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Tom Russell

Govt. incentives: Good for us, bad for them?

In recent months there’s been talk in Congress about placing tariffs on products exported from China. Actually, this debate is hardly new. What’s different now is the fact that it has gained more traction with Democrats now in power in both the House and the Senate.

As usual, much of the debate touches on such issues as China’s failure to address infringement of intellectual property rights, its currency manipulation and lack of environmental regulations like those faced by U.S. manufacturers. The overriding concern is that these issues create an unlevel playing field that, in turn, create huge trade imbalances and huge job losses among U.S. manufacturers unable to compete against their Chinese counterparts.

Another big impetus for the tariffs is what elected officials call the unfair government subsidization of exports. This is a legitimate concern, especially when you consider that China’s booming economy is already fueling huge government surpluses.

But before our elected officials race to criticize China and others for subsidizing exports, they need to look at what’s happening in their own backyard. For years, the U.S. government has subsidized agriculture, not to mention companies like Amtrak.

In addition, state and local governments have provided tax breaks and other financial incentive for years that have supported private employers expanding in their areas. This policy recently has benefited furniture companies such as La-Z-Boy and Legacy Classic, which have received incentives from the City of High Point to move from the county into the city.

Another recent initiative to be considered in the N.C. General Assembly would provide additional government incentives to both North Carolina furniture manufacturers and textile and apparel manufacturers that expand in the state. The same legislation would provide property tax exclusions for those companies and establish a $2 million training center for a new furniture technology at Catawba Valley Community College.

The furniture incentives are aimed at helping an industry that has lost more than 25,600 jobs between early 1996 and early 2006. At a January gathering of industry, state and local officials announcing the proposed legislation, this harsh reality cast a somber mood over the meeting. In some ways, it appeared that the incentives are too little too late. Providing additional incentives also seems a little hypocritical given the fact that we don’t want China and other countries doing the same thing.

This is not to say that the 50,000 plus furniture jobs left in North Carolina are not worth saving. Companies represented at the January event, including Century, Hickory Chair and Linwood Furniture, are making strides in this area by investing in their plants and making changes to create a more efficient production process. A state-sponsored furniture technology center will help these and other companies make further strides in this area.

But the timing for additional incentives may be off. That’s especially true when we are criticizing China and others for subsidizing their own factories, and are talking about placing tariffs on them as a result.