Yeutter: An Idea for Job Creation With a Proven Track Record

Posted July 15, 2010 at 2:50pm

One might normally expect Congress to react to the challenge of job creation (especially in the aftermath of a severe recession) as if it were a four-alarm fire bell. Instead, Congress is acting as if all it hears is the steady din of a South African World Cup vuvuzela — annoying, but all part of the game! What should Congress do? At the very least it should pick the “low-lying fruit” of job creation, but it seems not to recognize at least one palpable opportunity.

[IMGCAP(1)]Why is it so difficult to achieve consensus on what many people would consider to be no-brainer legislative opportunities? The familiar pattern of ideological gridlock is one reason, of course. Liberal and conservative Members of Congress are at opposite ends of the economic policy spectrum, and there aren’t many Members in between. So there is little compromise between the two polarities, and constructive debate seems to be the exception rather than the rule.

Nevertheless, were there an opportunity to create jobs, with no downside to anyone, that should look mighty appealing to a legislator. That opportunity is at hand in what is called the miscellaneous tariff bill. That obscure piece of legislation has been a boon to U.S. manufacturing for many years. What it does is lift import duties on raw materials and other manufacturing components that would otherwise not be available here in the U.S. This lowers production costs, to the benefit of American consumers, for manufactured products that are sold here. And for products sold abroad, it makes us more competitive than we otherwise would be.

But won’t importers and their foreign suppliers find a way to “scam the system” with the U.S. Treasury being the loser? Fortunately, the answer is no. To make sure that there is truly no available domestic supplier of these materials, Congress has traditionally provided for a lengthy comment period. If anyone objects, the proposed duty reduction is almost always rejected. In addition, there are still more reviews within the executive branch — by the U.S. International Trade Commission, the Office of the U.S. Trade Representative, the Office of Management and Budget, and others. Congress has also provided that no single reduction can reduce tariff revenues by more than $500,000.

Despite the success of this program through the years, the thoroughness of this process and its transparency, this legislation was last renewed more than three years ago and all existing duty suspensions have now expired. As a consequence of our political inertia, the U.S. is foregoing an estimated $3.5 billion in annual economic output and an estimated 90,000 jobs. When our economy was performing well, that loss didn’t generate much attention. Today it hurts! And we need to remove the hurt.

Something else is at stake as well — America’s manufacturing prowess. Recent polls show that most Americans believe China has surpassed us as the world’s leading manufacturer. That isn’t true, for we still produce 21 percent of the world’s manufactured products and China is third at 12 percent. But China is moving up, having expanded its manufacturing sector tenfold since opening up to the world. It is racing past many of its competitors, even in high-value products, and its challenge is ours to meet.

U.S. manufacturing produces $1.6 trillion of value annually, 11.5 percent of our gross domestic product. Nearly 12 million Americans still work directly in manufacturing, about 10 percent of our workforce. And these are jobs that pay well. All of us want that to continue. We want to be internationally competitive with good-paying jobs, and that means we must give American workers everything they need to be globally competitive — capital, technology, training and even miscellaneous tariff bills.

We’ll confront the China challenge, for Americans have never turned away from challenges. But we can’t afford to stumble in the process, and keeping input costs down will be critical to our success. So let’s not throw 90,000 jobs under the bus through sheer political inertia and lack of focus. Resurrecting the MTB is as close to a free lunch as any Member of Congress could ever hope for. That legislation should have been enacted ages ago, but doing it before the August recess would sure be helpful.

Clayton Yeutter served as U.S. Trade Representative from 1985-1989 and as secretary of Agriculture from 1989-1991.