Solutions to Address Outsourcing by Multinationals & Rebuild American Manufacturing


                                                                            May 10, 2023


Michael Collins wrote, “Hope is not a plan” in his book Dismantling the American Dream, How Multinational Corporations Undermine American Prosperity. In other words, we cannot hope to rebuild American manufacturing without doing things differently than we’ve done in the past 30 years.  The industrial policies we have been following resulted in the decimation of the U.S. manufacturing base with the loss of over 70,000 manufacturing companies and 5.8 million manufacturing jobs.
Michael proposes a number of solutions in his book, some of which are the same or similar to solutions I proposed in my book, Rebuild Manufacturing – the key to American Prosperity. First, we both agree that we need a new industrial policy and plan.  The free trade policy we’ve followed since WWII has only benefited multinational corporations at the cost of millions of manufacturing jobs and an escalating trade deficit. Every President in the past 30 years had the goal of doubling exports and creating more manufacturing jobs, but the trade and industrial policies they promoted did just the opposite. President Biden’s Build Back Better Plan has the goal of creating five million jobs, but without measurable objectives and a plan to achieve those objectives, Michael feels “nothing will change.”  
Michael points out that “it will take a reduction in the trade deficit of 20 percent to bring back one million manufacturing jobs.” That means, we would have to reduce our trade deficit by 100% of the 2020 trade deficit total to create five million jobs.  However, the opposite occurred as the trade deficit increased from “$676.7 billion in 2020 to $861.4 billion in 2021… [and] $945.3 billion in 2022” according to the Bureau of Economic Analysis.
Michael notes that “politicians, Democrats or Republicans, don’t seem to be willing to publicly commit to an objective of reducing the trade deficit.” He comments, “This is dangerous territory, and government is the only entity that can do anything about the trade deficit.”
I came to a similar conclusion in the chapter on “Have Free Trade Agreements Benefited American Manufacturing” of my book.  I also recommended that the U.S. do not enter into any new trade agreements, and Michael agrees, writing. “We should oppose any FTA that will cost jobs or increase the trade deficit.”
The question is how do you reduce a trade deficit.?  Since Michael and I are both members of the Coalition for a Prosperous America (CPA), we support addressing currency manipulation and the overvalued dollar as two of the main ways to balance trade.  Michael wrote, “The root cause of the trade deficit is that the United States is not price competitively primarily because the dollar is overvalued by 20 to 30 percent.” However, he wrote, “Most of the large importer corporations and Wall Street do not want the government to enforce the current WTO and IMF laws against currency manipulation or to devalue the dollar because they want to keep foreign import prices low.”
Michael summarizes four methods that can be used to reevaluate the dollar:

  • Impose countervailing duties (CVDs) – tariffs or taxes on imported goods that offset subsidies by trading partners.
  • Tax purchases by using a Market Access Charge (MAC) on all foreign investments in the U.S., including stocks, bonds, real estate, companies, or intellectual property.
  • Implement a withholding tax on the profits and dividends earned by foreign inventors that finance the dollar.
  • Tax sellbacks – impose a 30% tax on the profits of companies that have offshored.

Michael wrote that “A new working paper from the CPA called ‘Imports Growth and Job Creation from a Competitive Dollar’ reveals that if the dollar value could be reduced by 27 percent it would result in export growth five times faster than baseline, while imports would grow more slowly.”
Another CPA proposal that Michael supports is “Make existing China tariffs permanent” and “impose the 4A and 4B tariffs.”   He wrote, “The Trump tariffs with China are working, and in fact, are our only defence against China’s mercantilist cheating.” He recommends that “Congress should limit tariff exclusions for importers, especially those that are not using the imports to manufacture in the United States.”
Michael also recommends creating “a more level playing field with our trade partners” by building reciprocity into our trade agreements.  This would “allow the United States to impose reciprocal duties on all countries who have higher tariffs if they do not lower their tariffs and VATs.”  I wrote in my book, “Over 150 countries in the world have shifted a significant portion of their tax mix to border adjustable consumption taxes —Value Added Taxes (VATs) or goods and services taxes (GSTs)…The rates range from 12% to 24% and average 17% globally.” In 2017, CPA proposed a 12% GST to be applied as a credit to the 15.3% payroll tax. Michael wrote, “We should level the playing field by introducing a program to match the foreign country’s VAT…”
In order to reduce the unfair advantage that multinational corporations have under current U/S. trade policy, Michael supports CPA’s proposal for “Sales Factor Tax Apportionment” that “would tax profits based on where the product is sold and eliminate the ability of multinational companies avoiding taxes by shifting profits offshore.” I had explained that this tax proposal would be “determined solely on the percent of a company’s world-wide sales made to U.S. customers.”
He also recommends the new proposal for a “Global Minimum Corporate Tax of 15 percent”, which “would give government the ability to tax our home company’s overseas profits at 15 percent, and deter them from us9mg tax shelter countries to avoid taxes.”
Michael supports CPA’s proposal for the U. S. to withdraw from the World Trade Organization (WTO) because the requirement of consensus on trade rules and decisions by the 164 member countries have “turned out to be detrimental to the United States,” In addition, he supports “repealing the Permanent Normalized Trade Relations (PNTR) with both Russia and China.”
He writes that these actions are first steps in “decoupling form China” and then lists a dozen different steps to be taken thereafter that CPA recommends as part of the decoupling process.
Michael also briefly mentions the work of Harry Moser, founder of the Reshoring Initiative, to help companies use the Total Cost of Ownership Estimator™ to reshore manufacturing to America.  I have had the pleasure of collaborating with Harry Moser since 2010 as an authorized presenter on how to use TCO to return manufacturing to America and devoted a whole chapter on reshoring in my book. 
The Reshoring Initiative 2022 Data Report  states, “Jobs announced in 2022 were a record-breaking 364,000 – up from 238,000 in 2021. The total number of jobs announced since 2010 is now nearly 1.6million.”  However, Michael notes that “at the current rate of reshoring, it will take over 30 years to reach Biden’s goal of five million jobs.”
Michael’s last chapter makes a brief mention of the need for workforce training and comments that instead of training, “MNCs have used stop gap measures such as outsourcing, automation, buying services from foreign vendors, and poaching trained workers from their suppliers, but these strategies no longer work and the shortage of workers has caught up to American companies.”
I felt that workforce training was so important to rebuilding American manufacturing that I included a chapter on the subject of how to foster and develop the next generation of manufacturing workers in my book. Since my book was published, I have written many articles on this topic.
Most of the above recommendations are focused on government policies, but the likelihood of making such major changes in policies is slim to none at the present time. That is why we need to shift the mindset from a prevailing worldview of ‘inevitable decline’ of American manufacturing to one of ‘vibrant opportunity. We need a new level of thinking and action that scales solutions at hand with unprecedented collaboration and organize our efforts to achieve the following true north goals by 2030:

  • 50,000 world-class domestic manufacturing small – medium– large enterprises (10x increase)
  • Add 5 million middle-income manufacturing jobs (40%)
  • Add $1 trillion to the economy (40% increase)

We need to focus our attention on disruptive and emerging opportunities that create new growth opportunities for companies, people, communities.  We welcome collaboration with Industry Reimagined 2030.