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COOL Online Act Benefits Consumers Better than Shop Safe Act

Monday, October 4th, 2021

As more and more American consumers turn to buying products online instead of in person at brick-and-mortar stores, they become increasingly vulnerable to counterfeit goods and are unable to determine where the products have been made.  Country of Origin information is missing from the major online platforms so consumers are unable to fellow Americans by choosing to “Buy American” for products sold online.  Without knowing Country of Origin, they are not able to boycott buying products made in China by slave labor or protest the ethnic cleansing of the Uyghurs by the Chinese government. 

Over the last two years, a few Congressional Representatives and Senators have introduced bills in Congress to address these problems and protect consumers. This year, H. R. 3429, the Shop Safe Act of 2021, was introduced on May 20, 2021 by House Judiciary Committee Chairman Jerrold Nadler (D-NY), Internet Chairman Henry C. “Hank” Johnson, Jr. (D-GA), Internet Ranking Member Darrell Issa (R-CA), and Representative Ben Cline (R-VA).

Senator Christopher Coons (D-DE) also introduced S. 1843, the Shop Safe Act of 2021, in the Senate on May 26, 2021. These bills would supposedly protect consumers by stopping the online sale of harmful counterfeit products.

The Press Release issued by the sponsors on May 20, 2021, states: “The SHOP SAFE Act will:

  • Establish trademark liability for online marketplace platforms when a third-party sells a counterfeit product that poses a risk to consumer health or safety and that platform does not follow certain best practices;
  • Incentivize online platforms to establish best practices such as vetting sellers to ensure their legitimacy, removing counterfeit listings, and removing sellers who repeatedly sell counterfeits; and
  • Call for online marketplaces to take steps necessary to prevent the continued sale of counterfeits by the third-party seller or face contributory liability for their actions.”

This sounds good, but the online platform has to rely on the integrity of the distributor or manufacturer in stating that the product is not counterfeit.  I don’t know about you, but I wouldn’t have any confidence in China companies adhering to the “honor system.” Other concerns I have:  Does someone have to report a counterfeit product to the online platform?  How are counterfeit products identified?  Who investigates the charge? What proof has to be provided to prove a product is counterfeit?

Recently, the directors of US Inventor, Inc sent out an email to their supporters saying, “Big Tech is trying to pull a fast one again… This legislation grants immunity for trademark infringement to online selling platforms like Amazon, provided that their Chinese suppliers ‘attest’ that they ‘have taken reasonable steps to verify the authenticity of the goods’ and ‘agree not use a counterfeit mark’. Seriously…Congress is offering up a proposal to waive liability for Amazon based on their implementation of an “honor system” for their Chinese suppliers!”

I can understand the skepticism of US Inventors because one of the co-sponsors, Rep. Isa) was a co-sponsor of the America Invents Act of 2011 and two other co-sponsors voted in favor of the America Invents Act.  Readers of my articles are familiar with the harm caused by this Act.

US Inventors urged supporters not to believe the hype, stating:

  • “The SHOP SAFE Act of 2021 is HAZARDOUS to inventors, entrepreneurs, and small business.
  • The SHOP SAFE Act HURTS, not helps, intellectual property owners.” The SHOP SAFE Act limits your ability to protect your IP online.
  • The SHOP SAFE Act makes protecting your brand online harder not easier.
  • The SHOP SAFE Act lets the platforms off the hook for their misdeeds.
  • The SHOP SAFE Act hurts small business

They suggest asking yourself: “When was the last time you saw huge corporations and big special interests all support a bill containing MORE (not less) regulation? Why would the giant platforms who make more money from counterfeiting online like Amazon, eBay, Etsy, and Wish hail the SHOP SAFE Act as a cure?”

They conclude that the Shop Safe Act “does not fix the real problem” and “doesn’t close the loopholes.” Instead, “It adds a “safe harbor” for online marketplaces that lets them off the hook for legal liability.”  They say “The SHOP SAFE Act gives the online platforms and the counterfeiters MORE LOOPHOLES!  It’s “best practices” have already been tried and failed to stem the tide of pirated goods sold on sites like Amazon and eBay.”

A far better bill to protect consumers was S. 3707, the COOL Online Act, introduced by Senator Tammy Baldwin on May 13, 2020, and cosponsored by Rick Scott (R=FL), Kelly Loeffler (R-GA, and Christopher Murphy (D-CT).  While it wasn’t voted on in the 116th Congress, the provisions were included in Section 2510 of the United States Innovation and Competition Act of 2021 (S. 1260) passed on June 8, 2021 by the Senate.

The National Law Review wrote:  “The Act as passed by the Senate is virtually unchanged from the proposed legislation that we reported on. As a recap, the legislation would require that a wide variety of imported commodities sold online be accompanied by the following disclosures on the website ‘in a conspicuous place’:

  • The country of origin of the product, consistent with U.S. Customs and Borders Protection (CBP) marking requirements; and
  • The country of origin in which the seller is located (and, if applicable, the location of any parent corporation)
  • Further, the online disclosures for certain categories of goods already subject to existing specialized COOL requirements would also be required to comply with these existing requirements. Importantly, products covered by USDA’s Agricultural Marketing Service (AMS) COOL would have to comply with AMS’s COOL requirements in the online disclosure.
  • The legislation would be enforced by the Federal Trade Commission (FTC), but would require that FTC and CBP sign a memorandum of understanding to provide for consistent implementation of the legislation.”

This legislation will now move to the House of Representatives for consideration. We can only hope that the provisions of the COOL Online Act will be added to the House version of the United States Innovation and Competition Act of 2021. 

The Coalition for a Prosperous America, of which I have been a member since 2011, supports the COOL Online Act. I have been a member of the Buy America committee since it was started two years ago.  Recently, James A. Stuber, Co-Chair of the Buy America Committee and the author of What If Things Were Made in America Again, wrote “Congress must fight to ensure that America’s families know exactly what they’re buying online with their hard-earned money. Both the House and Senate should support country-of-origin labeling for all e-commerce transactions. Anything less could potentially put American lives at risk.”

We need the help of everyone who supports rebuilding American manufacturing by encouraging more people to Buy American.  Here’s what you can do:  Call the Capitol main number (202-224-3121) and ask to speak to the office of your Representative.  Ask them to vote against the Shop Safe Act. Ask them to sponsor or co-sponsor the COOL Online Act.  If you can’t get through on the main Capitol line, call the local office.  I’ve called my Representative.  Will you?

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Adrian Pelkus – An Inventor Devoted to Helping Other Inventors

Tuesday, September 7th, 2021

When my first book, Can American Manufacturing Be Saved? Why We Should and How We can was published in May 2009, I introduced it as a speaker at the Del Mar Electronics & Design Show in San Diego, CA and  displayed it at my company’s booth. One of the persons who stopped by and bought my book was Adrian Pelkus, President of A Squared Technologies, Inc. and leader of a group called the San Diego Inventors Forum.  Adrian invited me to the next meeting of the group and I accepted his invitation. Since June 2009, I have regularly attended SDIF meetings and became a board member when it was formally incorporated in 2014.  Our meetings provide information that helps inventors take a product from design concept, fundraising, producing, and successfully marketing the product. I give an annual presentation titled “How to Select the Right Processes and Sources for Your Product” and we hold annual inventors contest with cash prizes. We haven’t held in-person meetings since the COVID pandemic shutdown started in March 2020, but will start meeting again this fall.

In 2018, Adrian and his wife Amy moved to Lexington, South Carolina so he could devote more time to inventing new products. I keep in touch with them and learned that Adrian couldn’t stay away from helping other inventors. Last August, in the middle of the COVID pandemic, he started the South Carolina Inventors Forum using Zoom.

I recently interviewed Adrian to learn more about SCIF.  Adrian said, “After moving here from San Diego and recovering, I decided to build a new inventor nonprofit organization like we had in San Diego. To build new bridges here, I wanted to know and meet “who is who” in town, so I attended a few business group networking events. I discovered 1 Million Cups, which was developed by the Ewing Marion Kauffman Foundation in 2012.  The name came from the notion that entrepreneurs discover solutions and engage with their communities over a million cups of coffee. 1 Million Cups is a free program designed to educate, engage and inspire entrepreneurs around the country. Through the power of volunteers, 1 Million Cups has grown to more than 160 communities.

He explained, “1 Million Cups works with entrepreneurs, empowering them with the tools and resources to break down barriers that stand in the way of starting and growing their businesses. Mr. Kauffman believed it was a fundamental right for anyone who had a big idea to be able to bring it to life—and we’re here to fulfill that mission.”

I told him I was familiar with the Kauffman Foundation and used their curriculum when I taught high school students how to start their own business as one of the teachers for the Millennium Entrepreneurs after school program in the early 2000s. I also met the people who headed up the 1 Million Cups program in Fargo, ND in 2017 when I was the guest of the North Dakota Economic Development Department to visit manufacturers to write articles.

I asked how he recruited support for SCIF.  Adrian responded. “My decades of trade show and networking meeting experience like at CONNECT taught me to spot the group leaders and that’s how I met Sergio Aparicio, who is Manager of the City of Columbia’s Economic Business Development office. Sergio is also an organizer for the Columbia 1 Million Cups group that was meeting weekly prior to the pandemic at the downtown Richland Library with a 150-seat amphitheater.

He added, “I also met Tom Ledbetter, who is the Associate Vice Provost with the Center for Entrepreneurship and Educational Support at Midlands Technical College. A third organizer I met is Dr. Thaddeus Jones, who is a videographer and producer. I spoke to all of them about the idea of a forming a nonprofit organization with the mission to assist inventors with protecting, developing and commercializing their intellectual property through motivation, education, mentoring, a network of local service providers, and national networking opportunities.

He explained, “The main differentiation from the other organizations in town for high tech and business startups was that SCIF is a grass roots way to build business, encourage entrepreneurship of the everyday citizen at the community level, and the fact that my “curriculum” had been vetted in San Diego over a long period of time. The three of them vetted me and came back eager to assist.

Then, the pandemic came and caused mass business closures everywhere including here in South Carolina. 1 Million Cups stopped meeting, but I decided to go forward and start the SCIF meetings on Zoom. Tom Ledbetter and Dr Jones joined the SCIF Board of Directors. Midlands Technical College helped host and Thaddeus created the videos this first year.”

Adrian said, “I am very grateful Sergio has convinced both the city to support SCIF with a grant and for 1Million Cups to assist our mission as well. 1 Million Cups has secured a new meeting place and in fact hosted our SCIF first Invention Contest in August. At that meeting, I announced that the City of Columbia became our first Gold Sponsor. This contribution is appreciated beyond its monetary amount in that it represents the great connection we have made and how the city supports our SCIF Vision statement:

SCIF will contribute to South Carolina becoming known as an Innovation Hub here in the southeast. Economic development in the South Carolina region depends heavily on entrepreneurship and entrepreneurship depends heavily on creativity and invention. By assisting inventors in leveraging their intellectual property and becoming more entrepreneurial, SCIF will play an important role in furthering South Carolina’s reputation as supporting startups, general creativity, launching quality businesses and creating good paying jobs. SCIF will become a recognized valued partner in South Carolina’s economic re-development.”

I asked about his other networking activities, and he said, “I have busy building connections with GoFundMe and SBA to provide avenues for funding inventors and creative folk from concept to commercialization.  I met Valerie Torstenson, Outreach and Marketing Specialist for the South Carolina District Office of the U.S. Small Business Administration. She helped SCIFsign a Strategic Alliance Memorandum (SAM) that connects us to the SBA for assistance in getting loans for startups. Valerie will participate in our group meetings and share news, instructions and opportunities from the SBA.”

He added, “During my 13 years running the SDIF, I met individually with over 1500 inventors at my office. The method I created to standardize the interview allowed me to determine in one hour if an idea is feasible, already patented or on the market, what progress had been made, whether the goal is to start a company or license, and how the goal may be accomplished. Along with 37 years running my own company, I benefitted from the experience of joining over 300 people in their quest to become successful entrepreneurs. I also pursued over a dozen of my own ventures, and learned that we all had something in common —the need for funds.

With that in mind, I recently spoke with GoFundMe co-founder Andy Ballester and their VIP team about creating a special campaign for finding funds for inventors to test their ideas prior to company launch. They agreed to do a pilot program to assist many struggling inventors and innovators get started. These funds will allow them to search for IP, file patents, and build prototypes to show for raising capital to launch or license. They are working on putting together a fundraiser creation and how to share guide that will help our members. Our alliance with GoFundMe will be awesome for American inventors and innovators just getting started.”

Adrian said, “SCIF also joined the United Inventors Association of America(UIA).  I’ve known Warren Tuttle as Director of the UIA for over a decade and served on the board of the UIA for two years with him. Warren is the author of “Inventor Confidential, the Honest Guide to Profitable Inventing” in which I’m honored to be mentioned. We have been working together to co-create an organization called the UIA-CIO consisting of 20 nonprofit inventor clubs to start that will now be linked coast to coast. We invited Valerie Torstenson to the UIA-CIO inaugural meeting in August to announce our new alliance and was delighted to hear her tell us that she had introduced SCIF to the rest of SBA that day via their internal newsletter.” 

I asked Adrian for his parting thoughts, and he said, “I’ve worked long to protect inventor rights and realize now that it will take a unity of never-before-seen segments of society to restore the patent system to where it was prior to the American Invents Act of 2011.  The pandemic has created a swelling of interest in working from home and starting a business for a living to become entrepreneurs. The “industry” of inventing has long been plagued with get rich schemes and people claiming to be gurus and masters of getting a product to market. People I’ve met spent their life savings and many years being misguided and taken advantage by these invention submission companies, phony marketers, and hype hustlers.  It must stop!  That’s why I am excited about the new collaborations we are establishing with the SBA and crowd funding giant GoFundMe.  They may make entrepreneurial pursuits by inventors and innovators a bit easier and more successful.”

I told Adrian that San Diego Inventors Forum is happy to join the UIA-CIO, and we will look forward to participating in the collaborations he has generated to help our local inventors. It will be very beneficial for the clubs in the AIA-CIO to share resources and presentations.  I told him that my updated presentation on “How to Select the Right Processes ad Sources for Your Product” has been recorded on Zoom and will be available for viewing for free on September 9th and thereafter at this link.

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U S. Inventors Continue Fight to Restore Patent Rights

Tuesday, August 24th, 2021

September 16, 2021 marks the 10th anniversary of the America Invents Act (AIA) at the Decade of Stolen Dreams Inventor Rally organized by US Inventor, Inc., a non-profit association of inventors devoted to protecting the intellectual property of individuals and small companies. It represents its 13,000 inventor and small business members by promoting strong intellectual property rights and a predictable U.S. patent system through education, advocacy and reform.

There are six locations across the U.S. where inventors plan to make their voices heard about the consequences of the AIA and the Patent Trial and Appeal Board (PTAB) — Alexandria, VA • Burlington, VT • Dallas, TX • Denver, CO • Detroit, MI • San Jose, CA. Join US. Inventor Inc. on September 16th at a rally near you, and unite against the injustice of the America Invents Act and the PTAB.

The USI website states: “today, inventors are discouraged from pursuing research, development, and commercialization of inventions due to the implementation of the Patent Trial and Appeal Board (PTAB) under the America Invents Act of 2011 (AIA). Rather than helping small businesses as intended, the PTAB is often weaponized by large corporations to block competition from those who created superior technology. PTAB uncertainty, risk, and expense has become an overwhelming burden for entrepreneurs, stifling our ability to innovate and compete.

Having invalidated 84% of the 3,000 patents they have reviewed and destroyed the hopes and dreams of hundreds of inventors – the PTAB is still going strong. Even Chinese companies like Huawei, ZTE, HTC, and TikTok are regularly utilizing the PTAB to invalidate patents of U.S. inventors.”

For those new to the issue of inventors having lost the ability to stop large corporations from just taking valuable, patented technologies, here’s a quick rundown:

1. Patent Trial and Appeal Board (PTAB): The America Invents Act of 2011 (AIA) created an easier way to invalidate (revoke) an issued patent. The PTAB is an administrative court with no jury and much less due process than a real court. Rather than a lifetime-appointed judge, a PTAB trial typically has three attorneys who are called Administrative Patent Judges (APJs).

2. Injunctive Relief (the ability to stop an infringer after you have won your case): The U.S. Supreme Court decided that it was in the “public interest” for a proven infringer to continue infringing because it could serve the market better than a startup (Ebay, 2006). As a result, even if you win your case, you will have to pass a “public interest” test before an injunction can be issued to stop the infringer.

3. Abstract Idea: The U.S. Supreme Court’s Alice decision (2014), put into law that an “abstract idea” cannot be patented, but did not define this term. The result is that a sharp attorney can often convince a judge, who may have little tech experience, that a patent should have not been issued.

Article I, § 8, Clause 8 of the Constitution grants Congress the enumerated power “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” In my opinion, this makes the invalidating of patents by the PTAB unconstitutional.

A U.S. Patent is supposed to provide the inventor with the exclusive right to his or her invention. Inventors should be able to legally stop any infringer, no matter how large or powerful. They should be able to create a disruptive startup or license their invention at a market rate. This is what provided the incentive to invent that enabled America to lead the world in innovation for over 200 years. This is the right that US Inventor Inc. is fighting to restore.

Josh Malone, Policy Director for US Inventor, Inc. told me that in the 116th Congress (2019-2020) 35 representatives sponsored a bill to end the PTAB – H.R.4792 – Cyber Shield Act of 2019, but it was referred to the Subcommittee on Consumer Protection and Commerce and never got out of committee.

Also, on December 18, 2019, “H.R. 5478 – Inventor Rights Act was introduced by introduced by Representatives Danny K. Davis (D-IL) and Paul A. Gosar, D.D.S. (R-AZ), and on January 28, 2020, it was referred to the Subcommittee on Courts, Intellectual Property, and the Internet. This Act that would “restore patent protection for inventors and mitigate a generation of laws, regulations, and court decisions discouraging innovation by failing to secure to inventors the exclusive rights to their discoveries.”

The text of the Act stated “Recent changes to patent laws and procedures and Supreme Court decisions have adversely affected inventors such that the promise of Article 1, section 8 of the Constitution of ‘securing for limited times to inventors the exclusive right to their discoveries’ is no longer attainable.”

The Act stated that “Inventors are denied the fundamental right to ‘exclude others’ by the Supreme Court’s 2006 decision in eBay Inc. v. MercExchange, LLC.” Thus, inventors have lost their injunctive rights granted by the Constitution.  It also states that “Inventors were stripped of the right to file suit in their own judicial district by the Supreme Court’s 2017 decision in TC Heartland LLC v. Kraft Foods Group Brands LLC.”

Unfortunately, H.R. 5478 also never got out of committee to be voted on by the House. US Inventors is working to have the Inventor Rights Act reintroduced in Congress this year.

On February 8, 2021, US Inventor, Inc. filed suit against the US Patent Office (USPTO) “to stop patent validity challenges at the Patent Trial and Appeal Board (PTAB) until the required, official rulemaking regarding the procedure has been done. The America Invents Act of 2011 (AIA) created an administrative court, the PTAB, for patent validity challenges. Prior to this, an inventor would defend his or her patent in a real court with a jury, lifetime-appointed judge, and a lot of due process. The PTAB has no jury, much less due process, and a panel of attorneys called Administrative Patent Judges (APJs) who have invalidated (revoked) 84% of the patents that have gone through the process. The AIA said that the USPTO Director “shall” involve stakeholders in notice and comment rulemaking that takes into account things like the economic impact of the law and its effect on the reputation of the Patent Office. After ten years, this rulemaking has still not been done, and US Inventor believes this is unlawful as well as unfair and very bad for American inventors and the future of American innovation. A number of inventors were present at the hearing in Marshall, TX on July 1st, 2021.”

US Inventor President, Randy Landreneau stated, “”Our patent system is supposed to enable patent-based startups to compete with entrenched interests. It did this pretty well for 200 years, and America’s leadership in worldwide innovation is the proof. But in recent years, our lawmakers and officials have listened to Big Tech rather than inventors and patent-based startups. The result is the loss of the ability to stop a large corporation from taking a significant, patented invention, which is why American innovation is declining, Big Tech faces little competition and China threatens to take the lead in future technologies. The purpose of this lawsuit was to make our voices heard through the rulemaking process that has been avoided for ten years. The judge decided that we don’t have standing and dismissed our suit. We are appealing, but regardless of the outcome of this suit, US Inventor will continue to fight on many fronts to restore the rights of inventors in America.”

For further information on the patent crisis, you may watch the trailer for the documentary Invalidated: The Shredding of the U.S. Patent System  The full version is available on Amazon and iTunes.

You can help the efforts of US Inventors by signing the Inventor Rights Resolution “to restore patent protection for inventors and mitigate a generation of laws, regulations, and court decisions that have discouraged innovation by failing to secure to inventors the exclusive right to their discoveries.”  Click here to sign.

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USITC Report Reveals Only Small Positive Effect from Trade Agreements

Tuesday, July 20th, 2021

On June 29, 2021, the U.S. International Trade Commission (USITC) released a report on the economic impact of the many bilateral, regional, and multilateral trade agreements that the U.S has signed since 1984. These include NAFTA, that went into effect in 1994, the multilateral trade deal that created the World Trade Organization in 1995, as well as bilateral trade agreements such as KORUS (Korea-U. S). It also examined the one-year-old U.S.-Canada-Mexico Agreement, which replaced the original NAFTA. However, it did not examine the effects of the agreement struck by the United States to pave the way for China to enter the WTO in 2001.

The press release stated, “The USITC, an independent, nonpartisan factfinding federal agency, conducted the investigation pursuant to Section 105(f)(2) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (19 U.S.C. § 4204(f)(2)). This is the second of two reports that are required by the statute.”  Congress ordered the report as part of the 2015 Trade Promotion Authority law, which expired on July 1st. TPA facilitated the approval of trade agreements by allowing the president to submit them to Congress for a straight up-or-down vote without any amendments.

Each of these trade agreements were projected to expand “market access through both tariff and nontariff provisions, which both lowered barriers to trade and reinforced market certainty that such free trade regimes will remain in effect.” 

The ITC press release states, “the Commission has used a variety of quantitative and qualitative approaches to analyze the impacts of these agreements, and specific provisions within them, on U.S. industry and workers.”

A highlight from the report states:

  • “The Commission estimates that, to the extent quantifiable, the agreements have had a small but positive effect on the U.S. economy as a whole.  U.S. energy product exports to Korea rose sharply in both value and volume in recent years, as U.S. producers and exporters took advantage of broad reductions in trade barriers under the U.S.-Korea Free Trade Agreement (KORUS).”

Public Citizen, a nonprofit consumer advocacy organization that champions the public interest –in the halls of power, published their analysis of the ITC report, pointing out the following:

  • “Estimates that U.S. trade agreements have increased the wage gap in America between higher-and lower-skilled workers (page 122).
  • Tried to cover up the reality that the United States has a large and growing trade deficit with its Free Trade Agreement (FTA)partners. The aggregate U.S. trade deficit with FTA partners has increased by about $141 billion, or 418 percent, since the FTAs were implemented while the aggregate trade deficit with all non-FTA countries has decreased by about $46 billion, or 6 percent, since 2005 (the year before the median entry date of existing FTAs).
  • Estimates all the U.S. bilateral and regional FTAs combined have led to an increase in real GDP and aggregate U.S. employment by less than 1 percent (page 122).
  • Fails to discuss or review the 2.9 million jobs certified by Trade Adjustment Assistance (TAA)as trade job losses since the passage of the North American Free Trade Agreement (NAFTA)…
  • Finds that certain trade agreements have lowered employment levels in many industries including autos as well as textiles and apparel.
  • Finds that all the U.S. FTAs since 1985 have increased real GDP by a minuscule0.21 percent (page 127).”

In an article on 6/29/21 in Politico, Doug Palmer commented, “Nearly four decades of U.S. trade agreements have had only a “small, positive effect” on U.S. economic growth and employment, the U.S. International Trade Commission…Using 2017 as its base year, the ITC estimated the trade deals had increased U.S. economic output by $88.8 billion or 0.5 percent. The trade pacts increased overall U.S. employment by 485,000 full-time equivalent jobs or 0.3 percent, based on a model that assumes the economy is at its long-run full employment level.”

Proponents of all of the trade agreements projected increases to our national Gross Domestic Product and the creation of more U.S. jobs. China’s entry into the WTO in 2001 was supposed to require China to open its markets to imports from the U. S. and other nations by reducing Chinese tariffs and addressing nontariff barriers to trade. Proponents argued that the U. S. would benefit because of increased exports to a large and growing consumer market in China. However, history has shown that the reverse has been true.  

In a 2003 article, “The high price of ‘free’ trade,” Robert E. Scott of the Economic Policy Institute wrote, “Since the North American Free Trade Agreement (NAFTA) was signed in 1993, the rise in the U.S. trade deficit with Canada and Mexico through 2002 has caused the displacement of production that supported 879,280 U.S. jobs. Most of those lost jobs were high-wage positions in manufacturing industries.”

On January 30, 2020, Robert E. Scott and Zane Mokhiber of the Economic Policy Institute released the report, “Growing China trade deficit cost 3.7 million American jobs between 2001 and 2018.” Key findings include:

  • “1.7 million jobs lost since 2008 (the first full year of the Great Recession, which technically began at the end of 2007). Three-fourths (75.4%) of the jobs lost between 2001 and 2018 were in manufacturing (2.8 million manufacturing jobs lost due to the growth in the trade deficit with China).
  • The U.S. trade deficit with China rose from $347billion in 2016 to $420 billion in 2018, an increase of 21.0%
  • The growing trade deficit with China has cost jobs in all 50 states and in every congressional district in the United States.
  • The five hardest-hit states based on total jobs lost were California (654,100 jobs lost), Texas (334,800), New York (185,100), Illinois (162,400), and Florida (150,700).
  • The trade deficit in the computer and electronic parts industry grew the most, and that is reflected in job losses:1,340,600 jobs were lost in that industry, accounting for36.2% of the 2001–2018 total jobs lost.
  • Global trade in advanced technology products—often discussed as a source of comparative advantage for the United States—is instead dominated by China.”

According to the U. S. Census Bureau, the U. S. trade deficit with China dropped from $418.2B in 2018 to $310.3B in 2020.  We also had a trade deficit of $344.3B for 2019. This downward trend may reflect the beneficial effect of the tariffs imposed by President Trump on specified Chinese imports.

However, according to an analysis by Jeff Ferry, Chief Economist for the Coalition for a Prosperous America, we are still losing jobs from trade deficits.  “The Coalition for a Prosperous America’s research center has found, in an economic analysis of federal government data, that every $1 billion increase in imports causes a loss of 4,552 US jobs.”  

Using the Census data, this means that we lost 1.9 million jobs in 2018, 1,6 million jobs in 2019, and 1.4 million jobs in 2020. 

In my opinion, it’s time for the United States to stop this horrific loss of jobs by drastically changing our trade policies with China.  China is not our friend; they are not just our competitor.  They are our enemy.  Perhaps it’s even time to withdraw from the World Trade Organization.

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Sales Factor Tax Apportionment is Better than G-7 Tax Proposal

Tuesday, June 22nd, 2021

For many years, the Organization for Economic Cooperation and Development (OECD) has been coordinating talks among 140 countries on cross-border tax reform in order to get multi-national corporations to pay their fair share of taxes.  Currently, multinational corporations that have subsidiaries or divisions in other countries use legal accounting strategies to reduce their taxes by transferring profits to lower corporate tax rate countries or set up shell corporations in tax haven countries. It’s not fair for multinational firms to sell products in the U.S. market and then pay little or no federal taxes on the resulting profits. Domestic companies bear the brunt of our country’s tax burden, making it more difficult for them to compete in the global marketplace.

On June 5th, the G-7, which is an informal grouping of seven of the world’s advanced countries:  Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, reached an agreement on two pillars of global tax reform.

Pillar One of the agreement “changes allocation of taxing rights. Under the proposal, companies wouldn’t only owe taxes where they’re established and have assets and employees, but would also owe taxes where they have sales.” This new rule would apply to only the world’s 100 largest and most profitable companies.

Pillar Two “imposes a global minimum tax on potentially any company that has a low effective tax rate on foreign earnings. If companies pay lower rates in a particular country, their home countries could “top-up” their taxes on foreign earnings to the minimum rate, removing the benefits of shifting profits. A proposed global minimum tax rate of “at least 15 percent on a country by country basis,” is designed to discourage multinational corporations from shifting profits to low-tax countries. Hopefully, a “worldwide minimum corporate tax rate would reduce the attractiveness of tax havens, which have increasingly become a common part of global business practice in the last three decades.”

“Corporate profit shifting into tax havens by U.S. multinationals has jumped from roughly 5 to 10 percent of gross profits in the 1990s to roughly 25 to 30 percent in 2019, according to a report by the International Monetary Fund. And the use of tax havens costs governments $500 billion to $600 billion per year in lost corporate tax revenue, according to a study cited by the IMF.”

Daniel Bunn, vice president of global projects at the Tax Foundation, told the Epoch Times, “This agreement is subject to further agreements, there’s a lot of work still to be done to ensure that the policy works well. “I’m concerned that if policymakers aren’t careful, they could impact global foreign direct investment flows and hurt business investments globally.”

“It is a whole new way of doing tax policy for multinationals. And one of the reasons I think that Treasury has tried to limit this to the 100 largest companies is because it has the potential to be really, really complex,” Bunn said.

One advantage of the proposed global minimum tax is that it could potentially end the discussion of digital services taxes on big tech companies, more of which are in America than any other country.

One potential problem is whether OECD would be the organization that would designate the top 100 companies in the world. If so, what criteria would they use and how often would the rating be updated, as the ranking could fluctuate from year to year.

Another consideration is what would be the impact of a 15 percent global minimum tax on U.S. companies combined with the substantial tax increases proposed by President Joe Biden that includes a 15 percent minimum tax on large corporations’ book income, as well as increases to the tax rates on both domestic and foreign income.

These two pillars will be the subject of the meeting of the G-20 countries scheduled for later this summer.

On June 8th, the Coalition for a Prosperous America (CPA) issued a statement, saying they “support the Organization for Economic Cooperation and Development’s (OECD) efforts ‘to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.’ This represents a positive step towards eliminating the ability of multinational companies to avoid paying U.S. corporate tax by shifting profits offshore to tax havens.”

“While not perfect, the G7 announcement represents a positive step forward, especially for family companies like mine that pay a higher corporate tax rate than foreign and multinational competitors,” CPA Chair Zach Mottl said. “To truly end the game of multinational profit shifting, the OECD should implement Sales Factor Apportionment.”

“For too long, multinational corporations have used an army of lawyers and tax accountants to offshore production and avoid U.S. corporate taxes,” said Michael Stumo, CEO of CPA. “It is welcome news that the G7 economies are supportive of addressing the harm to domestic producers from multinational profit shifting. However, it is concerning that the G7 announcement would allow the first 10 percent of profits to be exempt, which would allow some profit shifting to still occur. The Biden administration, which called for implementing Sales Factor Apportionment for the top 100 multinational corporations, should urge the G7 economies and the OECD to fully implement a sales-based apportionment system for all companies shifting profits.”

This OECD proposal would be similar but more limited in scope to the Sales Factor Tax Apportionment (SFA) framework supported by the Board of the Directors of Coalition for a Prosperous America since 2017. One of CPA’s members, Bill Parks, a retired finance professor and founder of NRS Inc. was the originator of the SFA framework. Mr. Parks stated “Currently MNEs manipulate loopholes in our tax system to avoid paying U. S. taxes…MNEs can legitimately choose a cost that reduces or increases the profits of its subsidiaries in different countries. Because the United States is a relatively high-tax country, MNEs will choose the costs that minimize profits in the United States and maximize them in what are usually lower-tax countries.” 

Under SFA, the amount of corporate taxes that a multinational company would pay “would be determined solely on the percent of that company’s world-wide sales made to U. S. customers. Foreign MNEs would also be taxed the same way on their U. S. income leveling the playing field between domestic firms and foreign and domestic MNEs.” Thus, if a company generates $1 billion of profit on its U.S. sales, then it should pay corporate taxes on that $1 billion.

On May 18, 2017, CPA submitted written testimony to the House Ways and Means Committee, stating in part, “The US corporate tax system harms America’s trade competitiveness, overtaxes income from wages, under taxes consumption, and is bad at actually collecting what is owed. It also enables rampant base erosion through transferring profits to tax havens or countries with lower corporate tax rates. Full reform centered around destination based, border adjustment principles can result in an efficient, trade competitive, and largely tamper-proof tax system. SFA is a destination-based profit tax. Pretax income is allocated to the US in proportion to the percentage of a company’s total sales in the U. S. Pre-tax income earned outside the US is not taxed. Tax rates can be lowered substantially while still meeting revenue targets…SFA eliminates the disparate tax treatment between domestic companies (who pay the full income tax burden on worldwide income), multinationals (many of which shift profits to tax havens), and foreign companies (which pay a territorial income tax).” 

In September 2020, ”CPA published an analysis of the federal corporate tax paid by the S&P 500 companies in 2019 and found they paid on average less than 9% in cash federal tax last year. The analysis also found that by replacing the current corporate tax system with an SFA system at 21 percent, the United States could have expected to earn an additional $97.8 billion in federal corporate tax receipts for 2019.”

If the OECD doesn’t expand Pillar One into a SFA plan for all multinational companies, not just the top 100, then the U. S. Congress should act unilaterally to establish this plan here. Multinationals should no longer be allowed to employ convoluted profit calculations or reincorporate in a tax haven country as a means to avoid U.S. tax obligations. We need to take bold action if we want to rebuild our American manufacturing industry to create jobs and prosperity.

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Blacks & Hispanics Suffer from Loss of High Paying Manufacturing Jobs

Tuesday, June 1st, 2021

On May 24th, the Coalition for a Prosperous America released a new working paper, “Job Quality Index for Black, Hispanic and Asian American workers.  In this working paper, Jeff Ferry, CPA Chief Economist, and Amanda Mayoral, CPA Economist, present Job Quality Indexes for three important minority groups within the U.S. workforce: Asian, Black, and Hispanic Americans.

In November 2019, CPA published the first U.S. Private Sector Job Quality Index (JQI) report in partnership with Cornell Law School, The JQI “measures the quality of U.S. jobs as distinct from their quantity” using Bureau of Labor Statistics (BLS) data to calculate the average weekly wage for all Production and Nonsupervisory (P&NS) employees. These workers “make up 80% of the total U.S private sector workforce, 98 million out of a total 122 million workers.”

“The JQI is the ratio of high-quality jobs to low-quality jobs, multiplied by 100 and expressed as an index. By calculating the national average weekly wage for all P&NS employees, we can establish a threshold to split high- and low-quality jobs. The jobs in all sectors delivering a weekly wage above the threshold are termed high quality and all jobs below the threshold are low quality. The average weekly wage, or threshold, as of December 2020 was $857.60.”

Since its inception, the “JQI shows that the U.S. creates millions more low-quality jobs than high-quality jobs each year. The JQI for December 2020 was 80.5, indicating that 55% of nonsupervisory workers worked in low-quality jobs, and only 45% in high-quality.”

The results of the new working paper “show that Black and Hispanic American Job Quality Indexes are far below that for the total U.S. population. Asian American JQI however is substantially higher than the overall U.S. JQI.  The key findings were:

  • “Black American job quality is far worse than that of the total population. The Black Job Quality Index (JQI) for 2020 was 38.7, more than 40 points below the JQI for the total U.S. private sector production and nonsupervisory workforce. For the Black nonsupervisory workforce, 72% of their jobs are low quality, and only 28% rank as high-quality…”
  • The JQI for Hispanic Americans was 38.1 in 2020, 42 points below the U.S. JQI. In 2002, 28% of Hispanic American employees held high-quality jobs and 72% were in low-quality employment. Although far below the U.S. JQI, the Hispanic American JQI rose by 29% since 2007, when it was just 29.5. The increase in the Hispanic American JQI was driven largely by the growth of Hispanic jobs in high-quality health care and construction service jobs.
  • The Asian American JQI began the period well above the total U.S. figure and rose further, to reach 158.3 in 2020. At that level, 61% of Asian American employees were in high-quality jobs, with just 29% in low-quality. The high and rising Asian American JQI was driven by high-quality professional business service, health care, and finance/insurance jobs.

Ferry and Mayoral offered the following opinion: “Despite rising incomes for many Americans since 2007, Black Americans are not getting their fair share. Job growth for Black Americans since 2007 has been concentrated in low-quality jobs, notably in service sector jobs such as food service and social assistance. The slow growth in high-quality jobs since 2007, including a decline in many manufacturing sectors, has made it more difficult for Black and Hispanic Americans to gain access to these jobs. The JQIs for Black and Hispanic Americans reflect the economic inequality faced by these groups.”

They added, “The changing composition of the U.S. workforce in the years since 2000 hits Black Americans harder than it hits other ethnic groups, in particular whites, because Black Americans are more strongly concentrated among the 64% of the U.S. workforce that does not have a four-year college degree. For workers without four-year degrees, the traditional route to a middle-class income has been the manufacturing sector. That sector’s abrupt decline, which began in the 1980s but accelerated after 2000, has forced these workers to look elsewhere for employment. Unfortunately, the service sectors where jobs have grown most rapidly in this century pay well below manufacturing wages.”

It wasn’t “systemic racism” that caused the loss of higher paying manufacturing jobs —it was the greed of large American corporations with multinational presence that wanted to increase profits by shifting manufacturing to cheaper labor countries reduce costs of regulations.  Manufacturing was first shifted to Mexico after NAFTA and then to China after China was allowed into the World Trade Organization in the year 2000 and tariffs were reduced or eliminated. The loss of manufacturing jobs was made worse by   China’s flooding the U.S. with cheap imports that put domestic manufacturers out of business. 

The loss of high paying manufacturing jobs in cities like Detroit, Chicago, Philadelphia, and Pittsburgh, all cities with high Black populations, turned these cities and others into “job deserts” for high paying jobs.

When I visited Cincinnati in 2016 as the guest of Source Cincinnati, I learned that the city had lost 67% of its manufacturing base, and they were implementing a multi-pronged approach to reviving manufacturing jobs. Some cities in the southern states of North and South Carolina lost nearly all of their textile and furniture manufacturers. In 2017, I saw evidence of this devastation when I visited Greensboro, Raleigh, and High Point in North Carolina and Charleston, South Carolina.

Even in my long-time home of San Diego County, I documented the loss of 185 companies out of my database of about 1,000 manufacturers between 2001 and 2010. I wrote periodic reports starting in 2003, which led me to write my first book, Can American Manufacturing be Saved” Why we should and how we can” published in 2009.  This edition and the 2012 edition described the ramifications of losing 5.8 million manufacturing jobs in the U.S. between 2001 – 2010 and made recommendations on how to save American manufacturing.

In conclusion, Ferry and Mayoral recommended: “Policy initiatives to address the inequality of Black and Hispanic Americans suffering from much lower job quality than the total American population include supporting high-wage industries, notably manufacturing. These industries offer the best opportunity for Black and Hispanic Americans, who have relatively less educational qualifications than other Americans, to find high-quality jobs capable of supporting middle class lifestyles.”

Addressing the problem of rebuilding American manufacturing to create more high paying jobs for all Americans, including Black and Hispanic workers, is the whole focus of my book, Rebuild Manufacturing – the key to American Prosperity published in 2017. Reshoring manufacturing to America and personal decisions by consumers to buy Made in USA products are just two of the simpler ways we can rebuild American manufacturing.

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Mobile Makerspaces Help Entrepreneurs Grow New Manufacturing Businesses

Tuesday, May 18th, 2021

Makerspaces are a good idea for any community that wants to accelerate the development of manufacturing businesses in their region. According to Makerspaces.com, a Makerspace “is a collaborative work space inside a school, library or separate public/private facility for making, learning, exploring and sharing that uses high tech to no tech tools.  These spaces are open to kids, adults, and entrepreneurs and have a variety of maker equipment including 3D printers, laser cutters, CNC machines, soldering irons and even sewing machines.”

Many Makerspaces have been set up in renovated industrial buildings with City Chambers of Commerce or Economic Development agencies or departments as sponsors. However, many community colleges and universities have established Makerspaces on their campuses in recent years. “In 2016,the California Community College Chancellor’s Office, Workforce and Economic Division funded the $17 million CCC Maker Initiative for three years under the Doing What Matters for Jobs and the Economy framework. From January to June, 2017, 35 colleges participated in the Makerspace Startup process. Of those, 28 colleges competed for two-year grants that were awarded to 24 colleges in July 2017.”

Makerspaces are helping to prepare young people with the critical 21st century skills in the fields of science, technology, engineering and math (STEM).  They provide hands on learning and help with critical thinking skills for students. Some of the skills that are learned pertain to electronics, 3d printing, 3D modeling, coding, robotics, woodworking, and metal fabrication.   Makerspaces are also fostering entrepreneurship and are being utilized as incubators and accelerators for business startups.

I recently connected with Joel Leonard of SkillsTV.net and John Martinsic of Forest Scientific Corporation, and they told me about their collaboration in establishing a Mobile Makerspace program for cities, towns, and even rural areas.

They said, “The purpose of a Mobile Makerspace is “to empower under-served communities whether they be inner city or very rural is the education of youth. Students receiving technology education that includes manufacturing are equipped with problem solving skills and will learn that what they dream can become reality. They need exposure to possibilities to open their minds to new paradigms and

relieve them of limitations that only exist in their mind. In the new economy, entrepreneurs will have an increasing role in the overall job market and these young minds will fuel the economies of their communities where big multinationals are not interested in having a presence. It is great for regional economic development.”

They explained that by sharing a mobile Makerspace, schools, libraries, Small Business Development

Corporations, incubators, and economic and industrial development organizations can serve

more people and develop an interest in using the facilities of a Makerspace before building a permanent site. This can provide more utilization and less down time. Community interest will help with funding and the potential of obtaining corporate and foundation grants. Local manufacturers may realize that a Makerspace may be a good source of acquiring future talent, and entrepreneurs using a Makerspace may grow to the point that they will need their own industrial space, creating more manufacturers in the community, which provide higher paying jobs than retail or service jobs.

John said, “A Mobile Makerspace can also be used for job training and retraining by existing manufacturers in a community. It is also a cost- effective method to find potential employees and retrain

displaced workers. It could also be used to promote your permanent space by placing it out in the community, such as in front of a Walmart, flea market, or special event to educate your community about opportunities at your Makerspace.”

The electronic brochure that John emailed me provides more details about the Mobile Makerspace. It comes in a heavy-duty trailer rated at 9,990 lbs., and doesn’t require a special driver’s license. The trailer has a lower beavertail and a long ramp for easy loading.  It comes with an Etrack system and Ratchet straps for flexibility in securing the equipment. There are custom power options depending on your intended use. It can be configured with 12V DC lighting if being mainly used as a transport vehicle, and 120V AC or 220V AC Shore lines if you will be able to plug it in at your destination. Built -in or portable generators to operate anywhere are also available.  The machines are equipped with tie down hooks and retractable extensions cords.

There are many machine options to choose from for inside the Mobile Makerspace:

  • Mobile Tool Cart equipped with the tools
  • to make or fix nearly anything
  • Mitey Router, Mitey Mill, or Mitey Lathe
  • FabBotATC Router
  • 3D Printer Options
  • Laser Engrave/Cutter for cutting woods
  • Plastics CRP for cutting steel & aluminum
  • And many more in the Forest Scientific catalog

Mobile Makerspace can be utilized in two primary ways:

  1. As a transport vehicle, where the equipment is moved into a building at each destination
    1. Beneficial to share equipment when the climate, especially in cold northern climates is not conducive to having participants outside (especially at schools).
    1. If wired for electricity, it can also be used as a mobile lab.
    1. Usually not finished with a finished ceiling and may have a portable generator or just a shore line to keep the cost down.
  2. As a mobile lab to work in.
    1. Ideal to promote a fixed lab within a community.
    1. Ideal for sharing between Makerspaces and schools because there is little set up work upon arrival.
    1. Depending on the size of the trailer, you may be able to back it into a “shop” space and have little set up while isolating from adverse weather.

The brochure provided several options for configuring a Mobile Makerspace.  Below are examples of three packages:

Explorer Package – Ideal for promotion and working with students

  • Turnkey package including all equipment, computers, and software.
  • Custom 16 ft. trailer with custom graphics
  • Fabbot 2X2 CNC router with full enclosure on maker cart
  • 24X12 Universal Laser on Maker Cart with fume extraction
  • 3D Printer on Maker Cart
  • Three-year warranty
  • initial three-day training for success from day one
  • on-going tech support only a phone call away

Furniture/Housing Package – Wood and Plastic Sheet Production

  • Turnkey package including all equipment, computers, and software.
  • Custom 30’ Trailer with custom graphics
  • Makerfab 4X8 CNC Router
  • Dust collection
  • Maker hand and power tool power tool Cart with inverted router
  • Three-year warranty
  • initial three-day training for success from day one
  • on-going tech support only a phone call away

Manufacturing Entrepreneur Package – Make or Repair Nearly Anything

  • Turnkey package including all equipment, computers, and software.
  • Custom 34’ Trailer with custom graphics
  • FabbotATC 3X2 CNC router with full enclosure on Maker cart
  • CRP Metal cutting up to 1/2” Thick Pierce (Cut steel & aluminum)
  • 24 X 12 Universal Laser on Maker Cart with fume extraction (cuts woods & plastics)
  • 3D Printer on Maker Cart
  • Three-year warranty
  • initial five-day training for success from day one
  • on-going tech support only a phone call away

All Mobile Makerspace trailer packages are available for purchase or lease with a minimum of a one-year lease.  Funding sources for establishing a Mobile Makerspace can be sought through federal Economic Development grants, charitable foundation grants, corporate grants, and CARES Act grants before funds are exhausted. 

If your community wants to grow your manufacturing industry to create higher paying jobs, you should consider establishing a Makerspace.  To ascertain the type of manufacturing your community could grow, it may be beneficial to start off with a Mobile Makerspace. If your community has a well-established manufacturing industry, and the biggest problem is lack of skilled workers to fill jobs available, then you could focus on a Makerspace that would provide job training to students or retrain manufacturing employees in new skills.  If you are interested in either option, you can reach Joel Leonard at Joelskilltv@gmail.com and John Martinsic at johnm@forestcnc.com.

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U.S.-China Trade Policy is Focus of Day Four of CPA Conference

Tuesday, May 4th, 2021

The last day of the Coalition for a Prosperous America conference held on Friday, March 26th, was focused on U.S.-China trade policy. It’s gratifying to me that key elected representatives and officials are finally waking up to the fact that China is not our friend and instead is a threat to our national security.

Dennis Shea, former U.S. Ambassador to the World Trade Organization was the morning keynote speaker of the day in a live video.  He said, “China’s economic system is incompatible with the market rules of the WTO. China has not developed the market economy that was expected.  State-owned companies that are funded by state-owned banks and increased Chinese Communist Party (CCP) involvement in business has expanded in the past 20 years. Professor Mark Wu of Harvard Law School coined the term ‘China Inc,’ but Jude Blanchette, Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS) has said that ‘China Inc.’ has become ‘CCP Inc.’ The WTO has proved itself incapable of making China comply with WTO rules.  The WTO requires 100% consensus of its 164 member countries, but China will never approve changes in any WTO rules.  The WTO has been a tremendous advantage for China.  There have been administrative changes proposed, but china has been adamantly against these changes.  Where do we go from here?  First, the WTO members need to recognize that there is a problem.”

Senator Gary Peters (D-MI), who is Chairman of the Homeland Security and Governmental Affairs Committee in the Senate, was the next speaker. He said, “I have opposed every trade bill that CPA opposed and supported every bill that CPA supported.  The Biden Administration has enacted the Defense Production Act (DPA) to bolster vaccine production and increase the supply of critical PPE.  The Pfizer vaccine is made in Kalamazoo, MI. They are now producing 13 million doses/week, up from 5 million. You can’t be a really great country if you can’t make things. It is important to focus on manufacturing.  There are 58 manufacturing programs spread out over 16 government agencies. I am pushing for a national Institute of Manufacturing, which would give manufacturing a higher profile with other programs. I proposed creating a ‘manufacturing.gov’ website to be a one-stop cite to help manufacturers. I am working to increase enforcement funding to protect small companies from unfair foreign competition and have introduced legislation to have the Department of Commerce help small companies who are being affected by dumping by foreign companies.”

His speech was followed by a panel on “How to Win the Great Power Rivalry with China,” moderated by Jon Toomey, CPA Government Relations Director.  Panel participants were: Senator Marco Rubio (R-FL), Rep. Bill Posey (R-FL), Roger Robinson, President & CEO of RWR Advisory Group, and Dan DiMicco, former CEO and chairman of Nucor Steel.

Senator Marco Rubio commented, “The 21st Century is going to be about the balance between the U.S. and China. China seeks to dominate all industries and become the superpower of the century.  Our inability to make things leaves us dependent on China.  Dependence can lead to China to millions of Americans achieve the American dream without creating higher paying jobs. It is now possible for an entrepreneur to make products and create wealth with no benefit to American workers. This led to multinational companies moving manufacturing to other countries to create wealth with the loss of jobs to American workers.  It is time for policy makers to step n and ensure that the free market works for the every day American. You can’t be a great power if you can’t make things.  It has been our ability to develop and make things that is important to our national security.”

Roger Robinson said, “President Trump’s E.O. 13959 prohibited U.S. investors from purchasing or investing in securities of companies identified by the U.S. government as ‘Communist Chinese military companies.’ There are now 44 companies listed, but we need to have a list like this for human rights violators. We could put 300 companies out of our markets.  The Secretary of Treasury needs to close the doors of funding for CCP companies. We need to turn off the investment funding for Chinese companies. “ He added, “We need to put China in a box that would be very difficult to get out of like President Reagan implemented against Russia.”

Rep. Posey said, “China has held an anvil over people’s heads. More and more people realize that it is time to do something. We need to use financial and economic measures to put the squeeze on China that we have never dreamed about before. We need to get behind a precise plan to go for the jugular.  But I don’t see any sign of a unified plan now.”

Dan DiMicco said, “There is no negotiating with China, and the meeting in Alaska made that clear. It was a provocative exchange on the part of the Chinese.  I hope the Biden Administration is saying ‘the free lunch is over.’ We have the greatest opportunity in 30 years to come together on our position with China.”

The last panel of the conference was “How Customs Enforcement Can Protect Jobs and National Security,” moderated by Chuck Benoit, CPA Trade Counsel.  The panelists participating were: Vincent Annunziato, Director at Customs & Border Protection, Dan Nation, Division President of Parkdale Mills, and Therese Randazzo, Division Director, Forced Labor at Department of Homeland Security.

Mr. Annunziato said, “The way we collect data is changing. We are using Blockchain to validate the entity data of businesses when we are investigating county of origin for imports that may be violating regulations. We need to ensure that the identity of the manufacturer and the country of origin are correct to be able to apply the correct Harmonized Tariff Schedule.”

Ms. Randazzo said, ‘Enforced labor is any labor conducted under some kind of force. There are 25 million people worldwide who are suffering from forced labor.” She explained that the Trade Facilitation and Trade Enforcement Act of 2015 “prohibits all products made by forced labor, including child labor, from being imported into the United States.” She said that her division looks into 11 indicators of forced labor:

  1. Isolation from family and confinement
  2. Physical or sexual violence
  3. Not free to leave
  4. Withholding of wages
  5. Deception
  6. Excessive overtime
  7. Debt bondage
  8. Intimidation or threats
  9. Abusing vulnerabilities of illegal aliens
  10. Abusive language or working conditions
  11. Retention of identity documents

She added, “Our division collaborates with other government agencies and NGO organizations.  There are four phases in the forced labor process: (1) investigate, (2) Issue press releases (3) goods are detailed, (4) issue a finding wherein products are not allowed to be imported.”

Unfortunately, due an appointment conflict, I missed the final video presentation of the day featuring Clyde Prestowitz, discussing his new book, The World Turned Upside Down, America, China, and the Struggle for Global Leadership. You can watch his presentation at this link. I could have watched the video to be able to quote a few comments, but his book deserves my writing a separate article about it after I read it.

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How Technology & Currency Policy Contribute to ‘Build Back Better’

Tuesday, April 20th, 2021

The panels on the third day (March 25th) of the virtual CPA conference highlighted how the technology industry contributes to national security and the economy as well as how a currency policy would contribute to President Biden’s “Build Back Better” industrial strategy.

Jeff Ferry, CPA Chief Economist, began the day’s program with a brief discussion of the white paper he wrote, “Reclaiming the US Solar Supply Chain from China, He said, “I looked at Section 201 tariffs on solar, which are 30% on solar modules, and we gained 19.8% market share from 2018 – 2019 after the tariffs were imposed. New companies came on line to make solar modules, and prices declined 8% that year as there was sufficient domestic competition.  Sales of solar modules and installations of solar also rose. Solar modules are downstream, but China controls over 90% of the upstream production of ingots and wafers. We only have three US polysilicon sources in Tennessee, Michigan, and Washington.  We need to make ingots and wafers in the U.S.  We proposed a “Made-in -USA solar tax credit” available to US-based solar manufacturers, increased federal investment in solar R & D, and strengthening Buy American policies requiring the federal government to buy only US-made solar equipment and power generated only from US-made solar equipment.

Jeff then introduced Roslyn Layton, PhD, co-founder of China Tech Threat, who participated in a live video from Denmark where she is currently working. Jeff and co-wrote a white paper that was released on March 22nd,  titled “Maintaining U.S. Leadership in Semiconductors and Countering China’s Threats.”

Jeff said that the steep decline in U.S. market share in global semiconductor manufacturing is a risk to U.S economic and national security. The U.S. semiconductor industry is in danger of being surpassed by foreign competitors, especially those in China. The U.S. must maintain leadership in the semiconductor industry.

Roslyn said, “The U. S. share of the semiconductor industry has shrunk to 12%, and U.S. companies are selling equipment to make chips to Chinese companies most of which are government-owned companies or allied with the Chinese military.  The semiconductor equipment and chips are now being used by the Chinese military. The export controls on sales of equipment have loopholes that allow American companies to sell to Chinese companies. Taiwan Semiconductor Manufacturing Corporation (TSMC) and Samsung in South Korea account for over half of global chip foundry production, and their governments offer lots of incentives to companies to make chips in their countries. We need to develop a comprehensive policy to increase chip production in the U.S. We need to be making 50% of the chips we need in the U.S. for our national security and to increase jobs.” The white paper makes key policy recommendations.

Next, Jeff Ferry moderated a panel on how the U.S. technology industry can maximize its contribution to U.S. national security and the economy..  Participants were Mark Widmar, CEO of First Solar, Steve Papa, Founder and CEO of Parallel Wireless, and Roslyn Layton. Mark Widmar said, “I joined First Solar 10 years ago.  It is one of the largest solar companies because it is the only company that produces advanced thin film photovoltaic (PV) module.” Mark said, “We started off with a disruptive technology,” and then briefly described the technology and its advantages over silicon solar panels. He said, “We have a very vertically integrated production system. Our headquarters is in Tempe, AZ, but we do R&D in California and have a production plant in Ohio.

When Jeff asked how the U.S. can compete against China, Mark said, “It’s difficult to compete against the unfair, anti-competitive, predatory pricing of the Chinese. The concern I have is that the U.S. has become the victim of solar at any cost. The solar industry grew over 19% in only 16 months after the tariffs were imposed.

Steve Papa said, “I compete against Huawei, and the problem is the government financing and subsidies they are receiving from the Chinese government.  We can beat Huawei with American innovation, but if we want to beat Huawei, we have to solve the capital problem. American venture capitalists are investing in American companies that have plants in China. We need more innovation capital here in the U.S.”

Mark added, “There is no new capital coming into the solar industry because of the pat history of company failures due to China dumping.  China is trying to stymie any new technology development in the U.S. We are too slow to respond to competition. If we don’t address the root cause, Chinese government subsidies to their solar industry, we won’t succeed in the long-term.” 

After this panel, Michael Stumo, CEO of CPA, moderated a panel on currency policy.  Panel participants were Marty Davis, Cambria USA, Jason Kearns, U.S. International Trade Commission (ITC), and Stephen Vaughn, Partner of King & Spalding (trade lawyer).

Jason Kearns began by saying, “The ITC does three main things: (1) act as judges in trade cases, determine if there is surge in dumping cases and determine if imports are being transshipped, (2) provide reports to the President and Congress (3) change numbers on tariffs.”

He added, “The trade mindset is changing – more assertive approach to handle trade and process more reports and economic studies, but we are not receiving funding for more work. The ITC has a more important role to play. Prior to Trump’s implementation of tariffs, we really had no leverage in handling trade cases.”

Marty Davis said, “Cambria was founded about 20 years ago in the early 2000s. We have invested about $450 million in equipment to make quartz slabs for counter top industries. Then, China started dumping quartz slabs, and by 2016, China had 65% of the marketplace.  China violated our intellectual property. We started exploring trade enforcement with the ITC as China has violated trade law.  Chinese companies are selling slabs below the cost of the material. We filed a case with the Department of Commerce and the ITC.  We had to prove “standing” to be able to file the case, and we were able to do so because we controlled 60% of the market before the Chinese dumping. The resellers protested the case because they wanted cheap products. After winning the case, we got 300-500% tariffs, and we are going to invest $120 million in new plants. We had to spend $5 million to win the case.”

Stephen Vaughn stated, “Free trade was the policy from the end of the cold war in the early 1990s onward.  President Trump changed all this and was willing to take the heat. I worked under U.S. Trade Representative Robert Lighthizer during the Trump Administration. We did what the Administration wanted us to do. We should be asking: Do we want a middle class?  What industries do we want to have?  We need to make policy decisions based on the outcomes we want.”

The outcome I want is a strong domestic manufacturing base that creates higher paying jobs, so more Americans will be able to be in the middle class.  This goal has been the focus of everything I have done for the past 13 years by writing three books, writing hundreds of blog articles, and giving hundreds of presentations wherever I can.  This is why I’ve been a member of the Coalition for Prosperous America since 2011 and have attended six previous in-person trade conferences.

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Second Day of CPA Conference Focuses on Tax Reform

Tuesday, April 13th, 2021

The second day of the CPA virtual conference held March 23-27th featured two panels: the first on the topic of “Reforming Corporate Taxation to Help Reshore Our Industries,” and the second on ”Buy American.”   In the first panel, the focus was on whether or not additional tax reform is needed by Congress to make sure that tax loopholes that currently favor multinational corporations over domestic companies will be closed.

The Tax Cuts and Jobs Act of 2017 (TCJA) reduced corporate tax rates to a flat tax of 21% from a graduated tax system ranging from a low of 15% to a high of 35%.  At the time, the U. S. had the highest corporate taxes in the world after Japan had reduced their corporate tax rate to 30.86% in 2016, down from a high of 40.69% in 2010.

David Morse, CPA Tax Policy Director, moderated the panel, which began with a tribute to Bill Parks for his work on Sales Factor Apportionment. Mr. Parks is Founder and President, Northwest River Supplies and Founding Director, SalesFactor.org, “which works to advance tax policy that would level the playing field between domestic and multinational corporations, improve U.S. competitiveness in world markets, and foster the long-term health of the American economy.”

Simply stated, Sales Factor Tax Apportionment would tax U. S. and foreign multinational corporations based on their sales in the United States. In other words, the profit a company generates on its U.S. sales would be taxed. These taxes would have to be paid to do business in the U. S.  This would eliminate profit shifting to divisions in other countries or claiming residence in a country with lower or no corporate taxes in order to avoid U.S. tax obligations.

Senator Bill Crapo (R-ID) participated in the panel with a pre-recorded video in which he paid tribute to the work of Bill Parks, whose company is in his state.  He touted TCJA for reducing corporate taxes and stated that it stemmed offshoring of American manufacturing and helped reshoring.  He said that we could strengthen TCJ with legislation on Sales Factor Tax Apportionment.

Representative Bill Pascrell (D-NJ) also participated in the panel with a pre-recorded video.  Rep. Pascrell is on the Ways and Means Committee in the House, and he said that the current tax system is tilted to wealthy and large corporations at the expense of small to medium-sized businesses.  In his opinion, TCJA wasn’t tax reform, and real tax reform is needed.

Ji Prichard, who is Tax Counsel on the House Ways and Means Committee, shared that tax reform is under discussion in the committee.  President Biden’s “Build Back Better” campaign plan had a “carrot and stick” approach to reshore manufacturing – a 10% tax credit for reshoring and a 10% fine for offshoring. 

The third panelist Professor Reuven Avi-Yonah, Irwin I. Cohn Professor of Law and director of the International Tax LL.M. Program at the University of Michigan.  Professor Avi-Yonah has written extensively on the subject of taxes. He supports the Sales Factor Tax Apportionment because he believes that it will solve a major problem in the tax code:  tax avoidance by multinational corporations through profit shifting to offshore entities and reincorporating in tax haven countries. The problem with the OCED tax proposal is that it is only focused on digital transactions that would hurt American high-tech companies. He believes that SFA could be applied unilaterally.

The Buy American Panel was moderated by the Co-Chairs of the CPA Buy American Committee: Greg Owns, CEO, Sherrill Manufacturing and Liberty Tabletop, and Jim Stuber, Founder of Made in America Again and author of What if Things were Made in America Again.

Senator Tammy Baldwin (D-WI) participated in the panel via a pre-recorded video.  She said, “Wisconsin is a state that makes things. We are #1 or #1 in manufacturing of paper, tools, and ships.  It is very important that we produce the things that keep us safe and healthy. When the pandemic started, we saw a shortage of masks, gloves and other PPE. The American Rescue Plan for COVID relief included 10 billion dollars for government purchase of essential goods under the Defense Production Act.” She also said, “The pandemic made it clear that we need country of origin labeling (COOL) for online purchases.  I appreciate CPA’s help in drafting a bill. There are lots of gaps in the Buy American policy for infrastructure. Trade deals have provisions that give foreign companies the right to bid on government procurement. There are 16 countries that can bid as if they are an American company.  But the President can waive these provisions of trade deals in emergency situations.”

Senator Cynthia Lummis (R-WY) participated in a live video, and she said, I support country of origin labeling.  I am a lifelong rancher. We need more domestic products.  Wyoming has rare earth minerals and is an energy producing state.  Buying local and buying American grew in importance during the last year.  I think food security is a national security issue.  You can count on me as an ally on Buy American.”

Representative Claudia Tenney (R-NY) said she is the representative for the district in which Greg Owen’s company is located and also where Revere Copper is located (owned by Brian O’Shaughnessy, CPA’s Vice Chair.) She said that 94% of workers in her district work for small businesses. She also supports Buy American and country of original labeling.

The last panelist was Brad Markell, Executive Director of the AFL-CIO Industrial Labor Council.  He said, “This is the manufacturing arm of the AFL-CIO that includes the presidents of all of the unions in the manufacturing industry. The Trump Administration made great strides on Buy American. The Biden administration left these Executive Orders in place and have added two more E. O.s related to Buy American and supply chain.  Too many government agencies have waivers for Buy American. The manufacturing component of infrastructure is high for construction. Every time the federal government spends money is an opportunity to create jobs.”

The day’s session ended with closing remarks by Bill Bullard, CEO of the Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA).  He said, “The cattle industry is the single largest segment of U.S. agriculture generating about $65 billion in sales. There are about 729,00 farmers and ranchers in the U.S., down about a half million the past 40 years. Farmers and ranchers are scattered across the country and in nearly every county. Since 1990, we have lost 200,000 cattle ranches and millions of cattle. The U.S. underproduces cattle to supply demand and imports are increasing.  We import beef from 20 countries and about two million live cattle from Canada and Mexico each year. Since NAFTA, the amount of beef we import from Canada and Mexico has tripled, so that we’ve accumulated a $40 billion deficit. Retail prices have risen, especially since 2017, but the rancher’s share of the price has drastically dropped.  This is because there are only four meat packing plants in the U.S. and two are owned by Brazilian companies, so when you have many sellers and few buyers, the price drops.”

Bill’s proposed solution to this problem is country of origin labeling for retail sales that states where the cattle was born, raised, and slaughtered.  Imported beef that is repackaged must also reveal the country from which it is imported. This would be non-discriminatory to all countries. He also stated that “Buy American” policies for federal procurement should require that beef procured for school food programs and the military should fit the criteria of born, raised, and slaughtered in the U. S.  He urged everyone to contact their Congressional Representative and Senator to support country of original labeling for beef.  

We learned a hard less during the COVID pandemic about the dangers of being reliant on foreign countries for our pharmaceuticals and PPE. We must not allow foreign imports of beef and foreign ownership of meat packers to endanger the largest segment of agriculture products. Protecting the safety of our food production is a national security issue.

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