Smart Trade: FixingAmerica’s Economy Michael Stumo, CEOCoalition for a Prosperous America
About CPAMission: Balanced trade - eliminate the tradedeficit. The biggest potential source of jobs andgrowth for AmericaMembers: Manufacturing, agriculture andworker organizations and companies.Representing the interests of 2.7 millionhouseholds through our association andcompany members.
CPA: Representing American Producers Brian O’Shaughnessy Joe Logan Bob BaughRevere Copper Products Ohio Fmrs Union AFL-CIO Pam Potthoff Kevin Kelley Burl Finkelstein Women Involved in Rochester Technology and Kason Industries Farm Economics Manufacturing Assn
Biggest Trade ProblemsPersistent Trade Deficit - 20 yearsCurrency ManipulationForeign Consumption Taxes (border adjustable)State-Owned EnterprisesLawful foreign subsidies and barriersLack of a U.S. trade and manufacturingstrategy
Why is the trade deficit a core issue? “Recession” = Contraction of GDP Net Imports/Trade Deficits Biggest Most Volatile subtract from GDPGDP = C + I + G + NE Investment Net Exports: Consumption Total Exports minus Total Imports Government Procurement
How much GDP loss?...in 2001 the trade deficit was shaving at leastone percent per year off our economic growth.This may not sound like much, but becauseGDP growth is cumulative, it compounds overtime. ... America’s trade deficits since 1991alone have caused our economy to be 13percent smaller than it otherwise would be.That’s an economic hole larger than the entireCanadian economy.- Fletcher, Ian, “Free Trade Doesn’t Work,”(2011)
Industries We Have Already LostX Fabless chipsX Compact fluorescent lightingX LCDs for monitors, TVs and handheld devices like mobile phones electrophoretic displaysX Lithium ion, lithium polymer and NiMH batteriesX Advanced rechargeable batteries for hybrid vehiclesX Crystalline and polycrystalline silicon solar cellsX Inverters and power semiconductors for solar panelsX Desktop, notebook and netbook PCsX Low-end serversX Hard-disk drivesX Consumer networking gear such as routers, access points, and home set-top boxesX Advanced composite used in sporting goods and other consumer gearX Advanced ceramics and integrated circuit packaging.
Have bilateral trade agreements helped? Not really
But we’re moving to high tech, right?Advanced Tech - We are a net importer since 2002.
Well, maybe the service sector will save us! Maybe not.
Labor Costs?HourlyCompensationCosts inManufacturing,U.S. Dollars,2009 It’s not just cheap labor that’s the problem! The U.S. is actually now a laggard in manufacturing wages among developed nations.
Persistent Currency Undervaluation A Tariff and a Subsidy
NOT OVERTAXED; BADLY TAXEDThe U.S. is not overtaxed EU15 -- 40.3% of GDP US -- 25.4% of GDP 40.3%The U.S. is badly-taxed 35.0% Our tax system relies too 25.4% heavily on non-border adjustable income taxes This hurts Americans’ ability to save and invest domestically US exports are taxed twice US imports escape any consumption tax
TRADE IMPACT OF BORDER TAX ADJUSTMENTS The US tax system has become increasingly out of step with the rest of the world More than150 countries apply a consumption tax to their imports, doubling the tax burden on US exports The same countries rebate their tax on their exports; the US almost alone does not apply an offsetting tax on its imports Each year America’s two- way disadvantage amounts to an estimated half trillion dollars •
A $500 Billion Trade Distortion Problem• $143M Assessments on U.S. goods exports• $254M Rebates to goods imports to U.S.• $72M Penalty on U.S. services exports• $48M Rebate to service imports to U.S.• Total Trade Distortion: $500B No other trade practice * 2008 numbers distorts trade more. Source: Pat Choate, “Saving Capitalism”
Value Added Taxes are tariffs $356 Billion trade distortion
How they use VATsTariff and a subsidy Offset other costs like health care, income taxOffset tariff reduction Canada/Mexico: 15% VAT after NAFTA Central America: 12% VAT after CAFTA Korea: 10% VAT now. Later increase? China: 19% VAT
State Owned Enterprises“The state’s influence over China’s economy takes many formsand covers a whole spectrum of companies from fully stateowned to those that are nonstate but maintain close ties to thegovernment. China’s state-owned and state-controlledcompanies and industries are generally the largest ones inChina and are operated and managed by the centralgovernment of the People’s Republic. They are an instrumentof state power as well as the centerpiece of China’s industrialpolicy. They receive massive government sub- sidies and areprotected from foreign competition.”* U.S. China Economic and Security Review Commission,2011 Report to Congress, November 2011, p 40.
21st Cent. Trade Agmt Principles Balanced Trade/Net Exports National Manufacturing/Security Strategy Neutralize currency manipulation Address foreign border taxes Neutralize state owned commercial enterprises Reciprocity - benefits vs. concessions
Contact info: Michael Stumo, CEOCoalition for a Prosperous America tel: 413.717.0184email: firstname.lastname@example.org www.prosperousamerica.org www.tradereform.org www.cpabuyamerican.com
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