Why can’t things be the way they used to be?

tariffThe way things used to be was when the US cutlery companies needed help to fight against cheap foreign- made knives our Government would exercise its authority by taxing or restricting imports.

Some examples include -The McKinley Act of 1890, the Wilson Act of 1894, the Dingley Act of 1897, the Fordney-McCumber Act of 1922.

All of these acts substantially raised the price of imported cutlery and resulted in making American knives more affordable.

There is no doubt, the US firms today are struggling against cheap imports and China is one of the major contributors.

In my interview with W R Case & Sons Cutlery Company President, Mr. Tom Arrowsmith, he said he has seen more changes that are impacting the US knife companies in the last few years than all years before.

Mass merchants of the world have driven prices down. US manufacturers heard the sirens’ call of offshore manufacturing. Today only a small handful of knife makers make all of their products in the US.”

“Virtually all of the large manufacturers in the Knife Industry have substantial portions of their products produced mostly in China.”

In addition to China flooding our market with knives, consider this-

China is very restrictive in allowing US products to enter into their Country.

Here are the China/US Trade stats-

  • For 2008 YTD (Jan-Sept)- China imported $55 bil from US and yet, exported $250 bil so far this year, resulting in a US Trade deficit of $195 bil.
  • For 2007- China imported $65 bil from US and exported $321 bil to the US, resulting in a US Trade deficit of $256 bil.

It looks to me like we need to address the deficit by limiting or taxing Chinese made products, back off what we export to them (this is problematic because it hurts our manufacturers), or a combo of the two.

walkingupuscapitolOtherwise, the American cutlery company executives need to head to Capital Hill, but unfortunately they will have to get in line…

Oh yeah, I forgot to mention one minor detail

And this could throw a wrench into things; I don’t know if you are aware, but-

China is the biggest buyer of US debt. In other words, we are borrowing huge amounts of money from China.

And don’t think the additional bailouts, bridge-loans, and public works programs coming down the pike aren’t going to cost a trillion or two too. Then we are going to need them buying our debt all the more.


Sources: US Census Bureau Foreign Trade Statistics, American Pocketknives, by Dr. David Krauss, CNJ Knife Show with Tom Arrowsmith Part I

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  1. Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the weathiest nation on earth – its preeminent industrial power – into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It’s a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $9 trillion. What will happen when those assets are depleted? Today’s recession may be just a preview of what’s to come.

    Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.

    Clearly, there is something amiss with “free trade.” The concept of free trade is rooted in Ricardo’s principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn’t consider?

    At this point, I should introduce myself. I am author of a book titled “Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America.” My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

    This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It’s because these effects of an excessive population density – rising unemployment and poverty – are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.

    One need look no further than the U.S.’s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

    Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable – nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn’t a problem, but rather that it’s exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world’s population.

    Ricardo’s principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.

    If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at OpenWindowPublishingCo.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It’s also available at Amazon.com.)

    Please forgive me for the somewhat spammish nature of the previous paragraph, but I don’t know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.

    Pete Murphy
    Author, “Five Short Blasts”

  2. Thanks for the info, Pete. Pretty deep subject, obviously.

    One thing I would love to know, and you might can help- can you find out the numbers relating to “cutlery” imports into the US for 05, 06 and 07?


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