph, which are on page two of the letter I had to type in manually, and they are in the excerpt below:
?1361292432
The Second page goes this way:
February 8, 2013
Page 2
The US government is not that much better then the French. Titan had to pay Millions to Washington Lawyers to sue the Chinese Tire Companies because of their Subsidizing. Titan won. The government collected the duties. We do NOT get the duties, the government does.
Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour and ship all the tires France needs. You can keep the so-call workers. Titan has no interest in the Amiens-North Factory
Best Regards
Maurice M. Taylor Jr.
Chairmen and CEO
Page 2
The US government is not that much better then the French. Titan had to pay Millions to Washington Lawyers to sue the Chinese Tire Companies because of their Subsidizing. Titan won. The government collected the duties. We do NOT get the duties, the government does.
Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour and ship all the tires France needs. You can keep the so-call workers. Titan has no interest in the Amiens-North Factory
Best Regards
Maurice M. Taylor Jr.
Chairmen and CEO
I have read the letter, yes he attacks the Workers and the Union that represent them, but thrust is at the Government and its refusal to either put down the union OR put up protections from foreign imports. Basically he is looking at a situation where, within five years, he will have NO profit margin due to the Chinese and Indian imports. Thus he can NOT continue to pay the Union the Workers are entitled to under the Union Contract AND make a profit for the Chinese and Indian imports will be cheaper.
In short, the French Government and to a lesser extent the Union has to do one of two things, either destroy the Union by massive wage cuts OR restrict imports from law wage countries. France is refusing to do either, and thus Titian can NOT see how it can sell tires made in France at a profit.
The worse part is, while he mentioned the Union, the letter is addressed to the FRENCH GOVERNMENT. Thus the thrust is against the Government and its refusal to decide which way to go. The French Government wants "Free Trade" and it wants "Strong Union" but you can NOT have both. France has has to give up on one. The French Government has refused to make a decision so the market will, and that means the destruction of the French Unions by the destruction of their jobs via cheap imports.
I actually see this as an OFFER, if the French Government wants to take it as one, an offer that he would take over this plant with its Unionized Work Force, if the French Government is willing to put up the import protections needed to keep the plant profitable. If the French Government makes such a decision, even if it means dropping out of GATT, then he would re-think his refusal, but unless the French are willing to do that he will NOT even think about taking over this tire company.
http://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Trade
Now, FDR was tied in with the Breton Woods Accords of 1944:
http://en.wikipedia.org/wiki/Breton_Woods_system
The problem with Breton Woods is that it assumed a situation that was NOT in place in the post war era, thus the Marshall Plan had to be implemented, just to give US Money away to Europe. In the Post WWII era the US was running huge trade surpluses and thus slowly bankruptcy Europe and most of the rest of the World (The Soviet Bloc seems NOT to be affected, but that was due to a refusal to import anything from the US as part of the Cold War then anything to due with actual trade).
Thus massive influx of Money into Europe permitted Europe to turn itself around. Fear of a Communist takeover of any of the NON-Soviet occupied country force the US to encourage not only strong European unions (more to undermine support for Communism then being pro-union) but accepted some very significant trade restrictions (One side affect of VAT taxes for example was to encourage exports and discourage imports, thus the US did NOT adopt a VAT tax for it wanted to encourage imports, and did not object to VATs of other countries even through it encouraged exports).
http://en.wikipedia.org/wiki/Value_added_tax
Once the Marshall Plan had run its course and Western Europe was secure from Communist Take over, the US then started a policy of running a trade deficit to further support Europe. This was complicated by the fact that the US had been the #1 oil exported up to that time and would continue till the late 1950s and remain a net oil exporter till 1970. Thus the 1950 Deficit was NOT driven by oil importation (as has been the case since 1970) but to encourage industrialization of Europe and Japan. Instructions was a US policy and the US was willing to agree to treaties that hurt its ability to export to countries, so that such countries could develop and NOT fall into Communism.
The problem with this policy of agreeing to trade deficits and treaties that were disadvantage to the US in terms of actual trade (but made up for that in expanded support for the US in those same countries based on the export trade to the US) was that if the US had a true trade problem, the only way to correct the problem was to change the whole trade system, not fine tune it. As long as the US was expanding more then it was exporting, trade was NOT a problem. The imports could undermine US prices to a degree, but as long as the US was still the #1 exporter as well as the #1 importer, not a problem. The US in the 1940s, 1950s and into the 1960s accepted these unfair trade treaties as the price of fighting the Cold War.
Old saying in war, countries fight wars, till they go Bankrupt, then they sign peace treaties. Come the 1960s the US was facing some serious problems:
1, The War is Vietnam was costing the Government a lot of Money. This was complicated by the use of a lot of WWII equipment the US still had in storage, but was reaching the end of their service lives. A lot of it was dumped in Vietnam, a lot of it was dump elsewhere, but much of it was just scraped (for example this is when most of the WWII era Essex class Carriers were mothballed and later scrapped). These had to be replaced by much more expensive equipment (Admiral Zumwalt actual proposed the adoption of 30-40 Essex size carriers instead of the plan adopt of the Nimitz size carriers, on the ground 40 carriers would cover more of the ocean then 12 super carriers for about the same price, his plan was shot down).
2. Europe was no longer willing to buy US Tanks and Planes, instead were making their own. For example in the 1950s, Germany, France and Italy all used the M47 and later the M48 series of tanks, but come 1960, instead of adopting the M60 as the replacement for the M48 and M47s, instead build they own national tanks. Similar even occurred with Planes,
3. US cease being a net oil exported and became a net oil importer. In many ways this is the most important part of the crisis of the late 1960s and early 1970s, the US now had to IMPORT oil.
4. The Six day war of 1967 was followed by an Arab Oil Boycott. The US was a net oil exporter so the only effect in the US was higher prices at the pump. In Europe and Japan you had massive lines at gas stations (The US would have similar line after the 1973 Yom Kipper war, when the US was a net oil importer).
5. The Russian under Khrushchev had started a policy of moving away from the massive army Stalin favored to a more balanced, mechanized military force. New Tanks, Mechanized Infantry Fighting vehicles (MICV) and even a real Navy. This occurred as the US was getting even more involved with Vietnam,
6. The Six day war also showed how dependent the US Army in Europe was on Middle East Oil, and thus as a part of the Defense of Europe the US had to be able to defend the Persian Gulf (in many ways the eventual reduction of US forces in Vietnam and then the withdraw of funds for the South Vietnam Government is tied in with the need to protect Persian Gulf Oil. The money, troops and ships to protect the Middle East had to come from some place, and that place was NOT Europe or Korea in the late 1960s. In many ways the US lost Vietnam on the Suez Canal. The US had a choice in between 1967 and 1973, support Israel and re-supply Israel, or save those supplies for Vietnam. The US could not do both and the decision of easy. Vietnam fell).
7, Japan had been a source of Cheap crap (very similar to what is being imported from China today) in the 1950s, but by the 1960s were moving into higher value goods, including high end cameras, Televisions (and later in the late 1970s VCRs), better quality radios etc. By the 1970s Taiwan had moved into the Cheap junk market and Japan had clearly moved into Automobile and other high end good market. US trade law encouraged this. Japanese trade law did not actually prevent US imports, but how business is done in Japan when it comes to getting items to market, was and is almost as good as any tariff. The Japanese Government said it would reduce these non-tariff barriers but never did, for most of them were tied in with the large Japanese Banks who were the main supporters of the Japanese Politicians.
8, The US and its allies had adopted a new method of shipping starting in the late 1950s, but not really into actual use till the 1960s, the Cargo Pallet. Instead of loading items on a truck, taking them to a train, unloading the truck onto the Train, then by train to a port, then unloading the train to a ship, and a reverse once the items crossed the ocean, you loaded the items onto a pallet at your factory and then shipped it to where it was going. These 8 feet by 8 Feet by 40 feet palettes were designed NOT to be opened between the Factory and where they would be sold. These pallets could be moved quite cheaply by cranes from ship to truck to train as needed. This reduced the overall cost of transportation for most items, for the largest cost had been loading and unloading from one mode of transportation to another. This permitted increased trade between nations of goods previously only traded locally due to high cost of packing and unpacking.
The US constant trade deficient and the increase imports from Japan and Western Europe hurt the US, but the real two killers were the War in Vietnam and the US switch from an oil importer to an oil importer. The Vietnam war was like most wars, paid on Government Deficients. The problem is this produced to many dollars. The system that existed from 1945-1965 was based on to few dollars and thus the US trade deficient return dollars overseas where such dollars were in short supplies to pay for imports from the US. The problem by 1965 the US was now exporting more dollars with its trade deficit, then it was taking in with its various exports. The switch in Oil from exporter to imported made this even worse, for most Americans saw gasoline as gasoline not realizing the gasoline in 1965 had been 100% US produced, but by 1973 it was 10% produced overseas.
The switch from an oil exporter to an oil importer was a real killer. 10 Cents of every dollar spent for fuel went over seas (refining cost and fuel taxes were the same if the oil was produced in the US or overseas). When the US became a net oil importer in 1970, Nixon even removed a tariff on imported oil to keep the price of oil low (By 1970 a gallon of gasoline was 35 Cents a gallon, that sounds low, but in 1966 it had been only 25 cents a gallon, this was a 40% increase in the price of oil, It is like $3,59 gallon of gasoline went up $1.45 to $5.19 a gallon today).
Given the US Dollar was fixed to gold at the price of $35 an ounce of gold, something had to give. Nixon was unwilling to withdraw from Vietnam (Something Congress agree with till 1974). Congress was unwilling to have widespread unemployment (something Nixon agreed with). And Europe and Japan were unwilling to renegotiated GATT that they considered to have already been settled, something had to give, thus the problems of the 1970s.
In many ways the problems of the 1970s could be traced in the decision in 1959 to continue a trade deficient, even as price of gold in London reached $40 an ounce. Patches were made to make the system work, but the War on Vietnam, the expansion of the Soviet Military and the US response to that expansion, and the fear that if the trade deficient was reduced to quickly it would lead to a major recession (and this is right after the major recession of 1957, the worse recession between the Great Depression and Reagan's recession of 1982). JFK's decision to reduce the highest rate of income tax from FDR's 91% to 70% (and retaining the 50% long term capital gain deduction) and the subsequent financial deficient did not help reduce the trade deficient.
JFK, LBJ, and then Nixon all refused to address the above. Inflation was getting out of control due to this problem, but Nixon was NOT about to add tariffs to get the trade deficient down for he was a Cold Warrior and one of the price to pay for the Cold War was deficients with our allies. LBJ had put some trade restrictions in ("The Chicken tax"
but LBJ wanted his Great Society adopted and thus was NOT willing to sacrifice it on the alter of keeping the Value of the Dollar at $35 an ounce of Gold. Much of the economic problems of the 1970s (and the huge Federal budget deficients starting under Reagan) was how the US "Solved" the problems on the 1960s. At first the US withdrew from Vietnam and reduce spending, then we demanded that our allies reduce exports, then we under cut wages in the US. Reagan started the undercutting wages, thus while the US economy had grown since 1980, wages have been stagnate. Europe kept its wages up, for the system favored them, but what caused the problems for the US in the 1960s, now lead to problems not only in the US, but Europe and Japan. It is call the Triffin Dilemma.
http://en.wikipedia.org/wiki/Chicken_tax
In many ways the present system is much like the US in the 1960s and 1970s, it is a "Triffin Dilemma".
http://en.wikipedia.org/wiki/Triffin%27s_dilemma
The key to the Triffin Dilemma is that what even country is the source of evey other nation's "Reserve Currency", that country MUST run both a Trade Surplus and a Trade Deficit. The Dilemma is two part
1. It has to run a trade surplus to withdraw extra reserve currency from the international market place or face the possibility that the value of your currency comes to be viewed as over valued and loses its ability to buy things overseas, thus stopping all trade.
2. It has to run a a trade deficient to provide extra reserve currency to other countries to use, or face one's currency becoming so expensive, no one can buy it anymore overseas and all trade stops.
In the 1950s the reserve Currency was the Dollar and it was pegged to $35 an ounce of Gold. The US in the 1940s, 1950s and early 1960s ran trade deficits to supply dollars for use overseas, so such countries could trade between themselves AND with the US.
Come the mid 1960s, the US was running huge budget deficients, building up forces not only in Europe, but in Japan, Korea, Israel and more then any other one stop Vietnam. The US was just dumping dollars onto the world stage. At the same time the US was beginning to IMPORT oil for the first time in its history, thus causing an even larger out flow of dollars from the US. This lead to a surplus of Dollars that had to be withdrawn, but you withdraw excess dollars by going from a trade deficient to a trade surplus.
The problem was the US had entered GATT with the intention to always run a trade deficient, for that was the best way to build up Europe and Japan. Now come the 1960s, the US needed to stop such importation and start to withdraw dollars from the international market place, but Europe and Japan wanted nothing to do with that for both had become dependent on exports to the US as part of their economic recovery from WWII.
Thus the US could NOT withdraw the excess dollars from the world economy unless it adopted Tariffs, and given the Cold War (and the large Communist Parties in France, Greece, Turkey and Italy) the US feared such a Tariff would rip NATO apart and thus NOT an option. The Chicken Tax as an attempt to get Japan and Europe to work together with the US, but it failed for what the US needed Europe and Japan were NOT willing to give. Thus from the 1960s onward you have slow, but steady inflation (yes it went up to 18% under Carter, but that was a temporary push due to the Iranian crisis, the real problem was the steady 4-6 % inflation the US had from the 1960s till the late 1990s).
Now, due to the end of the Cold War, the US was able to reduce its military expenditures (So did Russia and the rest of the World, all to much higher degrees then the US). Due to the fall of the Soviet Union and thus the need to fully man oversea US bases, the US trade deficient even dropped (this was helped by the drop of the price of oil to its lowest price since the 1960s). The Fall of the Soviet Union helped the US in another way, the Russians gobbled up most of the excess US Dollars (as its own economy went from bad to worse) and thus US inflation disappeared for they was no longer any excess dollars in the world.
Come Bush II, he slashed the taxes and cause a large federal budget deficient, and then his wars helped the price of oil to go through the roof and with it the US trade deficient mushroomed again. Putin managed to straighten out the Russia Economy and then started to sell any dollars he collected for gold (Not so much to buy gold, but to sell dollars).
http://dailyfinance.com/2013/02/11/russia-gold-buying-spree-vladimir-putin/
In many ways Putin is betting the US, Japan and Western Europe and entering another Triffin Dilemma, but this time it is NOT just the US, but all of this first world allies. China, India and much of the third world is to the US, Japan and Western Europe, are roughly what Western Europe and Japan was to the US in the 1960s. All three need to keep the Dollar, Euro and Yen up in value by restricting imports, but doing so in such a way as NOT to restrict imports.
Worse, all three are all net oil importers, and all three run deficients with China, India and even Russia (Through with Russia it is mostly energy products).
The problem is China and India both have some severe internal economic problems that only get worse if the amount of exports is NOT expanded. Thus they will be unable to help the US, Japan and the EURO nations to keep imports down. This is very similar to the situation in the 1960s (through at that time it was the US vs Japan and Western Europe, while today it is US, Japan AND Western Europe against China, India and the third world). Something has to give. In the 1960s, tariffs were avoided, but at the cost of a huge cut in wages in terms of percentage of the economy starting under Reagan in the 1980s. The Cold war is over, Al Queda is NOT that big a threat (in fact Al Queda is like the Communist Parties of Italy, France, Greece and Turkey in the 1960s, best undermined by giving them what they want, while friends of the US stay in actual control of each of those countries, i.e. give in to what Al Queda is demanding, but not officially and make sure Al Queda gets no credit).
Thus in many ways what is the problem today, is the same in the 1960s, Japan, Europe and the US has to make a decision, either adopt tariffs and protect domestic industry OR cut wages. The US took almost 20 years to make up its mind, and then more by non-deciding then deciding (remember a decision NOT to make a decision is a decision). We are under that decision today, seeing the 99% slowly lose income. I do not know if Western Europe wants to join in a similar decision, but I suspect Japan will.
The opposite decision, that is to increase tariffs to protect domestic industry (or at least set up a RAPID system of imposing sanctions for subsiding exports) would require ACTION on the part of our Government (and the Governments of Japan and Western Europe).
Brazil, Russia, India and China (BRIC) have entered into agreements using each other currencies in trade between each other, rather then use the US Dollar or the Euro. That is step one is breaking up of GATT.
http://abundanthope.net/pages/True_US_History_108/BRIC-NATIONS-AND-ALLIES-SIGN-DEATH-WARRANT-FOR-THE-US-DOLLAR_printer.shtml
Please note the above cite is another cite saying the US will have hype inflation soon, I doubt that. the US did NOT have hyper inflation in the 1970s, it will NOT have it today. A Country only has hyperinflation when it has excessive debts in another country's currency not its own currency. The US debts are all in US Dollars thus hyper inflation is NOT a threat, but economic problems like the 1970s and 1980s are more then possible.
http://www.examiner.com/article/china-along-with-other-bric-nations-prepare-to-form-bank-to-replace-the-imf
The real question is what is the Intentions of each member of the BRICS (the BRICS is a group of people who meet and talk and decide issues between each other then any formal organization)? Is it to break the US? or is it to safeguard themselves? I suspect the later and thus they agreement is not an attack on GATT. On the other hand the mere fact that these nations have decided NOT to use dollars in trade with each other undermines GATT big time. I suspect they see the US, Japan and Western Europe in a new Triffin dilemma, and they want to see what the three do. In the 1960s the fear of the Soviet Union prevented the US from adopting Tariff to protect itself, that threat is long gone. US wages, as a percentage of GDP is the lowest it has been since the 1920s, and any further decline may lead to social unrest (One commentator made a comment that both Occupy Wall street AND the Tea-party shows the US population is in a pre-revolutionary mode, they want CHANGE, they do NOT know what change they want, but they want CHANGE and that is all you need to start a revolution. This demand for change is the product of the decline in income since 1980 and thus anyone who addresses that issue can use this demand for change for some radical action on the part of the people of the US).
Thus to avoid a revolt the US, Western Europe and Japan may impose tariffs in imports, to protect current income and to get income up. This can lead to problems in China and India (like similar tariffs would have caused problems for Japan and Western Europe in the 1960s) which can lead to severe problems in each of those nations (Both have a huge segment of their own population, like segments of the US population in a pre-revolutionary mode) and thus US, Western Europe and Japan imposed tariffs can lead to unrest in China, India and many other third world nations.
People tend to forget the 1930 Tariff, while it made the Depression worse, actually helped the US. i.e. the Depression was made worse in Europe, Japan and the rest of the world, but it made the US better able to deal with the Depression. Thus without the fear of the Soviet Union, I can see increase demand for protectionism, even in the US just to put off any support for a revolution in the US, Japan or Western Europe.
Thus, if you look at things as a whole, the US, Japan and Western Europe are still in the Driver's seat of the world Economy, but they have to make a choice, protect local businesses and thus put up tariffs, OR accept that China and India will subsidize they industry and thus destroy the industries of the US, Japan and Western Europe, leading to lower prices but also lower wages. The US in the 1950s-1980 ended up selecting the later action, for the first option was not acceptable to them given the existence of the Soviet Union. Will the US, Western Europe and Japan make the same decision the US made in the 1960s or will they opt for tariffs? Iceland decided riots were to big a risk, Greece decided riots were acceptable for now. The real Issie what will Europe, Japan and the US do as a whole?
Now, FDR was tied in with the Breton Woods Accords of 1944:
http://en.wikipedia.org/wiki/Breton_Woods_system
The problem with Breton Woods is that it assumed a situation that was NOT in place in the post war era, thus the Marshall Plan had to be implemented, just to give US Money away to Europe. In the Post WWII era the US was running huge trade surpluses and thus slowly bankruptcy Europe and most of the rest of the World (The Soviet Bloc seems NOT to be affected, but that was due to a refusal to import anything from the US as part of the Cold War then anything to due with actual trade).
Thus massive influx of Money into Europe permitted Europe to turn itself around. Fear of a Communist takeover of any of the NON-Soviet occupied country force the US to encourage not only strong European unions (more to undermine support for Communism then being pro-union) but accepted some very significant trade restrictions (One side affect of VAT taxes for example was to encourage exports and discourage imports, thus the US did NOT adopt a VAT tax for it wanted to encourage imports, and did not object to VATs of other countries even through it encouraged exports).
http://en.wikipedia.org/wiki/Value_added_tax
Once the Marshall Plan had run its course and Western Europe was secure from Communist Take over, the US then started a policy of running a trade deficit to further support Europe. This was complicated by the fact that the US had been the #1 oil exported up to that time and would continue till the late 1950s and remain a net oil exporter till 1970. Thus the 1950 Deficit was NOT driven by oil importation (as has been the case since 1970) but to encourage industrialization of Europe and Japan. Instructions was a US policy and the US was willing to agree to treaties that hurt its ability to export to countries, so that such countries could develop and NOT fall into Communism.
The problem with this policy of agreeing to trade deficits and treaties that were disadvantage to the US in terms of actual trade (but made up for that in expanded support for the US in those same countries based on the export trade to the US) was that if the US had a true trade problem, the only way to correct the problem was to change the whole trade system, not fine tune it. As long as the US was expanding more then it was exporting, trade was NOT a problem. The imports could undermine US prices to a degree, but as long as the US was still the #1 exporter as well as the #1 importer, not a problem. The US in the 1940s, 1950s and into the 1960s accepted these unfair trade treaties as the price of fighting the Cold War.
Old saying in war, countries fight wars, till they go Bankrupt, then they sign peace treaties. Come the 1960s the US was facing some serious problems:
1, The War is Vietnam was costing the Government a lot of Money. This was complicated by the use of a lot of WWII equipment the US still had in storage, but was reaching the end of their service lives. A lot of it was dumped in Vietnam, a lot of it was dump elsewhere, but much of it was just scraped (for example this is when most of the WWII era Essex class Carriers were mothballed and later scrapped). These had to be replaced by much more expensive equipment (Admiral Zumwalt actual proposed the adoption of 30-40 Essex size carriers instead of the plan adopt of the Nimitz size carriers, on the ground 40 carriers would cover more of the ocean then 12 super carriers for about the same price, his plan was shot down).
2. Europe was no longer willing to buy US Tanks and Planes, instead were making their own. For example in the 1950s, Germany, France and Italy all used the M47 and later the M48 series of tanks, but come 1960, instead of adopting the M60 as the replacement for the M48 and M47s, instead build they own national tanks. Similar even occurred with Planes,
3. US cease being a net oil exported and became a net oil importer. In many ways this is the most important part of the crisis of the late 1960s and early 1970s, the US now had to IMPORT oil.
4. The Six day war of 1967 was followed by an Arab Oil Boycott. The US was a net oil exporter so the only effect in the US was higher prices at the pump. In Europe and Japan you had massive lines at gas stations (The US would have similar line after the 1973 Yom Kipper war, when the US was a net oil importer).
5. The Russian under Khrushchev had started a policy of moving away from the massive army Stalin favored to a more balanced, mechanized military force. New Tanks, Mechanized Infantry Fighting vehicles (MICV) and even a real Navy. This occurred as the US was getting even more involved with Vietnam,
6. The Six day war also showed how dependent the US Army in Europe was on Middle East Oil, and thus as a part of the Defense of Europe the US had to be able to defend the Persian Gulf (in many ways the eventual reduction of US forces in Vietnam and then the withdraw of funds for the South Vietnam Government is tied in with the need to protect Persian Gulf Oil. The money, troops and ships to protect the Middle East had to come from some place, and that place was NOT Europe or Korea in the late 1960s. In many ways the US lost Vietnam on the Suez Canal. The US had a choice in between 1967 and 1973, support Israel and re-supply Israel, or save those supplies for Vietnam. The US could not do both and the decision of easy. Vietnam fell).
7, Japan had been a source of Cheap crap (very similar to what is being imported from China today) in the 1950s, but by the 1960s were moving into higher value goods, including high end cameras, Televisions (and later in the late 1970s VCRs), better quality radios etc. By the 1970s Taiwan had moved into the Cheap junk market and Japan had clearly moved into Automobile and other high end good market. US trade law encouraged this. Japanese trade law did not actually prevent US imports, but how business is done in Japan when it comes to getting items to market, was and is almost as good as any tariff. The Japanese Government said it would reduce these non-tariff barriers but never did, for most of them were tied in with the large Japanese Banks who were the main supporters of the Japanese Politicians.
8, The US and its allies had adopted a new method of shipping starting in the late 1950s, but not really into actual use till the 1960s, the Cargo Pallet. Instead of loading items on a truck, taking them to a train, unloading the truck onto the Train, then by train to a port, then unloading the train to a ship, and a reverse once the items crossed the ocean, you loaded the items onto a pallet at your factory and then shipped it to where it was going. These 8 feet by 8 Feet by 40 feet palettes were designed NOT to be opened between the Factory and where they would be sold. These pallets could be moved quite cheaply by cranes from ship to truck to train as needed. This reduced the overall cost of transportation for most items, for the largest cost had been loading and unloading from one mode of transportation to another. This permitted increased trade between nations of goods previously only traded locally due to high cost of packing and unpacking.
The US constant trade deficient and the increase imports from Japan and Western Europe hurt the US, but the real two killers were the War in Vietnam and the US switch from an oil importer to an oil importer. The Vietnam war was like most wars, paid on Government Deficients. The problem is this produced to many dollars. The system that existed from 1945-1965 was based on to few dollars and thus the US trade deficient return dollars overseas where such dollars were in short supplies to pay for imports from the US. The problem by 1965 the US was now exporting more dollars with its trade deficit, then it was taking in with its various exports. The switch in Oil from exporter to imported made this even worse, for most Americans saw gasoline as gasoline not realizing the gasoline in 1965 had been 100% US produced, but by 1973 it was 10% produced overseas.
The switch from an oil exporter to an oil importer was a real killer. 10 Cents of every dollar spent for fuel went over seas (refining cost and fuel taxes were the same if the oil was produced in the US or overseas). When the US became a net oil importer in 1970, Nixon even removed a tariff on imported oil to keep the price of oil low (By 1970 a gallon of gasoline was 35 Cents a gallon, that sounds low, but in 1966 it had been only 25 cents a gallon, this was a 40% increase in the price of oil, It is like $3,59 gallon of gasoline went up $1.45 to $5.19 a gallon today).
Given the US Dollar was fixed to gold at the price of $35 an ounce of gold, something had to give. Nixon was unwilling to withdraw from Vietnam (Something Congress agree with till 1974). Congress was unwilling to have widespread unemployment (something Nixon agreed with). And Europe and Japan were unwilling to renegotiated GATT that they considered to have already been settled, something had to give, thus the problems of the 1970s.
In many ways the problems of the 1970s could be traced in the decision in 1959 to continue a trade deficient, even as price of gold in London reached $40 an ounce. Patches were made to make the system work, but the War on Vietnam, the expansion of the Soviet Military and the US response to that expansion, and the fear that if the trade deficient was reduced to quickly it would lead to a major recession (and this is right after the major recession of 1957, the worse recession between the Great Depression and Reagan's recession of 1982). JFK's decision to reduce the highest rate of income tax from FDR's 91% to 70% (and retaining the 50% long term capital gain deduction) and the subsequent financial deficient did not help reduce the trade deficient.
JFK, LBJ, and then Nixon all refused to address the above. Inflation was getting out of control due to this problem, but Nixon was NOT about to add tariffs to get the trade deficient down for he was a Cold Warrior and one of the price to pay for the Cold War was deficients with our allies. LBJ had put some trade restrictions in ("The Chicken tax"
but LBJ wanted his Great Society adopted and thus was NOT willing to sacrifice it on the alter of keeping the Value of the Dollar at $35 an ounce of Gold. Much of the economic problems of the 1970s (and the huge Federal budget deficients starting under Reagan) was how the US "Solved" the problems on the 1960s. At first the US withdrew from Vietnam and reduce spending, then we demanded that our allies reduce exports, then we under cut wages in the US. Reagan started the undercutting wages, thus while the US economy had grown since 1980, wages have been stagnate. Europe kept its wages up, for the system favored them, but what caused the problems for the US in the 1960s, now lead to problems not only in the US, but Europe and Japan. It is call the Triffin Dilemma.
http://en.wikipedia.org/wiki/Chicken_tax
In many ways the present system is much like the US in the 1960s and 1970s, it is a "Triffin Dilemma".
http://en.wikipedia.org/wiki/Triffin%27s_dilemma
The key to the Triffin Dilemma is that what even country is the source of evey other nation's "Reserve Currency", that country MUST run both a Trade Surplus and a Trade Deficit. The Dilemma is two part
1. It has to run a trade surplus to withdraw extra reserve currency from the international market place or face the possibility that the value of your currency comes to be viewed as over valued and loses its ability to buy things overseas, thus stopping all trade.
2. It has to run a a trade deficient to provide extra reserve currency to other countries to use, or face one's currency becoming so expensive, no one can buy it anymore overseas and all trade stops.
In the 1950s the reserve Currency was the Dollar and it was pegged to $35 an ounce of Gold. The US in the 1940s, 1950s and early 1960s ran trade deficits to supply dollars for use overseas, so such countries could trade between themselves AND with the US.
Come the mid 1960s, the US was running huge budget deficients, building up forces not only in Europe, but in Japan, Korea, Israel and more then any other one stop Vietnam. The US was just dumping dollars onto the world stage. At the same time the US was beginning to IMPORT oil for the first time in its history, thus causing an even larger out flow of dollars from the US. This lead to a surplus of Dollars that had to be withdrawn, but you withdraw excess dollars by going from a trade deficient to a trade surplus.
The problem was the US had entered GATT with the intention to always run a trade deficient, for that was the best way to build up Europe and Japan. Now come the 1960s, the US needed to stop such importation and start to withdraw dollars from the international market place, but Europe and Japan wanted nothing to do with that for both had become dependent on exports to the US as part of their economic recovery from WWII.
Thus the US could NOT withdraw the excess dollars from the world economy unless it adopted Tariffs, and given the Cold War (and the large Communist Parties in France, Greece, Turkey and Italy) the US feared such a Tariff would rip NATO apart and thus NOT an option. The Chicken Tax as an attempt to get Japan and Europe to work together with the US, but it failed for what the US needed Europe and Japan were NOT willing to give. Thus from the 1960s onward you have slow, but steady inflation (yes it went up to 18% under Carter, but that was a temporary push due to the Iranian crisis, the real problem was the steady 4-6 % inflation the US had from the 1960s till the late 1990s).
Now, due to the end of the Cold War, the US was able to reduce its military expenditures (So did Russia and the rest of the World, all to much higher degrees then the US). Due to the fall of the Soviet Union and thus the need to fully man oversea US bases, the US trade deficient even dropped (this was helped by the drop of the price of oil to its lowest price since the 1960s). The Fall of the Soviet Union helped the US in another way, the Russians gobbled up most of the excess US Dollars (as its own economy went from bad to worse) and thus US inflation disappeared for they was no longer any excess dollars in the world.
Come Bush II, he slashed the taxes and cause a large federal budget deficient, and then his wars helped the price of oil to go through the roof and with it the US trade deficient mushroomed again. Putin managed to straighten out the Russia Economy and then started to sell any dollars he collected for gold (Not so much to buy gold, but to sell dollars).
http://dailyfinance.com/2013/02/11/russia-gold-buying-spree-vladimir-putin/
In many ways Putin is betting the US, Japan and Western Europe and entering another Triffin Dilemma, but this time it is NOT just the US, but all of this first world allies. China, India and much of the third world is to the US, Japan and Western Europe, are roughly what Western Europe and Japan was to the US in the 1960s. All three need to keep the Dollar, Euro and Yen up in value by restricting imports, but doing so in such a way as NOT to restrict imports.
Worse, all three are all net oil importers, and all three run deficients with China, India and even Russia (Through with Russia it is mostly energy products).
The problem is China and India both have some severe internal economic problems that only get worse if the amount of exports is NOT expanded. Thus they will be unable to help the US, Japan and the EURO nations to keep imports down. This is very similar to the situation in the 1960s (through at that time it was the US vs Japan and Western Europe, while today it is US, Japan AND Western Europe against China, India and the third world). Something has to give. In the 1960s, tariffs were avoided, but at the cost of a huge cut in wages in terms of percentage of the economy starting under Reagan in the 1980s. The Cold war is over, Al Queda is NOT that big a threat (in fact Al Queda is like the Communist Parties of Italy, France, Greece and Turkey in the 1960s, best undermined by giving them what they want, while friends of the US stay in actual control of each of those countries, i.e. give in to what Al Queda is demanding, but not officially and make sure Al Queda gets no credit).
Thus in many ways what is the problem today, is the same in the 1960s, Japan, Europe and the US has to make a decision, either adopt tariffs and protect domestic industry OR cut wages. The US took almost 20 years to make up its mind, and then more by non-deciding then deciding (remember a decision NOT to make a decision is a decision). We are under that decision today, seeing the 99% slowly lose income. I do not know if Western Europe wants to join in a similar decision, but I suspect Japan will.
The opposite decision, that is to increase tariffs to protect domestic industry (or at least set up a RAPID system of imposing sanctions for subsiding exports) would require ACTION on the part of our Government (and the Governments of Japan and Western Europe).
Brazil, Russia, India and China (BRIC) have entered into agreements using each other currencies in trade between each other, rather then use the US Dollar or the Euro. That is step one is breaking up of GATT.
http://abundanthope.net/pages/True_US_History_108/BRIC-NATIONS-AND-ALLIES-SIGN-DEATH-WARRANT-FOR-THE-US-DOLLAR_printer.shtml
Please note the above cite is another cite saying the US will have hype inflation soon, I doubt that. the US did NOT have hyper inflation in the 1970s, it will NOT have it today. A Country only has hyperinflation when it has excessive debts in another country's currency not its own currency. The US debts are all in US Dollars thus hyper inflation is NOT a threat, but economic problems like the 1970s and 1980s are more then possible.
http://www.examiner.com/article/china-along-with-other-bric-nations-prepare-to-form-bank-to-replace-the-imf
The real question is what is the Intentions of each member of the BRICS (the BRICS is a group of people who meet and talk and decide issues between each other then any formal organization)? Is it to break the US? or is it to safeguard themselves? I suspect the later and thus they agreement is not an attack on GATT. On the other hand the mere fact that these nations have decided NOT to use dollars in trade with each other undermines GATT big time. I suspect they see the US, Japan and Western Europe in a new Triffin dilemma, and they want to see what the three do. In the 1960s the fear of the Soviet Union prevented the US from adopting Tariff to protect itself, that threat is long gone. US wages, as a percentage of GDP is the lowest it has been since the 1920s, and any further decline may lead to social unrest (One commentator made a comment that both Occupy Wall street AND the Tea-party shows the US population is in a pre-revolutionary mode, they want CHANGE, they do NOT know what change they want, but they want CHANGE and that is all you need to start a revolution. This demand for change is the product of the decline in income since 1980 and thus anyone who addresses that issue can use this demand for change for some radical action on the part of the people of the US).
Thus to avoid a revolt the US, Western Europe and Japan may impose tariffs in imports, to protect current income and to get income up. This can lead to problems in China and India (like similar tariffs would have caused problems for Japan and Western Europe in the 1960s) which can lead to severe problems in each of those nations (Both have a huge segment of their own population, like segments of the US population in a pre-revolutionary mode) and thus US, Western Europe and Japan imposed tariffs can lead to unrest in China, India and many other third world nations.
People tend to forget the 1930 Tariff, while it made the Depression worse, actually helped the US. i.e. the Depression was made worse in Europe, Japan and the rest of the world, but it made the US better able to deal with the Depression. Thus without the fear of the Soviet Union, I can see increase demand for protectionism, even in the US just to put off any support for a revolution in the US, Japan or Western Europe.
Thus, if you look at things as a whole, the US, Japan and Western Europe are still in the Driver's seat of the world Economy, but they have to make a choice, protect local businesses and thus put up tariffs, OR accept that China and India will subsidize they industry and thus destroy the industries of the US, Japan and Western Europe, leading to lower prices but also lower wages. The US in the 1950s-1980 ended up selecting the later action, for the first option was not acceptable to them given the existence of the Soviet Union. Will the US, Western Europe and Japan make the same decision the US made in the 1960s or will they opt for tariffs? Iceland decided riots were to big a risk, Greece decided riots were acceptable for now. The real Issie what will Europe, Japan and the US do as a whole?
for their corporations from foreign competition. You are right, though, that lowering tariffs has led to increase tariff revenues. Tariff revenues were at an all time high in 2010 at $25 billion. Of course that is only about 1% of total government revenue, thanks largely to the 16th Amendment and the income tax.
The Hidden Progressive History of Income Tax
The income tax was the most popular economic justice movement of the late 19th and early 20th century. This truly grassroots movement forced politicians to act in order to stay in office, leading to the 16th Amendment to the Constitution in 1913. That’s right, the income tax was so popular that the nation passed a constitutional amendment so that the right-wing Supreme Court couldn’t overturn it.
Income and Tax Inequality in the Late 19th Century
Everyday Americans hated the tax system of the Gilded Age. The federal government gathered taxes in two ways. First, it placed high tariff rates on imports. These import taxes protected American industries from competition. This allowed companies to charge high prices on products that the working class needed to survive while also protecting the monopolies that controlled their everyday lives. Second, the government had high excise taxes on tobacco and alcohol, two products used heavily by the American working class.
These forms of indirect taxes meant that almost the entirety of federal tax revenue came from the poor while the rich paid virtually nothing. This spawned enormous outrage. The poor had a model in creating an income tax—President Abraham Lincoln, who instituted the nation’s first income tax to pay for the Civil War. Lincoln’s Revenue Act of 1861 created a graduated tax on everyone who made at least $800 a year, allowing him to pay for the war. Although a grand success, Republicans pulled away from it as they backed off of racial equality in the late 1860s and it was overturned in 1872.
...grassroots organizations across the country began organizing around replacing the tariff with the income tax. He tells the story of Merlinda Sisins of Pickleville, Michigan, a mother of 16 who, despite a lack of education and poor spelling, began writing letters to the Journal of United Labor, where she demanded that working people nominate their own to Congress in order to pass legislation that would destroy the tariff and the monopolies.
The income tax became such an overwhelming political movement during the 1890s that Congress, despite so many members' close relationship with the plutocracy, passed an income tax law that would have forced the rich to begin paying income taxes for the first time since 1870. The Wilson-Gorman Tariff of 1894 placed a 2% tax on incomes over $4000 a year (approximately $88,000 today).
Corporations immediately organized against this. In a strategy we can recognize today, the Chamber of Commerce distorted the bill’s purpose, telling the public that the income tax would drive them into poverty, even though the bill did not affect working-class people. Yet the Chamber made little headway in the face of this overwhelmingly popular movement.
http://www.alternet.org/labor/hidden-progressive-history-income-tax?akid=9361.277129.2KDGDd&rd=1&src=newsletter706781&t=14
The opposition to high tariffs was much, much more widespread than simply from those who wanted an increase in government revenue. After the passage of the 16th Amendment in 1913 tariffs were a smaller and smaller part of government revenues (from 44% in 1913 to 1% today). The high tariffs that republicans enacted in the 1920's were protection for their corporate backers, rather than attempt to starve government since tariffs as a source of revenue were increasing irrelevant by then. And this was less than 10 years after the progressive victory over high tariffs represented by the 16th Amendment.
These days high tariffs seem like a progressive idea to some, but a hundred years ago - when we actually had high tariffs - liberals did not view them that way. Perhaps, as with love, absence makes the heart grow fonder with respect to tariffs.
"People tend to forget the 1920s was a "Boom" time for the US..." They were a boom time but not for everyone. It is true that the GDP increased and Wall Street rose swiftly - at least until 1929, of course - but it is also true that income inequality reached record levels during the 1920's (since surpassed during the Bush years) and unions suffered such that percentage of the work force in unions reached historic lows (since surpassed as well). (Apparently the GOP could kill unions with high tariffs or with low tariffs.) So the 1920's were a 'Boom' time for some but not for many.
These Pacific and Atlantic trade negotiations are a good thing. There are major international trade problems and, as with global problems in general, it is a good idea to negotiate a global solution to them. We are right to be skeptical about the outcome, but liberals should not be afraid to negotiate on this issue or any other.
The reason for some optimism about them is that one of their main goals is to eliminate much of China's trading advantage by crafting standards on labor, the environment, etc. that China will not be able to comply with unless it transforms it society completely. If these standards could be included in WTO rules that would be great, but those negotiations have gone nowhere.
If our goal is not to put labor and environmental regulations into trade agreements, the Pacific negotiations make little sense. We already have 'free trade' agreements with most of the countries involved. Why would we include Canada, Mexico, Australia, Singapore, Chile and others in a trade negotiation, when we already have an agreement with them, unless we were including standards that will make it more difficult for China to compete with countries that have better labor and environmental laws?
And of course our Atlantic trade negotiation is with countries that already have better labor and environmental laws than the US has, so you probably would not apply tariffs on their products anyway ("...impose tariffs to reflect the lack of environmental and labor laws with other nations."
Indeed, we could 'walk away and take our ball with us'. That is precisely what the republican base here (and far-right parties in Europe like the National Front in France) want to do. They favor the US withdrawing from the UN, the WTO, the IMF, World Bank, Law of the Sea Treaty and about any other international agreement or organization that keeps the US from doing whatever it wants to do whenever it wants to do it. In that way republicans have not changed much over the decades. They kept the US out of the League of Nations after WWI, the International Trade Organization after WWII and the Kyoto Protocol within the last 15 years.
At least since Woodrow Wilson the Democrats have been the party that engages with the world; negotiates disagreements with other countries; and tries to solve global problems by involving as many countries as possible. Republicans have more often been the party of 'cowboy diplomacy' whereby the US can do whatever it wants to do and to hell with the rest of the world. Other countries had better join us or get out of the way.
I do not want the US to "take its ball and go home" on any global issue. I believe in multilateral negotiations on global problems, which lead to international agreements that are effective and enforceable so that countries cannot, after a treaty is agreed to, say "Never mind. We have the 'sovereign right' to pollute, invade, torture or do anything else we want to do. We are a sovereign nation and hereby walk away from any treaty that we previously agreed to."
Fuck this asshole, the world has had quite enough of turds like him
