PrintJanuary 27, 2011
Obama's Dangerous Export Initiative
President Barack H. Obama has announced his administration's commitment to advancing American exports -- to double America's exports by 2014. Now, there's a daring position to take: advocating a goal easily supported by the entire country, regardless of politics or demographics.
The question is how to advance exports. The United States is already a huge exporter; ships and planes depart daily, fully laden with millions of dollars' worth of export cargo. There could be more -- there can always be more -- but it's not like we're embarking on some great trip to the unknown.
When John F. Kennedy called us to the goal of space travel, it had never been done before. It was a quest, a path untraveled, even unexplored.
Similarly, when Ronald W. Reagan called us to the goal of rolling back communism -- not just to settle for détente, but to free other nations from the death-grip of dictatorial socialism -- it had never been done before. Many believed it an impossible goal -- that the most we could hope for was to stand athwart history, yelling, Stop!, like National Review's William Buckley -- but Reagan's vision paved the way to free Eastern Europe and her other vassals all over the world from the Bear's lethal control.
No such complexity is present in the call for increased exports. It's been done before -- heck, it's being done all the time. We're always exporting. We just need to export even more. That's manageable. The question is whether Obama's prescription will actually contribute to the goal or just do more damage around the edges, as his prescriptions so often do.
So laying out the welcome mat for foreign shoppers is fine; there's nothing wrong with it. But what will those shoppers find when they show up at the store? Aisle after aisle of wondrous variety, high quality, and great values? Or sparse shelves of high-priced, obsolete goods, leftovers from decades past?
Sadly, while our foreign shoppers won't yet find the latter, they won't find the former, either. We know how to export, all right -- when a deal is signed, we have the banking, transportation, and distribution professionals to make it happen -- but there's less on those shelves every year, as so much of our manufacturing base has fled toward more welcoming foreign shores.
President Obama to the Rescue
For the president to promise that his administration will help deliver huge growth in American exports, he has to have some plan, some specific roadblocks to lift. What currently stands in the way of increased American exports?
Crippling Taxes. Amazingly, for a nation founded on the principles of free-market economics, the United States manufacturing community suffers among the worst corporate tax burdens on earth. With federal taxes on corporate profits of over a third -- steep employer matches on employees' Social Security, Medicare, and other taxes -- and an additional potent cocktail of state and local property, income, and sales taxes, our tax burden has for decades served only as an encouragement for manufacturers to outsource components, processes, and whole manufacturing lines abroad.
So, is President Obama truly proposing the necessary halving (or better) of our corporate tax rates, and is he encouraging his party in the state capitols to join in sponsoring such reductions at the state level, in an effort to boost our manufacturing capability and enable us to be more cost-competitive to the world market? No? Oh.
Massive Regulations. The federal bureaucracy has grown to the point of generating hundreds of thousands of pages in the Federal Register every year. The cost of complying with this federal red tape has become a painful red entry on every balance sheet. How many manufacturing decisions would be borderline profitable without the regulatory burden but are tipped over to unprofitable when the red tape is figured in? How many assembly lines and distribution systems have we exported across our borders or across the oceans because the human cost of federal paperwork has grown too burdensome here?
So is President Obama proposing to erase the engine of regulation generation that his administration has become? Will he reverse the onerous burdens of his EPA directives to control carbon, his energy directives to shut down shower head manufacturers and light bulb factories? No? Oh.
Litigation Central. The United States has become a nation of lawsuits, as open venue-shopping and joint and several liability have become the path to riches for the unproductive, the anti-social, and the socialist. From old standbys like frivolous personal injury cases to the new "industry" of patent trolls, our business climate has been transformed from a business-friendly commercial paradise into a society that only an ambulance-chaser could love.
So is President Obama really proposing tort reform in the face of one of his greatest donor sources? Is he proposing that the federal government take advantage of the Commerce Clause -- rightly, for once -- to limit venue shopping and provide reasonable limits to the damage that a law degree and a copy machine can do to an innocent corporation, and will he encourage his partisans in the states to do the same at their level? No? Oh.
Crushing Mandates. Federal contracts have long cost far more than the same contract would in the nonunion private sector because of Davis-Bacon clauses mandating inflated wages and similar costly and unnecessary additions. Perhaps working from the maxim that misery loves company, the federal government has taken to overburdening the private sector with the same kinds of extras. This administration has mandated extra testing to support intrusive food labeling requirements and escalated the work necessary to merely reauthorize existing transportation permits. And it has promulgated the single largest millstone ever hung on the neck of American business: the mandate to purchase the higher-costing and less effective health insurance coverage known as ObamaCare.
So, is President Obama offering to strip Davis-Bacon and similar clauses from all federal contracts and direct the executive branch to reduce the onerous mandates that a century of expansion, but especially these last few years of binging, has placed upon an encumbered manufacturing sector? No? Oh.
Energy Costs. This administration has been at the forefront of every recent effort to increase the cost of energy, from the grid that powers plant machinery to the pumps that fill the tanks of diesel trucks. The Obama administration has shut down oil drilling in the Gulf of Mexico, refused to grant permits for new drilling of natural gas, and pushed subsidy after subsidy for wind and solar power, the weakling half-brothers of the energy-producing family, at the expense of traditional and useful power sources. This administration has even gone so far as to withhold Ex-Im Bank support for multimillion-dollar exports if they support energy projects, applying a destructive "green test" to the historically nonpartisan export promotion agency!
So, will President Obama remove the job-killing green test that he placed on export programs -- the tests that have driven foreign customers into the arms of our foreign competitors? Will he restore full support to oil drilling and pipelines on federal lands and grant permits for the critically necessary development of ANWR, the Bakken Fields, and our Gulf, Atlantic, and Pacific coasts? Energy costs are crippling everything from American manufacturing to the retail shelves. Will Obama help us, or will he continue to crush us with his jackboot while whispering sweet niceties off his teleprompter?
Selling the Rope
Since the president isn't dismissing his armies of tax collectors, regulation-generators, and millstone-installers to increase our production of export-worthy products, he must have something else in mind for boosting exports. And so he does.
The president has spoken of the roadblocks our export control regime has placed on the export market, how the complexity of our federal export enforcement process prevents worthy sales. But does it really? And just how exactly does Obama want to open the market further?
Let's begin with a lesson. There are countries that heavily restrict exports, other countries that somewhat restrict exports, and still other countries that are almost completely wide open. The USA falls in the last column.
Unlike countries like Mainland China, which set high taxes (from 4% to 17% in China's case) on all exported goods, the United States has always forbidden the taxing of exports. It's in our Constitution (Article I, Section 9), so we have no financial hurdle to remove; that one's been down for over 220 years now. Being pro-export is nothing new here.
And unlike countries that require export licenses (again, like Mainland China), which requires government permission for the vast majority of shipments, the United States requires export licenses for only a bare minimum of national security concerns:
- Denied Party Restrictions: We can't sell to terrorists, drug cartels, or other international criminals -- or their fronts -- without an export license.
- Country Restrictions: We have sanctions on several countries due to their governments' support of terrorism or similar gross transgressions -- near absolute on Cuba and Iran, and more moderate on North Korea, Syria, Sudan, and Burma, mostly banning trade only with government-related entities in these four. We can't sell to these entities without an export license.
- Product Restrictions: We have near-absolute restrictions on certain classes of products for national security reasons, which can be summed up almost entirely in the following buckets: avionics and satellite technology, nuclear equipment and technology, chemical and biological weaponry, and just about anything that's been customized for the military. We can't sell these sorts of things without an export license.
So there we have it. The government heavily restricts our ability to sell to about six countries out of over two hundred worldwide. They restrict our ability to sell to a couple thousand individuals and organizations, in a world of millions of companies and billions of people. And they restrict defense contractors and similar specialized vendors from selling potentially lethal weapons and other products to international criminals.
Virtually everything else, to everyone else, to everywhere else, is totally open, requiring no pre-shipment permission at all from the U.S. government. That's some draconian regime this president wants to relax!
So where do we stand? In a country in which the government's only export controls are on those transactions that would harm our national security, if the president seeks to boost exports by removing export controls, the answer is clear. He's willing to further jeopardize our national security in the interest of being able to say "we made it possible to sell these twenty fighter planes" or "these dozen nuclear reactors" or "these fifty satellites."
At a time when we ought to be recognizing the real dangers of growing threats across the globe -- from the megalomaniacal Hugo Chávez in Venezuela to recent dinner guest Hu Jintao of China, while the Islamofascist threat continues to expand past their base in North Africa and the Middle East -- this president is happy to lighten our already mild export controls.
In his campaign, President Obama promised to sit down to dinner with our enemies. He didn't admit that he planned to use trade deals and the diminution of our national security to pay the tab.
This should probably be no surprise -- Obama's entire administration thus far has been a rapid march toward the weakening of our own defense capabilities and the strengthening of our enemies' -- but it is nevertheless amazing to witness the audacity of presenting it as the keystone of a great export enhancement program.
Chavez-sponsored guerrillas work to weaken our benighted ally Colombia. The Muslim Brotherhood and its ilk riot to bring down the government of Egypt. Post-Soviet Russia is proving to be nearly as dangerous to itself and its neighbors as Soviet Russia was. The anti-Western forces have been gaining on us; this is no time to put up a For Sale sign on the front yard and start selling munitions.
A century ago, Lenin famously declared that America would gladly sell him the rope with which he would hang us. It took us sixty years and the election of a wise old lifeguard from Dixon, Illinois, but we managed to defy his prediction that time.
Today, we are again faced with the question of selling rope to the enemy, and at a critical juncture, a lesser man is at the helm. For once, this enemy of the free market is more than willing to step up to the cash register and ring up a sale. Will a Congress understandably focused on economic growth be able to give this precarious situation the priority it requires?
John F. Di Leo is a Chicago-based Customs broker and international trade compliance trainer. A former county chairman of the Milwaukee GOP, his columns regularly appear in the Illinois Review.
