Discussion -Logistics Policies

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Nov 24, 2024

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1 Formal Letter Jacob Afful Department of Business, Bellevue University SCLM 466 -861N Supply Chain Management and Economics Professor Gary Lawson November 2023

2 Market Competition and the Failure of Competitiveness Enhancement Policies in the US The Honorable Representative Jackson United States House of Representatives Washington, DC 20515 Dear Representative Jackson, The purpose of this letter to you Representative Jackson, is to bring your attention on lack of effort by the United States policymakers to enhance the international competitiveness of its industries and how largely it been a failure. As you may be aware, the US export market has fallen steadily over the past 20 years as has the average earnings of US workers. Competitive enhancement policies have failed because of the narrow view of market competition on the part of policymakers. This has been particularly evident around international trade policy where protection and subsidies are provided to the private sector with no guarantee of efforts to strengthen competitiveness. This letter wishes to share with you two strategy to enhance international competitiveness. First, commercial policy should include a quid pro quo in which continued protection is contingent on the implementation of an adjustment plan aimed at meeting competitiveness targets and workplace reorganization goals. Second, fundamental issues affecting the cost of production such as workers rights, environmental standards, and human rights, should be removed from the process of international competition through negotiations. You may ask why does competition matter? In the world of competitive advantage, entry into international trade does not disrupt the full employment situation but simply leads to a more efficient allocation of resources and thus a rise in total world output. Congressman, an anti trust policy has been used both to reduce market power and, more recently, to increase market power

3 internationally (e.g., encouraging the formation of Sematech). Tax credits and accelerated depreciation have been widely used, the reason being that if international competitiveness depends on the cost of production, then reduction in tax rate is a direct cost reduction. In fact, industry protection and new technology development have generally been promoted through procurement by the Department of Defense and NASA. Trade policy in this country sits somewhat uneasily in the category of c-e policy. The traditional focus of lawmakers, economists and other stakeholders has been the reduction of foreign trade barriers. Trade protection is supported only to counter unfair practice by foreign producers (e.g., subsidization or dumping). Such action is generally not intended to boost exports but to reduce import penetration. It may in fact reduce exports if foreign countries retaliate. Most of the US commercial policy is informed by this view, including, of course, trade liberalization under GATT and bilateral free trade agreement with Canada, Mexico, and Israel, and anti- dumping, countervailing duty, section 301 and “super 301” policies to counteract unfair trade and commercial practices by foreigners. Congressman Jackson, US policies have tended to seek simply to reduce corporate operating cost to enhance international competitiveness. But cost reduction alone is insufficient, since it ignores the new competitive environment described earlier. Whiles cost reduction I must add allows increased price competitiveness or increased for return on investment, it does not guarantee either of these outcomes. United States companies are notorious for passing these gains to shareholders instead ploughing back into its business. A good example is the auto industry’s response to the dollar depreciation in the late 1980s, A sudden relative cost gains vis-à-vis Japanese rivals was wasted with large pay raises for top-level management and increased distributed profits, instead of with a push for greater market share.

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4 Sir, I hope you find the time to read my letter and together with your colleagues in Congress we can start the debate on such an important policy and begin to affect a change. Thank you for your time! Jacob Afful

5 Reference Milberg, W. (1994). Market Competition and the Failure of Competitiveness Enhancement Policies in the United States. Journal of Economic Issues (Association for Evolutionary Economics) , 28 (2), 587. https://doi- org.ezproxy.bellevue.edu/10.1080/00213624.1994.11505571

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