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How Trump Can Fix “Free Trade” Without Tariffs

Now that Donald Trump has concluded what everyone already knew–that you can bribe companies to keep jobs in the US by giving them huge tax breaks–perhaps it’s time to fix the real problem: the use of slave labor to reduce overseas manufacturing costs.

Most people (especially in the US) think that slavery is primitive and gradually dying out. Quite the contrary, slavery is growing apace and is big business. According to the non-profit International Labour Organization, there are 21 million slaves “employed” worldwide and these workers generate $ 150 billion per year in excess profit for the companies who “employ” them.

Most people also think that slavery is primitive, practiced only in countries that can’t afford automation. Quite the contrary, slave labor is a highly effective way to increase productivity and innovate manufacturing processes while reducing costs.

To illustrate this, one need merely look at the history of slavery in the United States. As the groundbreaking book, The Half Has Never Been Told: Slavery and the Making of Capitalism in America, points out, the amount of cotton cultivated and picked per slave increased by 361% from 1811 to 1860.

That’s an increase in productivity comparable to that of the increased productivity that result from the invention of the mechanical loom. In fact, much of the world’s economic growth, and around two-thirds of the economic growth in the US during that period was directly related to increased productivity in the picking of cotton.

These performance improvements were not accomplished through automation or hybridization, but through harnessing the creativity and flexibility of the slaves themselves. Here’s how the system worked: slavers set high quotas for each individual slave. If a slave did not make quota, he or she was beaten. If a slave did make quota, the slaver raised the quota for that slave.

The constant application of torture, combined with increasing quota demands, forced slaves to constantly innovate to work more efficiently. For example, they learned (and taught each other) to pick with both hands, eliminate all excess movement, constantly improving their performance.

This why you shouldn’t be surprised when you hear about torture inside slave labor camps in North Korea. Such activities are not just politically motivated; they’re a proven methodology to get higher productivity and constant innovation from forced labor.

Many goods sold in the US are slave-produced, either directly or within their supply chain. The US Department of Labor has identified 102 product categories of products sold in the United States that are produced either by either forced labor or child labor, or a combination of both. In China alone, for instance, forced child labor has been linked to cotton, toys, fireworks and electronics.

I don’t want to be a Grinch, but there’s a 100% chance that some–even most–of the gifts under your tree this Christmas were produced, at least in part, through slave labor. The reason is simple: while most companies that import from the US claim to have supply chains that do not involve slave labor, they do not really know whether that’s the case.

For example, according to their website, the clothing importer Land’s End audits factories in its supply chain only “when we believe there is high risk for slave labor and human trafficking.” However, the company doesn’t state under what conditions they’d become suspicious, an obvious “chicken and egg” dilemma.

More importantly, Land’s End audits, by their own admission, are “conducted by approved 3rd party audit firms on our behalf.” Such audits, however, are known to be “ineffectual…especially in spotting child labor,” according to a recent BBC program on forced labor. As Forbes pointed out:

“There were two key troubling findings that emerged: Firstly, that auditors can be duped. Secondly, that suppliers engage in ‘unauthorized outsourcing,’ which is veiled from the audit’s view.”

To make matters worse, forced labor in manufacturing is goes hand-in-hand with rampant environmental degradation, because the areas where governments tolerate (or profit from) slavery are also governments that either environmental regulation or do not enforce them. As a result, one out of seven children worldwide now with “toxic” air, according to The Washington Post.

That’s not all. Forced labor also goes hand-in-hand with human trafficking and sex slavery, including child prostitution.That was certainly the case during the chattel slavery period in the United States and it’s true today everywhere that slavery is tolerated.

So let me net it out for you. Not only has outsourcing decimated US manufacturing (as Trump rightly pointed out), it has achieved the lower costs that have driven away US manufacturing by creating worldwide human suffering on a truly massive scale.

In other words, doing the right thing–eradicating slavery overseas by making it less profitable–is also what will make US manufacturing great again. Trump can immediately make US manufacturing more competitive (and decrease worldwide slavery) simply enforcing current law and without raising tariffs.

The U.S. Tariff Act of 1930 clearly states:

[a]ll goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions shall not be entitled to entry at any of the ports of the United States, and the importation thereof is hereby prohibited.”

Originally, the law contained a loophole, called the “consumptive demand” clause:

but in no case shall such provisions be applicable to goods, wares, articles or merchandise so mined, produced, or manufactured which are not mined, produced, or manufactured in such quantities in the United States as to meet the consumptive demands of the United States.”

In other words, under the “consumptive demand” loophole, if the US can’t make it, you can import it even if would otherwise be prohibited. In practice, however, companies have used the loophole to allow the importation of any product whatsoever, even if it could be manufactured in the US (albeit at a higher cost).

And so matters stood until February of this year, when Congress–in a rare act of compassion and sanity–removed this loophole from the Tariff Act. It is now illegal to import slave-produced goods regardless of whether they can’t be produced (or can’t be produced as cheaply) in the US.

Because billions of products imported every year have supply chains that depend upon slave labor, many US firms are now in violation of the law. Trump should therefore direct the U.S. Customs and Border protection to impound all goods that can’t be proven by to be completely free of slave labor though their entire supply chain.

Putting the burden of proof on the importers will increase the cost of imported goods by increasing the overhead connected with importing and by forcing companies to eliminate the cost savings that comes from slave labor.

Will it make a difference? Well, let’s go back to the amount of profit that slavery generates each year: $ 150 billion. The yearly US trade deficit (the sum of what we import minus the sum of what we export) was $ 532 billion in 2015. That’s revenue, not profit.

So, yes, eliminating the percentage of that profit that comes from importing slaved goods into the US would have a major impact on our trade deficit and make it comparatively more profitable to manufacture such goods (and the components comprising them) in the US, where supply chains can be more easily monitored.

Thus, rather than bribing companies to keep or move manufacturing in the US, Trump could be having conversations like this:

  • Trump: Tim, I want you to move Apple manufacturing back to the US.
  • Tim Cook: Well, Mr. President, I’d love to do that but it would decrease Apple profits.
  • Trump: I understand completely. However, starting next year, any electronics that Apple imports will be impounded in port until you can prove beyond a reasonable doubt they were manufactured 100% without slave labor.
  • Tim Cook: The groundbreaking ceremony for our new US-based factory complex will be in two weeks.

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