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And its roll with China

March 2n, 2012


With the transfer of a great many of our industries outside of the borders of the United States, mainly for less expensive labor, I often see the phrase protectionism throw about like rice at a wedding. It is not a well known fact, unless youre a history freak such as I, that protectionism was the first economic policy implemented by the new United States government, pushed by the likes of George Washington, Alexander Hamilton, Thomas Jefferson, James Madison and James Monroe, some pretty heavy hitters in our Nations history, whereas under their guidance it was adopted as our primary economic policy. They had good reason, as our nation had just gained its independence from the United Kingdom, and the commercial ties remained in favor to the British Empire, and the early American leadership realized that if our new nation was ever to develop its own national economic policy that it needed to levy some heavy tariffs against English goods in order to level the playing field for Americas less developed manufactures. Over a period of time tariffs were increased, subsidies apportioned, along with money spent for American infrastructure. Reducing our need for the more efficient British goods (made in old fashion sweat shops by cheap labor) and the strong agricultural base that supported the British Empire, besides the tariffs pumped some money into the newly formed Federal Government. Eventually the production of American goods and their replacement of British made stuff, finally broke most of the economic bonds that had linked (with a strong chain of high

taxes) the American colonies thereby enabling the United States to establish itself as an independent major economic and political power. In the following decades, the argument over the amount of Protectionism became a contested regional issue as the strength of domestic manufactures in the North captured more and more of the subsidies, infrastructure development and very visible overall gains of Protectionism. Thereby creating a growing regional issue, which in-turn was to fracture the American Union into a North and South divide. The ever growing differences between the two regions in Protectionism and the overall manufacturing capability, contributed to the Civil War it must be remember that the Democrats in Congress, controlled by Southerners, wrote the tariff laws in the 1830s, 1840s and the 1860s, and had continually lower the value of the tariffs, where in 1857 the rates were the lowest since 1816. The South had no complaints but the low rates angered the Northern industrialists and factory workers, especially in Pennsylvania, who demanded protection for growing iron industry. The Whigs and the newly formed Republicans complained because they favored high-tariffs to stimulate industrial growth, in the 1860 election the Republicans called for an increase in tariffs which was finally enacted in 1861 after the Southerners resigned their seats in Congress some historians since them have played down the tariff issue hanging their hat of the issue of slavery. On the subject of slavery it is important to recall that slavery in the United States was a form of slave labor which existed as a legal institution in North America for more than a Century before the founding of the United States in 1776, where it continued in the South until the passage of the 13 th Amendment to the United States Constitution in 1865 after the Civil War. The 1st English colony in North American in Virginia acquired its first Africans in 1619, after a ship arrived that carried a cargo of around 20 Africans, whereas the

practice established in the Spanish colonies as early as the 1560s expanded into the English North America. Most slaves were of African descent and were held by whites, in the English colonies and had a status of foreigners, where the non-Christian knowing this contributing to the hardening of their legal boundaries as foreigners. Yet, over decades, many slaves in the Upper South were born of as a mixed race, where most had white fathers, and because of generations of white fathers, by the early 19th Century, some mixed-race (breeds) would qualify as legally white under state laws. It should be noted that some Native Americans and free blacks also held African-descended slaves, to slow this breed population, in 1662 the Colony of Virginia passed a law adopting the partus sequiter ventrem by which the children of a slave mother inherited her status, in direct contradiction to English common law where the children inherited the status of the father. It is a well known fact that Europeans also had Native Americans as slaves, as slave labor was in high-demand in the regions where there was good-quality soil and a moderate climate for large plantations of high-value crops that required labor-intensive cultivation, such as tobacco, cotton, sugar and coffee. By the early decades of the 19th Century, the greater majority of slaveholders were located in the Deep South, where large work-gangs worked the large plantations, with 66% of the plantations growing cotton.

Before the establishment of chattel slavery (outright ownership of a slave and his/her descendants) much of the labor was organized under a system of bonded labor known as indentured servitude. A system found even today applying to labor brought into the country illegally of foreign born nationals, where the person or persons seeking life in the land of the free and not having the funds to move, are contracted to provide labor for a number of years to repay their travel costs to the United States. Between 1680 and 1700 as fewer Europeans migrated to the colonies, planters began to import more Africans, in this the House of Burgesses in Virginia enacted a new slave code in 1705 the coupled a variety of legislations and added new provisions that set in concrete the principles of white supremacy in the law. By the early 18th Century, colonial courts and legislatures had established race slavery which in effect created a caste system in which slavery applied mainly to Black Africans and people of African descent, with an occasional Native American thrown in for good measure. From the 16th Century to the 19th Century it is estimated that over 12-million Africans were shipped to the Americas, of these around 645,000 were landed in the future United States in the 1860 US Census the slave population in the United States was around 4-million, 6.3% of the total population.

The power of the slaveholders and the commodities produced in the South practically ran the US Government, where in the 72 years between the election of George Washington and Abraham Lincoln, 50 of those years had a slave holder as its President, and for the entire period there was never a 2nd term elected President who was not a slaveholder. In this fact it is also to be remembered that slavery was a serious contentious issue in all US politics from the 1770s to 1860, whereas it was even a topic of serious debate in the drafting of the US Constitution (where slave trade was protected for 20years along with slaves being counted toward Congressional apportionment), and a subject of Federal legislation such as the ban on the trans-Atlantic slave trade in 1808, the passage of the Fugitive Slave Act in 1850, the following landmark US Supreme Court cases like the Dred Scott decision of 1855.
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Therefore historically the southern slave holding states had little perceived need for mechanization, like the North, and gained there capital from selling their commodities abroad, and in this supported a policy that would allow them access to cheaper foreign goods. In the North, the policy was to develop a strong manufacturing base and championed the cause of increased tariffs that would allow its manufactured to compete with foreign competitors, with the plan to eventually secure the domestic market. Soon after the birth of our nation, our 1st US Secretary of the Treasury, Alexander Hamilton advocated stiff tariffs to assist in protecting our infant industries, include in his plan were Federal subsidies, derived in part from the imposed tariffs. Southern statesmen agreed with the need to gain American independence but argued with Northern interests over the utility of higher and higher tariffs, whereas the flip side was higher tariffs in the countries they were exporting their products, with a great majority of the commodities produced with slave labor. Throughout the 19th Century, leading US statesmen including Senator Henry Clay (Secretary of State 1825 to 1829) from Kentucky, bridged the differences between the two competing factions, and continued Hamiltons tariff themes within the Whig Party under the name of the American System. However, as the benefits piled up

for the Northern interests, and even higher tariffs were proposed by Northern Politicians, the tariff issue begin widening the crack into a wide chasm between the North and the South. Championing the farmers (plantation owners) and the craftsmen against the factory owners in the North, the Southern Democratic Party successfully contested several elections during the 1830s, 1840s and the 1850s, a major part over the increasing tariffs and strong protections put in-place for the Northern industries. Nonetheless, the Southern Democrats were never as strong in the House as the more populated voting North as the Northern Whigs sought and finally received higher protective tariffs, over the bitter resistance of the South. ignore Federal Laws. It was through the actions of across the aisle politics that some Southern and Western Democrats in favor of a strong Union, joined with Southern Whigs interested in preserving the Union managing to guide the Union through later decades. History tells us that mostly over the issue of abolition and other scandals, the Whigs collapsed by the middle of the Century, leaving a void in the National leadership that Abraham Lincolns fledgling Republican Party would fill. Abe, who labeled himself Henry Clay tariff Whig strongly opposed free trade, as did a large number of Southern Leaders, albeit they argued for less protectionism. Unfortunately their efforts were not enough to calm the differences between the North and the South, where the increasing strident and militant tone of Abolitionism in the North and the Republican Party, coupled with the increasing accumulation of wealth by the Northern Capitalists drove the South from the new Republicans the final straw being the election of Lincoln and the majority of the Northern state constituencies by the Republican Party pushed the South into secession from the Union. Relieved from the restrictive tariffs in the South as their statesmen resigned their political Federal positions, Lincoln and his gang imposed a cross-theboard 44% tariff which was in effect during the Civil War, this to pay for the construction of the Union-Pacific Railroad, the WAR effort, and to protect the Northern Industry. This political action finally caused one Southern state to bring the issue up of whether or not the States had the right to

The actions of the North ultimately were successful, with the combination of capital for the war-industry, railroad, and new domestic goods to replace foreign goods (with the assistance of the high import tariffs) brought a huge increase in American production. In the South the Union naval blockade, and subsequent damage done by the well-equipped Union Armies obliterated Southern Manufactures by the end of President Lincolns 1st term the Northern manufacturing states had 10X the GDP of the South. After the Civil War, there were a combination of former Whigs, Moderate Republicans, Northern and Southern Democrats who looked forward to lower tariffs, but the Radical Republicans, managed stop their drive running rough shod over their opponents, asserted military despotism consequently the era of high tariffs remained in place for decades. Since early in the 20th Century, the shift brought on by the Republicans moved towards the growth of Corporations and Capital centralization, and the downgrading of labor issues in other words although the push leading up to the Civil War was shouted loudly in the media that slavery was a no-no, the following years showed that the heavily dominated Republican government was in love with slave-labor, only under a different name than just slavery subsequently although the Robber Barons benefited from the new political leaders, it was a battle most of which their efforts were in the degradation of the Labor Forces, raising their arms in victory how in fact they were protecting American jobsthe tariffs still were an issue, but not as much as the rights of the workers. Tariffs today in the United States are at the lowest level in its history, and since we continue to compete with foreign lands that embrace the Value Added Tax (VAT) and the USA does not utilize the VAT system our small manufactures, artisans, craftsman, and tradesmen called into question the GOPs true allegiance to their country exports and the increased imports from countries, whereby there is no leveling mechanism other than a local, state or federal tax on all goods foreign or domestic. There is a growing number of groups that firmly believe that allowing foreign goods to enter our domestic market without being subject to tariffs or other forms of taxation (VAT), is leading to a situation where our domestic goods are at a disadvantage that is only increasing, call it a reverse

protectionism brought on by the large exodus of domestic Corporations who have shifted a large bulk of their manufacturing oversea in chasing cheap labor, whereas do they NOT only scream if a tariff or Value Added Tax is even implied, they dodge and duck the Corporate offshore taxes due in the USA.Under GWB they enjoyed a terrific windfall that they lobby daily not to give up. Yet, politically and militarily if another country raises a question or two, they expect the government of the United States to come to their defense, no matter the occasion or the reason. In simple words, the final selling price of a product from a country that has not VAT (like us) sold in a country with a VAT must bear not only the tax burden of the country of origin, but in addition the tax burden including the VAT in the country it is being sold. In reverse, the selling of a product from a country with the VAT and sold in a country that does NOT have such a tax, bears NO tax burden in the country it is sold in reality this allows countries that export to the USA to drastically reduce the price of their products thereby further increasing the disadvantage to the consumer in the USA. The GOP has constantly fought against any sort of VAT, whereas some on the other side of the aisle want at least a compensating tax on importsnada, zip, no way Jose!

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