Archive for June, 2015

House Leadership Blindsides Opposition to Trade Promotion Authority

Tuesday, June 23rd, 2015

On Monday, June 15th, House Republican leadership announced that they had decided to delay the re-vote anytime up to July 30th on Trade Promotion Authority (TPA) which “fast tracks” ObamaTrade. Less than three days later, the opposition was blindsided by representatives in the House approving the standalone TPA bill by a close vote of 218 to 208 (see how Representatives voted here.) Because the House approved a standalone TPA bill, the Senate has to vote on a standalone TPA bill as well as legislation extending Trade Adjustment Assistance (TAA) and the U.S. trade preferences program before the president can sign the TPA bill into law. The trade preferences bill would renew the African Growth and Opportunity Act (AGOA), the Generalized System of Preferences, and trade preferences for Haiti.

There was a question whether enough of the 14 Senate Democrats who voted in favor of a combined TPA-TAA bill on May 22nd would vote in favor of a standalone TPA bill. TPA supporters hoped these senators would be influenced to vote in favor of cloture because they have voted for fast track already and because all 28 House Democrats who voted for a TPA bill to be combined with the Trade Adjustment Assistance (TAA) bill were united in voting for a standalone bill on June 18th.

Senator McConnell filed for cloture on both the TPA bill and the preferences legislation late Thursday, for the vote to be held on Tuesday, June 23rd. The vote on cloture requires 60 votes. As I finish this article, I just watched the Republican leadership get the 60 “yes” votes needed to invoke cloture, with 37 senators voting “no,” and three not voting.

This means 30 hours of debate on the bill would begin, meaning that a final vote on the TPA bill could take place as early as Wednesday. Only a majority of 51 votes are needed to pass TPA. After the passage of TPA, the Senate would then vote on cloture on the Trade Adjustment Assistance (TAA) and the trade preferences bill. If cloture is invoked, a final vote on the TAA-preferences bill could come Thursday or Friday.

The House of Representatives would still need to vote on the Trade Adjustment Assistance bill. Since only 86 Republicans voted in favor of the TAA bill on June 12th, it would require at least 92 Democrats to vote in favor of TAA in order for it to pass the House. At that time, only 40 Democrats voted to renew the TAA program, while the vast majority joined House Minority Leader Nancy Pelosi (D-CA) in voting “no” to stop or delay the TPA.

On June 18th, June 18, White House Press Secretary Josh Earnest told reporters that “President Barack Obama isn’t going to support a strategy that gives him half a loaf on his trade agenda.

With Capitol Hill leaders working on a plan that would split Trade Promotion Authority from Trade Adjustment Assistance, Earnest made clear Obama will demand both. ‘The only legislative strategy that the president will support is a strategy that results in both TPA and TAA coming to his desk,’ he said.”

In an email to members of the SoCal Fair Trade Campaign on June 19th, Arthur Stamoulis, Executive Director of the Citizens Trade Campaign, wrote in part, “As short-sighted and inappropriate as the original Ryan-Hatch Fast Track bill was, the House package is actually even worse. It would weaken human trafficking measures; eliminate simple currency measures and other enforcement provisions; and even prohibit the consideration of climate solutions in future trade negotiations. Senators now have even more reason to vote no than they did last time around.

After the previous Senate vote to approve the combined TPA/TAA bill on May 18, 2015, Senator Elizabeth Warren released a 15-page report, “Broken Promises: Decades of Failure to Enforce Labor Standards in Free Trade Agreements,” showing that the United States pursues very few enforcement actions to uphold the labor protections in its trade agreements. In her press release, she stated, ““Supporters of past trade agreements have said again and again that these deals would include strong protections for workers, but assurances without strong enforcement are just empty promises,” Senator Warren said. ” The facts show that, despite all the promises, these trade deals were just another tool to tilt the playing field in further of multinational corporations and against working families.”

In the Weekly Standard of June 17th, anti-TPA Republican, Senator Jeff Sessions, stated, “It is essential that there be no misunderstanding: fast-track preapproves the formation of not only the unprecedentedly large Trans-Pacific Partnership, but an unlimited number of such agreements over the next six years. Those pacts include three of the most ambitious ever contemplated. After TPP comes the Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union, followed by the Trade in Services Agreement (TiSA), seeking as one its goals labor mobility among more than 50 nations. Together, these three international compacts encompass three-fourths of the world’s GDP. Including the nations whose membership is being courted for after enactment, the countries involved would encompass nearly 90 percent of global GDP. Yet, through fast-track, Congress will have authorized the President to ink these deals before a page of them has been made public. Then, the Executive sends Congress ‘implementing’ legislation to change U.S. law—legislation which cannot be amended, cannot be filibustered, and will not be subjected to the Constitutional requirement for a two-thirds treaty vote…This nation has never seen an agreement that compares to the TPP, which forms a new Pacific Union. This is far more than a trade agreement, but creates a self-governing and self-perpetuating Commission with extraordinary implications for American workers and American sovereignty.”

On June 19th, Steve Elliott of Grassfire, emailed, “They made their dirty “back-room” deal behind closed doors and now they are on auto-pilot to “land” ObamaTrade Fast Track despite massive public opposition…Boehner and McConnell use deception and trickery to resurrect the defeated Fast Track bill and then announce that this is on a “glide-path”!

In an email I received June 23rd, Chris Chmielenski of NumbersUSA, stated, “The current version of TPA, H.R.2146, would allow Pres. Obama to negotiate immigration increases into free trade agreements that would only be subject to a simple up-or-down vote from Congress. TPA would not only cover the massive Trans Pacific Partnership (TPP) between the United States and 12 other Pacific Rim nations, but also cover the Trade in Services Agreement (TiSA) between the U.S., European Union, and other nations. TiSA includes labor mobility for more than 50 nations and could increase the number of foreign workers allowed to work in the U.S. and extend the length of their work visas.”

In an email I received on June 22nd, Senator Rand Paul stated, “Over the past few weeks, more and more Americans have begun to see why I oppose Obamatrade. As far as I’m concerned, the American people have had enough of government hiding things from us. And every time they say it’s “for our own good,” we’ve found ourselves in an even deeper mess…If passed, “fast-track” authority would allow trade deals the Obama administration negotiates with the 12 member nations covered in the Trans-Pacific Partnership to pass Congress with a simple majority vote — instead of the 67 U.S. Senate votes the U.S. Constitution requires for ratification of a Treaty…It’s time for this scheme to be released for the American people. If the President won’t release it and agree to an open and transparent process — to ensure Americans’ liberty is protected — Congress must vote “NO!”

Food & Water Watch Executive Director Wenonah Hauter, issued a press release June 23rd, which states in part: “Today, the Senate narrowly approved a procedural motion to pass a degraded version of the Fast Track Trade Promotion Authority that passed last month… Today’s bill also weakened the Senate’s earlier provisions addressing human trafficking and currency manipulation and includes new House language that prohibits trade deals from ever addressing climate change or immigration issues…Fast Track will accelerate Congressional consideration of the as-yet-unseen Trans-Pacific Partnership, a trade pact that will undermine key consumer, public health and environmental protections, and other trade deals that follow. These trade deals could undermine America’s food safety standards and commonsense food labeling measures, bringing a rising tide of unsafe imported food to our grocery stores and restaurants.”

After the cloture vote, Michael Stumo, CEO of the Coalition for a Prosperous America issued the following statement, which in part states, “The Republican base and the Democratic base remain united in their opposition to current trade and global governance policy. Job creation claims are no longer believed because they have proved false. Growth claims fall flat. The rhetoric in favor of trade deals contrasts shockingly with the data on post-agreement performance.

America needs to establish a long term goal of balanced trade, a medium term goal of becoming a net exporting nation and a short term goal of producing more of what we consume. We need to recognize that tariffs and quotas are no longer the issue. This is not 1906 anymore. The new mercantilism and trade distortions are currency manipulation, foreign border tax hikes, industrial subsidies and a few other tactics that move the net trade needle towards deficit. Any modern trade policy must address these modern tactics. And America must fix its tax policy to substantially increase our trade competitiveness.”

Since the Trade Promotion Authority only needs 51 votes to pass, it is likely that the bill will pass the Senate because of 60 senators voting for cloture. The only path left for the American people will be to convince Congress not to pass the Trans-Pacific Partnership Agreement. At least, the Trade Promotion Authority requires “at least 60 days before the day on which the President enters into the agreement, publishes the text of the agreement on a publicly available Internet website of the Office of the United States Trade Representative.”

I urge all Americans to stop being apathetic and exercise their constitutional right to address their representatives in Congress. We must stop the Trans-Pacific Partnership Agreement and other treaties in negotiation from destroying our national sovereignty and harming the American way of life.

Boehner and his “Lieutenants” Battle for International Corporate Elite

Tuesday, June 16th, 2015

On Friday, June 12, 2015, the House passed the Trade Promotion Authority. This meant that 191 Republicans and 28 Democrats in the House of Representatives voted to surrender their Constitutional authority on trade and allow President Obama to conclude the Trans-Pacific Partnership Agreement (TPP) and other agreements that have been negotiated behind closed doors. The good news is that the House failed to renew the Trade Adjustment Assistance (TAA) portion of H.R. 1314 by a vote of 302 to 126. Since the Senate-passed version of H.R. 1314, contained both the TPA and TAA measures, the House needed to pass both portions of H. R. 1314 for the bill to go to the president’s desk for signature.

Many did not expect the Trade Promotion Authority bill to be voted on if the TAA bill failed, but as soon as it failed, a motion was made to vote on the TPA bill. Then, as soon as the TPA passed, I watched Republican House Speaker John Boehner (OH) make a motion to reconsider the TAA after the House reconvenes on June 15th. The re-vote was expected to take place Tuesday, June 16th, but at a Rules Committee meeting late Monday, June 15th, the House Republican leadership decided to delay the re-vote until July 30th in an attempt to give President Obama and the Republican leadership more time to figure out how to pass the stalled trade package.

If the House and Senate pass bills with different language, then they have to form a House/Senate Conference Committee. That committee negotiates and works out the differences in the two bills, sends the bills to the House and Senate, and if both chambers approve, it then goes to the President for signing.

There was also a third trade-related bill, H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015. This bill was the first of the three bills that the House voted on, and it passed by a vote of 240 to 190. This bill had to pass because it had all the Paul Ryan goodies promised to Republicans who were wavering in exchange for their TPA support (although the currency manipulation language that was in the Senate-passed bill was stripped out.)

It is likely that deal cutting will be conducted behind the scenes to get Democrats to vote in favor of the TAA. Even though Democrats have consistently supported Trade Adjustment Assistance legislation, Democrat leadership and labor unions were unhappy because the TAA program was to be funded by large Medicare cuts, and it would not provide enough funding to offset the harm of TPA. Other Democrats voted “no” to delay or stop the Trade Promotion Authority bill.

The Republican leadership hates TAA, but was willing to help pass it to get Democratic votes. Important conservative organizations like Heritage Action and Club for Growth opposed TAA but supported TPA. A last minute Boehner/Pelosi deal on TAA prevented the defunding of Medicare to fund TAA, and instead would fund it by direct tax hikes by raising the penalties for misfiled taxes. “A vote for Obamatrade on Tuesday is a vote to give the IRS more power and more incentives to go after small businesses,” said Curtis Ellis, founder of the website, brought to you by the American Jobs Alliance, in an exclusive interview with Breitbart News. It seems unlikely that more Republicans will vote for the TAA after the revelation that voting for TAA is technically voting for a tax increase.

What angers me is that the existence of the Trade Adjustment Assistance bill is a tacit admission by both parties that trade bills cause people to lose their jobs so that they need assistance to be retrained for other jobs. What does a person with a good paying manufacturing job get trained to do? Work at Walmart or flip burgers for McDonalds? That is what too many American workers have been forced to do when the company they worked closed their doors due to unfair competition from foreign companies as a result of previous trade agreements concluded in the past 20 years.

There are rumors that if the TAA bill fails again, the Republicans have a “Plan B” and will draft another rule that would bring TPA to the floor on its own without being tied to the TAA legislation. If this is necessary, the Republican House leadership would risk losing the support of some Democrats and some of the Tea Party-supported Representatives that voted “yes.” If a stand-alone Trade Promotion Authority bill does pass, the Senate would have to reconsider and vote on the TPA bill without the TAA portion being included.

If the Trade Promotion Authority is granted to President Obama, future historians may mark this event as the day when our Constitutional representative democracy ended and our country unofficially transformed into an oligarchy, which is defined as “a small group of people having control of a country, organization, or institution.”

In 1995, Republicans concluded a “Contract with America,” while in 2015, Republicans appear to have concluded a contract with the oligarchy composed of the international corporate elite of large, multinational corporations that betray America’s small businesses, farmers, ranchers, and workers. These large, multinational corporations now comprise the majority of the membership of the National Association of Manufacturers and the U. S. Chamber of Commerce. Many are no longer American-owned corporations, having been acquired by corporations from foreign countries.

For seven years, Republicans have accused President Obama of overstepping the power of the Executive Branch of our government, but now they just voted to give him even more power in the name of “free trade.” This is why I heard conservative radio talk show host Mark Levin express his outrage against Republican leadership in the House on his show Thursday evening, June 11th, when he said that these “trade agreements aren’t free trade, they are crony capitalism.”

Tea Party members and supporters can feel good that 54 Republicans voted “no” on granting Trade Promotion Authority, nearly all of whom were Tea Party supported candidates in either the 2010 or 2012 election. These Representatives realized that the TPP would be a threat to our national sovereignty and leads us one step closer to global governance. Only seven Tea Party-supported Representatives changed their mind at the last minute and voted “yes” on the TPA. They were: Rod Blum (IA), Mo Brooks (AL), Trent Franks (AZ), Jody Hice (GA), Matt Salmon (AZ), David Schweikert (AZ), and Martin Stutzman (IN).

It is a pity that conservative groups like the Tea Party, Grassfire, and Numbers USA were so late in joining the opposition to the Trade Promotion Authority. Their opposition earlier in the game could have influenced more of the 65 or so Tea Party-supported Representatives to have the courage to vote “no” on the TPA.

Democrats should be ashamed of the 28 Representatives who voted to turn their backs on America’s small businesses, farmers, ranchers, and workers by approving the TPA. Those voting in favor were: Brad Ashford (NE), Ami Bera (CA), Don Beyer (VA), Earl Blumenauer (OR), Suzanne Bonamici (OR), Gerry Connolly (VA), Jim Cooper (TN), Jim Costa (CA), Henry Cuellar (TX), Susan Davis (CA), John Delaney (MD), Suzan DelBene (WA), Sam Farr (CA), Jim Himes (CT), Ruben Hinojosa (TX), Eddie Bernice Johnson (TX), Derek Kilmer (WA), Ron Kind (WI), Rick Larsen (WA), Gregory Meeks (NY), Beto O’Rourke (TX), Scott Peters (CA), Jared Polis (CO), Mike Quigley (IL), Kathleen Rice (NY), Kurt Schrader (OR), Terri Sewell (AL), and Debbie Wasserman Schultz (FL). I don’t know whether any of these Democrats changed their mind at the last minute, but the two Representatives from San Diego, Susan Davis and Scott Peters, were “undecided” up to the day before the vote.

At the beginning of the year, there were 11 Democrat Representatives in southern California that were undecided on the Trade Promotion Authority. Visits to district offices by me and members of the state chapter of the Coalition for a Prosperous America for which I am chair played a role in influencing 9 of the 11 to vote “no” on the TPA. This shows how important work at the district office level is to get our elected Representatives to hear and pay attention to our voices.

Now that the re-vote on the Trade Adjustment Assistance has been delayed for two weeks, there is more time to put pressure on Representatives that voted for the Trade Promotion Authority to influence them to vote against it. I urge you to contact your Representative today and ask them to oppose the Trade Adjustment Assistance bill and a stand-alone Trade Promotion Authority bill. Together we can see that H. R. 1314 succumbs to a well-deserved death!


How would the Trans-Pacific Partnership Agreement affect the Reshoring Trend?

Tuesday, June 2nd, 2015

Reshoring has become a trend, not just anecdotal, as hardly a week goes by without an article about a company returning manufacturing to America in some news outlet. However, the Trans-Pacific Partnership Agreement is projected to reduce the rate of reshoring and manufacturing jobs being brought back to the U. S. Combined with the high U. S. dollar, the impact is likely to be severe.

Utilization of the Total Cost of Ownership worksheet estimator developed by Harry Moser, founder of the Reshoring Initiative, has provided a method for companies to do a true analysis to be able to see that they may not be saving as much, if any, of the money anticipated by sourcing offshore because the cost savings are often outweighed by the hidden costs of doing business offshore.

Total Cost of Ownership (TCO) is “the sum of all the costs associated with every activity of the supply stream,” according to the 13th edition APICS dictionary.” However, most companies don’t look beyond quoted unit price to make decision of where to source and ignore 20% or more of the total cost of offshored products. According to the Archstone Consulting survey reported in the American Machinist Magazine July 16, 2009, 60% of manufacturers apply only “rudimentary” total cost models: Wage Arbitrage, PPV (Purchase Price Variance), and Landed Cost.

This is because in the cost accounting systems used by most corporations, transportation costs, travel costs to vendors, rework costs of defective parts, cost of inventory, etc. are in separate accounting categories. This is why it is critical that CFOs and Supply Chain managers be trained in how to use the TCO worksheet to increase reshoring. Harry Moser’s TCO worksheet is able to quantify many of the following hidden costs of sourcing offshore that are not captured by any other current method:

  • Currency fluctuations
  • Cost of managing offshore contract
  • Design changes
  • Quality problems
  • Legal liabilities
  • Travel expenses
  • Time and effort to make transition
  • Poor communication
  • Intellectual Property infringement
  • Cost of inventory

The reshoring trend has also benefited by the following changing supply chain dynamics in offshore sourcing that have occurred since 2007:

  • Oil prices tripled, raising logistics costs
  • Labor rates in China rose by 300%
  • Component/material prices increased
  • Automation increased U.S. productivity
  • Political instability in China – Labor riots/strikes
  • Exchange rate variables
  • Risk of disruption from natural disasters

This is why the Boston Consulting Group issued a press release May 5, 2011, stating, “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015… since wage rates account for 20 to 30 percent of a product’s total cost, manufacturing in China will be only 10 to 15 percent cheaper than in the U.S.” This prediction was very controversial at the time and generated a great deal of debate.

On October 11, 2011, the Boston Consulting Group issued a report, stating, “Seven industry sectors had reached “tipping point” of returning to U.S.” They are:

  • Appliances and electrical equipment
  • Computer/electronics
  • Fabricated metal products
  • Electrical equipment/appliances
  • Furniture
  • Machinery
  • Plastics and rubber products
  • Transportation goods

Note: These sectors account for 70% of U.S. imports and 2 trillion in U.S. consumption

Because robotics, automation, lean manufacturing, and the rapidly improving technology of additive manufacturing have helped companies do more with fewer people, many have been skeptical that reshoring would create many jobs. The Boston Consulting Group’s predictions of which industry sectors would return to the U. S. first are now verified by data that the Reshoring Initiative has captured since its founding in 2010. This data also provides the answer to the question of how many jobs have been created by reshoring.

The following chart shows the number of jobs created by reshoring:


Jobs Companies
Transportation Equipment 13,823 33
Electrical Equipment, Appliances, Components 9,240 58
Computer/Electronic Products 3,483 25
Machinery 2,860 20
Apparel/Textiles 2,154 46
Fabricated Metal Products 1,721 39
Food 1,628 9
Wood Products 1,028 18
Medical Equipment    738 17
Hobbies    723 29
Construction    577 4
Plastic/Rubber Products    470 16
Castings      57 8
Non-Metallic Mineral Products      12 1
Primary Metal Products        0 5
Chemicals & Energy        0 1 each
Other 1,016 24

The Reshoring Initiative has also captured reshoring data by state. You will be surprised by some of the states that made it in the top ten because the Boston Consulting Group predicted that reshoring would mainly occur in the low wage states of the south. The data for the top ten states is shown on the chart below.



Cases Jobs/Facility
South Carolina 7,530 8 941
Texas 3,792 13 292
Kentucky 3,412 4 853
Georgia 3,145 8 393
Tennessee 3,137 15 209
Ohio 2,739 24 114
Michigan 1,742 16 109
New York 1,165 19 61
North Carolina 1,020 15 68
Kansas 1,000 2 500

Three of these states, Ohio, Michigan, and New York are definitely not low wage states. California dropped from a rank of 10th in the number of jobs shown on the 2014 table to 12th on this new table. Frankly, if a company can reshore to California, Michigan, New York and Ohio, they can reshore to anywhere in the U. S.

According to the 2012 Annual Re-Shoring Report by the MIT Forum For Supply Chain Innovation, the top decision drivers for reshoring are: (1) Time-to-Market – 73.7% (2) Cost Reductions – 63.9% (3) Product Quality – 62.2% (4) More Control – 56.8% (5) Hidden Supply Chain Management Costs – 51.4% and (6). Protect IP – 48.5%.

If reshoring continues to expand at its current rate, the Reshoring Initiative predicts that the $600 billion/year trade deficit would be eliminated; the U. S. economy would add 3 million manufacturing jobs while adding 9-12 million total jobs because of the multiplier effect of manufacturing jobs; reduce unemployment by 4%; cut the U.S. budget deficit by about 50%, and increase manufacturing output by 25%.

Because of my concerns about the impact of the Trans-Pacific Partnership Agreement about which I have written, I recently asked Harry Moser for his opinion on the potential effects.

He said, “We have made huge progress from around 2003 when we were losing net about 130,000 manufacturing jobs/year till 2014 when reshoring plus FDI exceeded offshoring by about 10,000 jobs. However there are still about 3 million manufacturing jobs offshored. So, reshoring is still in its infancy and is still fragile. Offshore LLC prices are still typically 25% lower than domestic prices. It is a struggle to get companies to understand that in some cases the domestic total cost is lower even though the price is so much higher. Tariffs are one of the largest, most unambiguous of the “hidden costs” that need to be quantified. TPP will reduce tariffs, making the TCO argument more difficult and less likely to suggest reshoring. This is also an especially poor time for TPP with the USD up substantially and at its highest level in several years. The combination of the high USD and TPP will reduce the rate of reshoring by a roughly estimated 20 to 50%.”

He added, “Since the U.S. is the world’s largest market, with one language and with consumers who are mainly driven by price not nationalism, ours is the target market for all offshore companies. TPP will reduce barriers to trade, making our market even more attractive. If TPP has equal percentage impacts on our imports and our exports, the result will be negative since our goods imports exceed our exports by about 40%. ”

The TPP would reduce or eliminate tariffs for 11 more countries, so it will have the most impact on the companies that have reshored because of cost savings. I think Harry’s opinion that the TPP would have a 20 – 50% reduction on the rate of reshoring is conservative. This adverse effect on reshoring is one more reason why we must stop the fast track Trade Promotion Authority from being passed by the House. Now that the Trade Promotion Authority fast tracking the TPP passed the Senate, it is critical that you contact your Congressional Representative to urge them to oppose granting fast track Trade Promotion Authority for the Trans-Pacific Partnership Agreement.