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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.

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Posted in Jobs, Manufacturing, Trade Policy | No Comments »

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 Obamatrade.com 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!

 

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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:

Industry

 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.

State

Jobs

 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.

 

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International Corporate Elite Steamrolls Trade Promotion Authority Through Senate!

Tuesday, May 26th, 2015

Late Friday evening, May 22, 2015, the Senate voted to pass the Trade Promotion Authority (H.R. 1314) by a vote of 62 to 37 to give President Obama the authority to “fast-track” trade agreements through 2018, with an extension to 2021 possible. If this legislation also passes the House, this would mean that the Trans-Pacific Partnership Agreement (TPP) and the Trans-Atlantic Agreement may be negotiated and signed without any amendments by Congress and with only a majority vote rather than the supermajority vote required for treaties under the Constitution.

Of the Republican senators, 54 voted yes, four voted no and one did not vote. Fourteen Democrats joined the majority of Republicans in voting yes. According to the Roll Call, they are: Bennet (CO), Cantwell (WA), Cardin (MD), Coons (DE), Feinstein (CA), Heitkamp (ND), Kaine (VA), McCaskill (MO), Murray (FL) Shaheen (NH), Warren (VA), and Wyden (OR). The four Republicans who voted no are: Collins (ME), Paul (KY), Sessions (AL), and Shelby (AL).

Nearly every Democrat or Democrat-leaning organization from unions to the Sierra Club opposed the Trade Promotion Authority, so those fourteen Democrat Senators turned their back on their constituencies and the American working class they claim to support to follow lock-step with the Republicans they accuse of being in the pocket of “big business,” i.e. the large multinational corporations that comprise the membership of the U.S. Chamber of Commerce, the National Association of Manufacturers, etc.

There were over 100 amendments proposed, but only ten were allowed to reach the floor for a vote. Three were rejected for discussion or a vote because they were ruled as not being not germane to the topic: Inhofe (R-OK) # 1312 (AGOA), Shaheen (D-NH) SA #1227 (small business), and McCain (R-AZ) #1226 (catfish).

The Hatch (R-UT) (substitute) amendment #1221 was approved without any description or discussion by a vote of 62 yes to 37 no.

The Flake (R-AZ) amendment #1243 to strike the extension of the Trade Adjustment Assistance program (TAA) failed 35 yes to 63 no. The Trade Adjustment Assistance was originally a separate bill and was added to the Trade Promotion Authority to “sweeten” the deal to gain Democrat votes. Trade Adjustment Assistance is a federal program to reduce the damaging impact of imports. The current program features four components for workers, firms, farmers, and communities.

The Brown (D-OH) amendment #1251 purpose was to require the approval of Congress before additional countries may join the Trans-Pacific Partnership Agreement because the TPP is a “docking” agreement in which other countries may be added after it is signed and in effect. In his comments in support of this amendment, Senator Brown specifically mentioned the need for Congress to approve the addition of China to the Agreement. Unfortunately, the amendment failed by a vote of 47 yes to 52 no.

The Stabenow-Portman amendment #1299, whose purpose was, “To make it a principal negotiating objective of the United States to address currency manipulation in trade agreements,” failed by a vote of 48 yes to 51 no.

The Hatch amendment #1411 was agreed to by a vote of 70 yes to 29 No without any description or discussion.

Two Amendments had already been considered on May 21st:

  • Lankford SA 1237 passed by a vote of 92 to 0 to establish consideration of the conditions relating to religious freedom of parties to trade negotiations as an overall negotiating objective of the United States.
  • Brown SA #1242 failed by a vote 41 to 45 to restore funding for the trade adjustment assistance program to the level established by the Trade Adjustment Assistance Extension Act of 2011

Of equal importance, the Warren amendment #1327 failed to pass by a vote of 39 Yes to 60 No. Its purpose was “To prohibit application of the trade authorities procedures to an implementing bill submitted with respect to a trade agreement that includes investor-state dispute settlement” [ISDS].

This is the chapter of the TPP that allows foreign corporations to bypass the domestic legal system to use to fight laws they don’t like. International Tribunals, not U.S. courts, would decide on lawsuits between the U. S and “investor” companies in member countries. Foreign “investors” could file lawsuits against city, state, and federal agencies for laws and regulations they feel infringe on their “expected future profits.” They can also sue for compensation for the loss of these “expected future profits.”

In her comments to introduce the amendment, Senator Elizabeth Warren mentioned that over 100 law professors had sent a letter to Congress and the Obama administration urging them to not include the ISDS in the TPP. I discovered that she was quoting from the “Analysis of Leaked Trans-Pacific Partnership Investment Text by Lori Wallach of the Citizen’s Trade group” that was released on Wednesday, March 25, 2015. You can download the leaked chapter at https://wikileaks.org/tpp-investment/

This 13-page analysis includes this paragraph: “A March 2015 letter signed by 139 U.S. law professors urges congressional leaders and the Obama administration ‘to protect the rule of law and our nation’s sovereignty by ensuring ISDS is not included” in the TPP, stating, “ISDS threatens domestic sovereignty by empowering foreign corporations to bypass domestic court systems and privately enforce terms of a trade agreement. It weakens the rule of law by removing the procedural protections of the justice system and using an unaccountable, unreviewable system of adjudication.’ A May 2012 letter signed by former judges, law professors and other prominent lawyers from TPP nations warns: ‘the foreign investor protections included in some recent Free Trade Agreements (FTA) and Bilateral Investment Treaties (BIT) and their enforcement through Investor-State arbitration should not be replicated in the TPP. We base this conclusion on concerns about how the expansion of this regime threatens to undermine the justice systems in our various countries and fundamentally shift the balance of power between investors, states and other affected parties in a manner that undermines fair resolution of legal disputes.”

This analysis is well worth reading to become fully informed of the dangers of international tribunals adjudicating cases instead of our domestic legal system. Two of the most dangerous features of the ISDS chapter are:

  • “Foreign investors alone would be granted access to extrajudicial tribunals staffed by private sector lawyers who rotate between acting as “judges” and representing corporations in cases against governments, posing major conflicts of interest.”
  • “Foreign tribunals would be empowered to order governments to pay unlimited cash compensation out of national treasuries.”

Senator Warren also mentioned that even the CATO Institute, a champion of free trade, had recommended removal of ISDS from the Trade Promotion Authority legislation. The report she referenced is Free Trade Bulletin No. 57, “A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute Settlement,” by Daniel J. Ikenson dated March 4, 2014. The CATO Institute is a well-known American libertarian think tank, so its recommendations should have had some influence on Republicans in the Senate, but evidently did not. Instead, the vast majority of them chose to follow their cue from the international corporate elite behind this treaty.

Ikenson wrote that there are “practical, economic, legal, and political reasons to expunge ISDS from current trade negotiations.” He presented “Eight Good Reasons to Drop ISDS from TPP and TTIP, which you can read in full at the above link.

Since there was very little information on the Trans-Pacific Partnership Agreement in the major media prior to its introduction in the Senate and the failure of the first cloture vote on May 12th, it is imperative that freedom-loving organizations make Democrat and Republican Representatives in the House aware of the facts about the damage the TPP would do to our country.

America now stands at a crossroads, whether Americans will remain in control of their destiny or will be forced to bow before foreign tribunals and have even more of their jobs shipped overseas. If we are to protect our national sovereignty and our jobs, we must stop this legislation in the House by flooding their switchboards!

Members of the manufacturing task force of the California chapter of the Coalition for a Prosperous America of which I am chair have done their part by visiting the offices of all 33 of the southern California Representatives in the past year. The final hour is near. Let your Representative hear your voice! If you don’t know who your Representative is, click here.

Posted in Jobs, Manufacturing, National security, Trade Policy | 1 Comment »

Would the Trans Pacific Partnership really be Free Trade?

Tuesday, May 5th, 2015

Free trade ? what does this mean? Businesdictionary.com defines it as “The interchange of goods and services (but not of capital or labor) unhindered by high tariffs, nontariff barriers (such as quotas), and onerous or unilateral requirements or processes.” By this definition, would the Trans Pacific Partnership really be free trade?

Last week, Congressman Tom McClintock (R-CA) gave a speech in support of passing the Trade Promotion Authority aka “Fast Track Authority” saying, “Every nation that engages in trade prospers from it. Every nation that fails to trade, fails to prosper…It is freedom that produces prosperity – the free exchange of goods between people and between nations for their mutual betterment. The greater the freedom, the greater the prosperity.”

This is only true if the nation benefits from the trade by exporting more than it imports. In 2014, the U. S. imported $2.34 trillion in goods compared to exporting $1.62 trillion in goods, resulting in a trade deficit of $721.6 billion. Because we have a surplus in exports of services, our total trade deficit was reduced to $505 billion. It seems to me that we are not benefitting from our current trade agreements as we should and that another trade agreement with 11 more countries would only make our trade deficit much worse.

Rep. McClintock argued that “…since the 1930’s, Congress has chosen to exercise its responsibility by establishing the broad terms of the agreement it seeks and then giving explicit instructions to our negotiators at the beginning of the process. IF, and only IF, these objectives are advanced in the agreement, Congress will then consider it as a whole package and either approve it or reject it.

McClintock said, “That process is now called ‘Trade Promotion Authority. It has stood the test of time, has been used to the great benefit of our nation in the past and has never been controversial until now… It is precisely because of this mistrust that the Trade Promotion Authority sets forth some 150 objectives that must be advanced before Congress will even consider the resulting agreement. And once those objectives are attained, a majority of the Congress must still approve it.”

What is wrong with this argument is that the Trans Pacific Partnership Agreement has been in negotiation for five years without any involvement by Congress; it is not at the beginning of the process. Rep. McClintock seems to mistakenly believe Congress retains the power to direct the President’s negotiations when in fact there is only one more round of negotiations scheduled.

Rep. McClintock wrongly asserts that Congress set forth 150 negotiating objectives in the TPA that the President “must” comply with. This statement is not true. None of the objectives are binding and most are simply vague aspirations of global goals. Indeed, the House Ways and Means Committee firmly rejected any efforts to make the negotiating objectives binding.

The President also is empowered to unilaterally draft “implementing legislation” that will change U.S. laws and regulations to comply with the agreement he negotiated. Through the TPA, Congress even limits its own ability to debate and prevents its ability to amend the implementing legislation.

The Obama Administration made the draft text of the agreement classified and has kept it hidden from public view, making it illegal for the press, experts, advocates, or the general public to review the text of this agreement. Even Congressional members can only view it at the office of the U. S. Trade Representative without pen, pencil, paper or a camera to take picture of any pages. They are also prohibited by law from discussing the specifics of the text in public.

This is why on April 25th Senators Sherrod Brown and Elizabeth Warren wrote President Obama a letter stating, “We write to request that you promptly declassify the latest bracketed negotiating text of the TPP and release it publicly before asking Congress to vote on “fast track” authority to facilitate the TPP’s ratification.”

They add, “Because the negotiations are largely complete, there is no reason the TPP must remain secret from the American people before Congress votes on fast track authority. In 2001, President George W. Bush made public a draft of the scrubbed bracketed text of the Free Trade Area of the Americans (“FTAA”) agreement several months before Congress granted partial fast track authority to facilitate ratification of that deal.”

They conclude, “We have an additional concern: the fast track legislation currently under consideration goes far beyond the TPP. Fast track, as currently written, would preclude Congress from amending or filibustering any trade agreement submitted to this Congress or any future Congress—potentially through 2021.”

Their concerns are shared by Congressman Dan Lipinski (D-IL) who has introduced “the Truth, Transparency, Accountability, and Fairness in Trade Act to protect American workers being harmed by foreign trade agreements.” His bill would require “the Executive Branch to review and report on the operation of existing trade agreements to determine whether American jobs and exports are being negatively impacted. If negative impact is found, any Member of Congress would have the right to submit a “termination bill,” which would have expedited consideration and allow for the cancellation of some or all of the trade agreement causing damage. After passage of a termination bill, any renegotiated agreement would be barred from being considered under Trade Promotion Authority (the fast-track process).”

It is not just Democrats that are opposed to the Trade Promotion Authority bill. Senator Jeff Sessions (R-AL) expressed his concerns about the Trade Promotion authority in an interview on the John Fredericks Radio Show on Thursday, 4/23. (WHKT, AM 1650, and a Network of AM Stations across Virginia.) He subsequently released a critical alert of his Top Five Concerns with Trade Promotion Authority.

“Conservatives like Reps. Walter Jones and Duncan Hunter have said they oppose the measure, wary of giving the White House any more authority. At the end of last year, 19 House Republicans signed a letter calling on their colleagues not to pass TPA in the lame-duck session.”

At www.obamatrade.com, you can listen to videos of several conservatives urging Republican Congressional Representatives to oppose the Trade Promotion Authority, including TV host Lou Dobbs, Frank Gaffney, President of Center for Security Policy, former UN Ambassador Alan Keyes, Niger Innis, Executive Director of TheTeaParty.net, Richard Manning, President of Americans for Limited Government, and Sandy Rios of American Family Association. The American Family Association is part of a broad coalition of conservative organizations urging Congress to reject granting President Obama so-called “fast track” power. Author, talk show host, and defender of the Constitution Mark Levin says no conservative should support Fast Track “Trade Promotion Authority.”

Michael Stumo, CEO of the Coalition for a Prosperous America, stated, “The minority staff of the House Ways and Means released a side by side comparison of this week’s Fast Track bill with the bill from January 2014. Basically it is more of the same. Will they never learn? From CPA’s perspective, the new bill is a failure.”

The new bill does not have any enforceable provision to address foreign currency manipulation. It does not address the foreign border adjustable taxes (VATs), which are tariffs by another name. It has insufficient language to address the problem of government subsidies to state owned enterprises. It allows the Investor State Dispute Resolution to be handled by the foreign tribunals without providing a rationale as to why the U. S. court systems are not good enough.

For these reasons and other reasons mentioned in my previous article, “What would be the Impact of the Trans Pacific Partnership Agreement,” this Agreement is the opposite of free trade. It is government controlled trade and is so overreaching on non-trade issues that it would control many aspects of the lives of all Americans, not just businesses.

The Trade Promotion bill passed the House Ways and Means Committee and the Senate Finance Committee on April 22nd and 23rd. It could be brought up for a vote in the full House and Senate any time after Congress gets back from this week’s recess. Time is of the essence! Don’t give up your freedom! Tell your representatives in Congress to vote NO on Fast Track.

Posted in Jobs, Trade, Trade Policy | No Comments »

What would be the Impact of the Trans Pacific Partnership Agreement?

Monday, April 20th, 2015

Last Thursday, Senators Hatch, Wyden, and Ryan introduced “The Bipartisan Congressional Trade Priorities and Accountability Act of 2015,” which is the Trade Promotion Authority bill that would grant President Obama “fast track” authority for the Trans Pacific Partnership Agreement.

The TPP agreement has been in negotiation since 2010 between the United States and 11 other countries around the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The TPP would cover 792 million people and 40% of world’s economic activity. It is a “docking agreement” so other countries could be added, and India, China, and Korea have expressed interest in joining the TPP.

There has been no involvement by Congress in the writing of the Agreement; instead, 600 corporate advisors have worked with the U. S. Trade Representative and his staff to write the more than 1,000 pages of the Agreement. Members of Congress did not even have access to view the Agreement until last year, and they cannot take any staff with them and are not allowed to take pen, pencil, paper, or a camera when they go view it at the U. S. T. R.’s office.

This Act would give Constitutional power over trade to the President and take it away from Congress. It would allow the Executive Branch to conclude negotiations and sign the Agreement before a vote by Congress. It allows only 45 days for committee analysis and only 15 days to bring it up for floor vote. It allows only 20 hours of debate by Congress and eliminates amendments, filibuster, and cloture. It requires only simple majority vote in the Senate and House whereas the U.S. Constitution Article 1, Section 8 Treaty clause requires 2/3 vote of Senate. The TPP would remain in effect until 2018, but could be extended to 2021.

What is missing in the TPP

 The TPP does not address any of the “predatory mercantilist” actions that our current trading partners are using that have created the enormous trade deficit that I wrote about a few weeks ago. These policies are: currency manipulation, “border adjustable” taxes called Value Added Taxes (VATs), which are a tariff by another name, government subsidies for State-Owned Enterprises, and “product dumping” by manufacturers in one country at below their cost to produce to destroy competition in another country.

“Over 20 countries, representing 1/3 of global GDP, are engaged in currency wars” by undervaluing their currency. These governments work with their central banks to manipulate the currency value in order to provide a competitive advantage to boost exports and impede imports. China’s currency is estimated to be 25-40% undervalued. As Paul Volcker, former Secretary of the Treasury, has explained, “In five minutes, exchange rates can wipe out what it took trade negotiators ten years to accomplish.” Foreign government intervention in foreign exchange markets is manipulation, not free trade.

Value Added Taxes (VATs) range from a low of 10% to a high of 24%, averaging 17% worldwide. The U. S. is one of a handful of 159 other countries that do not charge a VAT. This means that American products that are exported are an average of 17% more expensive when imported by a country that adds a VAT. In reverse, foreign imports are an average of 17% less expensive because the U. S. does not charge a VAT. Thus, we reduce tariffs through our trade agreements only to have our trading partners add a tariff by another name to the cost of our products that we export. This gives other countries an unfair competitive advantage in the global marketplace.

We have all read news stories about “product dumping” cases against U. S. industries, such as the tires, steel, and solar panel industries. With regard to government subsidies, the best example is how Foxconn was able to get Apple’s business for manufacturing the iPhone, iPad and now the iWatch because the Chinese government gave them the land and built the building for them.

What is wrong with the TPP?

 The TPP overrules prior acts of Congress and destroys our national sovereignty. For example:

 Buy American Act made Null and Void: For the manufacturing industry for which I play a role, the most adverse effect would be that the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. What this means is that the TPP’s procurement chapter would require that all companies operating in any country signing the agreement be provided access equal to domestic firms to bid on government procurement contracts at the local, state, and federal level. There are many companies that survived the recession and continue in business today because of the Buy American provisions for defense and military procurement. The TPP could be a deathblow for companies that rely on defense and military contracts, such as the U. S. printed circuit board industry. Most of the commercial printed circuit manufacturing was already offshored to China and South Korea years ago.

Product Labeling: Country of Origin Labeling, labeling of GMO products, and “organic” labeling could be made illegal because of being viewed as an “illegal trade barrier.” Even the health warnings on tobacco products could be viewed as an “illegal trade barrier.”

Many TPP countries are farm-raising seafood using chemicals and antibiotics that are prohibited in the U. S. and farmed seafood from China is being raised in water quality equivalent to U. S. sewers. According to Food & Water Watch, around 90% of the shrimp and catfish that Americans eat are imported. They warn, “The TPP will increase imports of potentially unsafe and minimally inspected fish and seafood products, exposing consumers to more and more dangerous seafood.”

Bill Bullard, CEO of R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) has stated “that fast food restaurants are not required to disclose the origins of their beef and even when restaurants say the beef is “U.S. Inspected,” it is as likely as not to be imported.” When we were in Washington, D. C. together last month, Mr. Bullard told me that the increased importation of sheep and lamb from Australia and New Zealand could wipe out the American sheep ranching industry.

The California Farmers Union recently sent a letter to Rep. Davis Valadao (R-CA) stating, “Passage of the TPP would lead to a flood of dairy imports from New Zealand chronically depressing U. S. dairy producer prices…Agricultural imports will rise dramatically under the proposed agreement…The Agreement further poses a threat to the food security that we have long enjoyed as a nation because imports will replace U. S. produced agricultural products.”

Investor State Dispute Resolution: ISDR is designed to allow foreign corporations to bypass the domestic legal system to use to fight laws they don’t like. International Tribunals, not U.S. courts, would decide on lawsuits between “investor” companies in member countries and the U. S. Foreign “investors” could file lawsuits against city, state, and federal agencies for laws and regulations that may infringe on their “expected future profits.” They can also sue for compensation for the loss of these “expected future profits.” Thus, the TPP would infringe upon states’ rights as state and local governments have the constitutional authority to enact rules governing many areas covered by the TPP. But, they will no longer have the freedom to do so in the many regulatory areas covered by the TPP.

The TPP includes hundreds of pages that govern the policies of states concerning non-trade domestic policy and state and local officials would be bound to comply with much of the Agreement’s rules and regulations.

Space doesn’t allow me to cover all of the things that are wrong with the TPP with regard to non-trade issues, such as patent and copyright laws, land use, as well as policies concerning natural resources, the environment, labor laws, health care, energy and telecommunications.

Except for the large multinational corporations that participated in writing the Agreement and are its beneficiaries, there is something for everyone to hate. Opposition to the TPP cuts across party lines ? there are Democrats, Republicans, and Libertarians opposed to many of the “leaked” provisions of the TPP. Organizations from the left to the right are opposed to the TPP as negotiated. It will hurt the 98-99% of American manufacturers who had no place at the table in writing the Agreement. It will hurt American consumers and American workers of all ages. It will harm our environment and put our food and water safety at risk. But, most of all it will destroy our national sovereignty. Now is the time for you to write, call, or email your Senator and Congressional representative to urge them to vote “no” on granting Fast Track authority.

Posted in Country of Origin, Economy, Manufacturing, National security, Taxes/Regulations, Trade, Trade Policy | 1 Comment »

Is there a Relationship Between our Trade Deficits and our National Debt?

Tuesday, January 27th, 2015

In his State of the Union address, President Obama asked Congress for Fast Track trade authority to move forward on the two trade agreements that have been in negotiations behind closed doors for the past four years: The Trans-Pacific Partnership Agreement and the Trans-Atlantic Trade Agreement. I have already written several articles about why Fast Track Authority should not be granted and the dangers of the TPP. The purpose of this article is to show that there is a relationship between our trade deficits and our national debt. As shown by the chart below, we now have a more than $18 trillion national debt.

Source: http://en.wikipedia.org/wiki/History_of_the_United_States_public_debt

Notice how it sharply ramps up starting in 2001. The recessions of 2001-2002 and 2008-2009 obviously played a significant factor in the increase in the national debt from $5.8 trillion in 2001 to its present level, because during recessions, there is a decrease in tax revenues and an increase in spending for unemployment benefits, food stamps, and other assistance, as well as spending on programs to attempt to stimulate the economy.

However, 2001 also coincides with the first full year of trade with China under the rules of World Trade Organization after “Congress agreed to permanent normal trade relations (PNTR) status,” which “President Clinton signed into law on October 10, 2000,” paving “the way for China’s accession to the WTO in December 2000.”

According to Alan Uke’s book, Buying Back America, the United States now has a trade deficit with 88 countries. Of course, some deficits are small, but some are enormous, such as China. According to the Census Bureau, our top seven trading partners are: Canada, China, Mexico, Japan, Germany, South Korea, and the United Kingdom. These seven countries represent 50.9% of our total trade deficit $ -461.3 billion for January – November 2014. At an average deficit of $40 billion per month, the 2014 trade deficit will exceed $500 billion. Our 2014 trade deficit with China alone was $-$314.3 billion for January – November, representing 68% of the total.

Some may claim that we are still the leader in advanced technology products, but this is no longer true. The U. S. has been running a trade deficit in these products since 2002, which has grown to an astonishing average of nearly $90 billion per year since 2010.

Even our most recent trade agreement, the Korea U. S. Free Trade Agreement (KORUS FTA), which went into effect on March 2012 has had negative impact. The Office of the   Last March, the U. S. Trade Representative for the Obama Administration touted, “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos, exports are up for a wide range of our agricultural products, and exports are up for our services.” However, the reality is that our imports continued to exceed our exports, and the U. S. trade deficit with Korea jumped from -$13.62 billion in 2011 to -$22,838.3 billion through November 2014, which is a 60% increase in two and a half years.

china trade deficitSource:  http://www.businessinsider.com/chart-us-trade-deficit-with-china-2013-4

Notice that there is a similar upward slope on the above graph to the upward slope of our national debt chart. Anyone can see that our trade deficits have a significant impact on our national debt.

The only thing that kept our trade deficits from being higher than they have been is that fact that we have increased the exports of services to balance our imports of goods as shown by the following chart:

 

Year Total Goods Services
1999 -$258,617 billion -$337,068 billion $78,450 billion
2000 -$372,517 billion -$446,783 billion $74,266 billion
2002 -$418,955 billion -$475,245 billion $56,290 billion
2004 -$609,883 billion -$782,804 billion $68,558 billion
2006 -$761,716 billion -$837,289 billion $75,573 billion
2008 -$708,726 billion -$832,492 billion $123,765 billion
2010 -$494,658 billion -$648,678 billion $154,020 billion
2012 -$537,605 billion -$742,095 billion $204,490 billion
2014 -$461,336 billion -$673,612 billion $212,277 billion

Source: https://www.census.gov/foreign-trade/statistics/historical/exhibit_history.pdf

As you can see, our trade deficit in goods more than doubled from 1999 to 2004 and reached astronomical heights just before the worldwide recession.

So how do our trade deficits add to the national debt? One way is that many products, especially consumer products, which were previously made in the U. S., are now made in China or other Asian countries, so we are importing these products instead of exporting them to other countries. The offshoring of manufacturing of so many products has resulted in the loss 5.8 million American manufacturing jobs and the closure of over 57,000 of manufacturing firms. These American workers and companies paid taxes that provided revenue to our government, so now we have less tax revenue and pay to pay for the benefits and public assistance for the unemployed and underemployed.

Our balance of payments indebtedness for trade and the additional cost to the government paid by taxpayers for these benefits has resulted in our escalating national debt. The cheaper China price of goods that we import instead of producing here in the U. S. results in a cost to society as a whole. We need to ask ourselves: Is the China price worth the cost to society?

I say a resounding NO! We need to stop shooting ourselves in the feet. We need to stop benefiting the one percent of large multinational corporations to the detriment of the 99% percent of smaller American companies.

Beyond stopping Fast Track Authority and the Trans-Pacific Partnership from being approved, we need to focus on achieving “balanced trade” in any future trade agreement. Until we change the goal of trade agreements, we should refrain from negotiating any trade agreement. The last thing we need is to increase our trade deficit more than it already is.

In addition, we need to facilitate returning more manufacturing to America by changing our tax policies and making regulations less onerous to manufacturers, without compromising our commitment to protect our environment. This is the only way that we will simultaneously reduce our trade deficit and the national debt.

 

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Why We Must Stop the Fast Track Authority in the “Lame Duck” Session

Tuesday, November 18th, 2014

The rumors in Washington, D. C. are that granting President Obama Fast Track Authority under Trade Promotion Authority will be brought up in the “Lame Duck” session, perhaps as an addition to one of the bills extending certain tax credits, called “Tax Extender bills.”

Simply put, granting Fast Track Authority to the president means:

  • Choice of countries is delegated to President
  • Executive Branch negotiates and signs a trade agreement before vote by Congress
  • Allows only 20 hours of debate by Congress
  • Forbids any amendments to the trade agreement
  • Requires only a simple majority vote in each House violating U.S. Constitution Article 1 Treaty clause giving the Senate authority to approve a treaty by a supermajority.
  • Gives Constitutional power over trade to President and takes it away from Congress
  • Usurps Constitution and is dangerous to give this much power to the Executive Branch

There are two trade agreements that have been in secret negotiations since 2010. The first is the Trans-Pacific Partnership. Eleven nations have participated in the negotiations: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan announced its intention to join the agreement last spring. However, the TPP is intended as a “docking agreement,” so other Pacific Rim countries could join over time, and the Philippines, Thailand, Colombia, and others have expressed interest. Even China could join the TPP at a later date without suffering any disadvantage though this would negate the original reason for the TPP as a counter to China’s hegemony in the Pacific.

The TPP is much more than a trade agreement; it is a Trade and Global Governance Agreement because only five of the 30 chapters relate to tariffs and quotas. The other 25 chapters cover such topics as: domestic regulation: food & product safety, financial regulation, investor states’ rights, immigration, intellectual property, federal, state and local laws on taxes, patents, copyrights, trademarks, immigration, environment, labor standards, among many other issues. Clauses in these chapters may even overrule prior acts of Congress without new legislation being introduced, passed in Congress, and signed by the president.

Most dangerous of all, International Tribunals, not U.S. courts, would decide on lawsuits between companies in member countries and U. S. In a commentary article on October 15, 2013, Lt. Col (Retired) Allen West wrote, “TPP would subject the U.S. to the jurisdiction of foreign tribunals under the authority of the World Bank and United Nations. These unelected, unaccountable panels would constitute a judicial authority higher than the U.S. Supreme Court. They would have the power to overrule federal court rulings and order payment of U.S. tax dollars to enforce the special privileges granted to foreign firms that would be exempt from EPA and other regulations that strangle American firms.”

In addition, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. What this means is that the TPP’s procurement chapter would require that all companies operating in any country signing the agreement be provided access equal to domestic firms to U.S. government procurement contracts over a certain dollar threshold. To meet this requirement, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. There are many companies that survived the recession and continue in business today because of the Buy American provisions for defense and military procurement. The TPP could be the death knoll for these companies!

The other trade agreement is the Transatlantic Trade and Investment Partnership (TTIP) also known as the Transatlantic Free Trade Agreement (TAFTA), which is a proposed free trade agreement between the European Union and the United States. The Obama administration considers the TTIP a companion agreement to the Trans-Pacific Partnership, and it is similar in scope and nature to the TPP, incorporating all the same global governance chapters.

In the last 20 years, the U. S. has made trade agreements with 20 nations, of which the major trade agreements are:

  • NAFTA
  • Created the World Trade Organization & let China join
  • Panama Free Trade Agreement
  • Central America Free Trade Agreement
  • Colombia Free Trade Agreement
  • Korea Free Trade Agreement

What have been the consequences of these past trade agreements? One consequence is an increasing trade deficit. In 2013, our total trade deficit in goods was $688.4 billion, of which China represented 46% at $318.4 billion. Our top six trading partners of Canada, China, Mexico, Japan, Germany, and South Korea represent 64% of our total trade deficit.

Another serious consequence is the loss of American jobs. From 2000 to 2010, the U. S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed. Where did most of the jobs go? U.S. Department of Commerce data shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.” Millions of people have lost their jobs because corporate CEOs concluded, “It’s cheaper to manufacture where they pay 50 cents/hour and let us pollute all we want.”

As a result, the real unemployment rate is 16.1%, and there are still nearly 2 million less jobs than there were at the start of the Great Recession in December 2007!

The TPP and TTIP/TAFTA are bad for American companies, American workers, and American consumers. What good does it do to have cheaper consumer goods if you don’t have a job?

I urge everyone to Contact your Congressman to ask them to vote no on granting Fast Track Authority!

 

Posted in Jobs, Manufacturing, Trade, Trade Policy | 2 Comments »

“Manufacturing in Golden State Summit Highlights Threats to Prosperity”

Tuesday, October 28th, 2014

On October 16th, about 130 business leaders met at the conference facilities of AMN Healthcare in San Diego for the third “Manufacturing in the Golden State – Making California Thrive” economic summit. The summit was hosted by State Senator Mark Wyland in partnership with the Coalition for a Prosperous America and a long list of other regional businesses and associations. The purpose of the summit was to discuss how several national and California policies are threatening the growth and prosperity of California manufacturers and what policies should be changed to help them grow and thrive.

After State Senator Wyland welcomed attendees, Michael Stumo, CEO of the Coalition for a Prosperous America, provided an overview of the schedule for the day.

I provided an update to the overview of California manufacturing that I had presented at our summit in Brea on March19th covered in a previous article. California lost 33.3% of manufacturing jobs between 2000 and 2009 compared to 29.8% nationwide and 25% of its manufacturing companies. California lags in manufacturing job growth at a .36% rate compared to the national 6.09% rate.

I highlighted that the San Diego region offers a great deal of help for inventors and start-up technology based companies through the San Diego Inventors Forum, CONNECT’s Springboard program, the Small Business Development Centers in North County and South County, CleanTech San Diego, as well as groups like the San Diego Sports Innovators. San Diego also offers more career path and workforce training programs than most other states, including those offered by three of our event sponsors: California Manufacturing Technology Consulting, the Center for Applied Competitive Technologies, and the Lean Six Sigma Institute.

The good news is that California is benefitting from the reshoring trend that is sweeping the county. According to data collected by the Reshoring Initiative, California ranks first in the number of companies (28) that have reshored and third in the number of jobs created by reshoring (6,014).

I then moderated a panel of the following local manufacturers, who gave their viewpoints of the effects of some of our national policies and the challenges of doing business in California:

  • James Hedgecock, Founder and General Manager of Bounce Composites
  • Scott Martin, President, Lyon Technologies
  • Robert Reyes, Head of Strategic Sourcing, Stone Brewing Company

Hedgecock stated that Bounce Composites is less than two years old and makes thermoset composites, starting with paddle boards and branching into small wind turbine blades this year. He bemoaned the fact that in California you have to pay $800 to incorporate a company, which is double to quintuple the cost of incorporating in other states. Also, as a LLC, you have to pay taxes on gross profits rather than net profits, which is tough on a start-up company.

Martin said that Lyon Technologies has been in business since 1915 and has changed its products several times over the years. Current products include bird and reptile incubators, poultry products, and veterinary products, which they export to about 100 countries. He stated that the Value Added Taxes (VATs) that are added to the products they export and the currency manipulation practiced by several countries make it difficult for their products to be competitive in the world marketplace.

Reyes said they are expanding out of San Diego and are building a new $25M brewery and restaurant in the Marienpark Berlin, scheduled to open by end 2015/beginning 2016. Stone exports beer to Germany and other European countries and having a brewery in Germany will ave on shipping costs for exporting. They are also planning on opening a brewery on the East Coast in Virgina.

The national expert panel included Greg Autry, Adjunct Professor of Entrepreneurship, Marshall School of Business, University of Southern California; Pat Choate, economist and author, “Saving Capitalism: Keeping America Strong”; Mike Dolan, Legislative Rep., International Brotherhood of Teamsters; and Michael Stumo, CEO of CPA.  The focus of the talks was on national security, manufacturing growth strategies, tax strategies and fixing the trade deficit.

Autry, led off the national panel with the topic of “National Security Concerns with U. S. Trade Regime.” He began by stating, “An economy that builds only F-35s is unsustainable – productive capacity is what wins real wars. Sophisticated systems require complex supply chains of supporting industries. They require experienced production engineers and experienced machinists.” He added that we cannot rely on China to produce what we need for our military and defense systems. “We should not be relying on Russia’s Mr. Putin to launch our satellites and space vehicles and provide us a seat to get to the international space station.”

He pointed out that our technical superiority in military systems will not assure our national security any more than the technical superiority of Nazi Germany’s aircraft and tanks did for them. Economic superiority is what matters. The manufacturing industry of the U. S. out produced Germany during WWII and the Soviet Union in the Cold War.

Autry stated that Wall Street’s new hero, Jack Ma, founder of Chinese company Alibaba Group Holding Ltd, is a danger to American interests by the fact that Alibaba just overtook Amazon as the world’s largest online retailer by market capitalization. It was the wealth he created at Amazon that enabled founder Jeff Bezos to now lead a new company, Blue Origin, which was just selected by the United Launch Alliance to finish development of a new engine to replace the Russian made RD-180 rocket engine used by ULA’s Atlas 5 rocket. There is considerable skepticism by many of Mr. Ma’s independence from the Chinese government. Mr. Ma’s next target appears to be PayPal, which is responsible for the wealth of Elon Musk, now CEO and CTO of SpaceX, CEO and chief product architect of Tesla Motors, and chairman of SolarCity.

Next, Michael Stumo presented “A Competitiveness Strategy for America: Balance Trade and Rebuild Domestic Supply Chains.” He said, “Our ultimate goals should be: improved standard of living, full employment, and durable, sustainable growth. America has no strategy to win. Our trade deficit cuts our growth in half. Domestic supply chains were sacrificed to global supply chains; i.e. offshored and hollowed out….We need a strategy to win.”

He pointed out that “free trade is supposed to produce balance and address foreign mercantilism, but our trade policies enable mercantilism…We must replace the goal of ‘eliminating trade barriers’ and have Congress establish a new directive via statue to balance trade.”

He said that to achieve balanced trade, we must address, reciprocity, currency manipulation, forced technology transfer [by China], foreign VAT rebates, state-owned enterprises, and government subsidies.

In conclusion, he recommended that we should:

  • Create durable comparative advantage through technical superiority, infrastructure, low energy costs, etc.
  • Balance trade and fight foreign mercantilism
  • Create our own comparative advantage
  • Maximize domestic value added
  • Identify and minimize our advantages while minimizing our disadvantages

In conclusion, he urged, “Don’t be afraid of asserting and pursing our national economic interest.”

The next speaker was Mike Dolan, Legislative Representative for the Teamsters, who has long experience working for Fair Trade (fighting expansion of the job-killing NAFTA/WTO model). He said that big corporations want Congress to pass Trade Promotion Authority in the “lame duck” session to grant the president Fast track Authority for the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) Agreements. He called the TPP “NAFTA on steroids” and said that TTIP is just as bad. He said that Fast Track was invented by President Nixon and has been used 16 times. He said that we need a new form a Trade Promotion Authority where Congress has input with regard to the countries involved in the Agreement, certifies that negotiating goals were met, and votes to approve it before it is signed. He urged attendees to contact their Congressional Representative to oppose the TPP for the following reasons:

  • “Lack of transparency during negotiations warrants more thorough consideration than a up or down vote
  • Under previous trade deals, the U. S. has hemorrhaged jobs and cannot afford more of the same
  • The TPP is too large and complex to delegate constitutional authority away from Congress”

Pat Choate (Economist; Author, Saving Capitalism: Keeping America Strong) discussed how our trading partners have used Value Added Taxes (VATs), and currency manipulation to their advantage and to the disadvantage of the U. S. VATs or border adjustable consumption taxes are used by other countries to offset income, payroll, or other employer taxes to help their manufacturers be more competitive in the global marketplace or to offset other costs like national health care or pension programs. VATs range from a low of 10% to a high of 24%, for an average of 17%.

While tariffs have been dropped since 1968 as part of many trade agreements signed since then, the effective trade barriers have remained constant because of the VATs being imposed.

These consumption taxes have been a causative factor in increasing our trade deficits with our trading partners, which was $471.5 billion in 2013, $318 billion with China alone. He supports CPA’s advocacy of making changes in U. S. trade policy to address this unfairness which tremendously distorts trade flows.

During lunch, keynote speaker Dan DiMicco, Chairman Emeritus of Nucor Steel Corporation, spoke on “Seizing the Opportunity.” He led off by shocking the audience with facts about the real state of our economy and our unemployment rate. By September 2014, we still had not reached the level of employment that we had when the recession began in December 2007 although 81 months had passed. We lost 8.7 million jobs from December 2007 to the “trough” reached in February 2010, but because our recovery has been much slower than the previous recessions of 1974, 1981, 1990, and 2001, the gap in recovery of jobs compared to these recessions is actually 12,363 jobs.

In contrast to the misleading U-3 unemployment rate of 5.9% for September 2014 that is reported in the news media, the U-6 rate was 11.8%. The government’s U-6 rate is more accurate because it counts “marginally attached workers and those working part-time for economic reasons.”However, the actual unemployment is worse because the participation in the workforce has dropped from 66.0% to 62.7%. In other words, if the December 2013 Civilian Labor Force Participation Rate was back to the December 2007 level of 66.0%, it would add 8.2 million people to the ranks of those looking for jobs.The manufacturing industry lost 20% of its jobs, and the construction industry lost 19% of its jobs.

Unemployment Data Adjusted For Decline in Civilian Labor Force Participation Rate
(Adjusted For Decline from December 2007 Level Of 66.0% to 62.8% in September 2014)

Reported Unemployed U.S. Workers 9,262,000
Involuntary Part-time workers 7,103,000
Marginally Attached To Labor Force Workers 2,226,000
Additional Unemployed Workers With 66% CLF Participation Rate 8,199,000 
Unemployed U.S. Workers In Reality 26,770,000
Adjusted Civilian Labor force 166,287,000
Unemployment Rate In Reality 16.1%

 

DiMicco said, “We got in this position from 1970 until today because of failed trade policies allowing mercantilism to win out against true FREE Trade. We bought into wrongheaded economic opinions that America could become a service-based economy to replace a manufacturing-based economy. Manufacturing supply chains are the Wealth Creation Engine of our economy and the driver for a healthy and growing middle class! The result has been that manufacturing shrank from over 30% to 9.9% of GDP causing the destruction of the middle class. It created the service/financial based Bubble Economy (Dot.com/Enron/Housing/PONZI scheme type financial instruments.)”

He added, “We have had 30 years of massive increases in inefficient and unnecessary Government regulations. These regulations, for the most part, in the past have been put in place by Congress and the Executive Branch. However, today they are increasingly being put in place by unelected officials/bureaucrats as they intentionally by-pass Congress.

American’s prosperity in the 20th century arose from producing more than it consumed, saving more than it spent, and keeping deficits to manageable and sustainable levels. Today, America’s trade and budget deficits are on track to reach record levels threatening our prosperity and our future.”

He said, “Creating jobs must be our top priority, and we need to create 26-29 million jobs over the next 4-5 years. There are four steps we can take to bring about job creation:

  • Achieve energy independence.
  • Balance our trade deficit.
  • Rebuild our infrastructure for this century.
  • Rework American’s regulatory nightmare.

In conclusion, DiMicco said, “We need to recapture American independence through investment in our country’s people, infrastructure, and energy independence, and by reversing the deficit-driven trends that currently define our nation’s economic policy. Real and lasting wealth IS, and always has been, created by innovating, making and building things — ALL 3 ? and servicing the goods producing sector NOT by a predominance of servicing services!”

As the mid-term election approaches, we need to cast our votes for candidates who address the serious issues discussed at the summit, so that we can work together as Americans to restore California to the Golden State it once was and restore America to be “a shining city upon a hill whose beacon light guides freedom-loving people everywhere,” as declared by Ronald Reagan in 1974.

Posted in Economic Development, Jobs, Manufacturing, National security, Reshoring, Taxes/Regulations, Trade Policy, Training | No Comments »

Free Trade is the source of our Trade Deficit and National debt

Tuesday, June 3rd, 2014

We all like to get something for free, so free trade sounds good. The question is: do we even have free trade? No, we do not. What we call free trade isn’t “free,” and it isn’t “good,” at least for most Americans. At best, it benefits large, multinational global corporations that have manufacturing facilities located in other countries. At its worst, it is the primary source of our trade deficit and loss of good paying manufacturing jobs, leading to an escalation of our national debt.

Brian Sullivan, Director of Sales, Marketing and Communications of the Tooling, Manufacturing & Technologies Association says, “We should rename ‘free trade’ because it isn’t free and it isn’t fair. Since it’s trade that’s regulated in favor of multinational special interest groups, why don’t we call it for what it is: How about ‘rigged market trade’ or ‘turn your back on your fellow countrymen trade’ or ‘throw American workers out on the street trade.’”

For more than the first 150 years of its history, the United States was a protectionist country in order to protect its fledgling manufacturing industries and then gain preeminence as an industrial nation in the 20th century.

After World War II, the U.S. switched from protectionism to free trade in order to rebuild the economies of Europe and Japan through the Marshall Plan and bind the economies of the non-Communist world to the United States for geopolitical reasons.

To accomplish these objectives, the General Agreement on Tariffs and Trade (GATT) was negotiated during the UN Conference on Trade and Employment, reflecting the failure of negotiating governments to create a proposed International Trade Organization. Originally signed by 23 countries at Geneva in 1947, GATT became the most effective instrument in the massive expansion of world trade in the second half of the 20th century.

GATT’s most important principle was trade without discrimination, in which member nations opened their markets equally to one another. Once a country and one of its trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members. GATT also established uniform customs regulations and sought to eliminate import quotas. By 1995, when the World Trade Organization replaced GATT, 125 nations had signed its agreements, governing 90 percent of world trade.

In 1994, GATT was updated to include new obligations upon its signatories. One of the most significant changes was the creation of the World Trade Organization (WTO.) The 75 existing GATT members and the European Community became the founding members of the WTO on January 1, 1995. The other 52 GATT members rejoined the WTO in the following two years, the last being Congo in 1997. Since the founding of the WTO, a number of non-GATT members have joined, and there are now 157 members, including China. The main countries still outside it are Iran, North Korea, and some nations in Central Asia and North Africa.

A major benefit for GATT and WTO members was the reduction or elimination of tariffs. However, while the U. S. and other member countries complied with this provision, over the years, the other 156 members have replaced their tariffs with Value Added Taxes (VAT), which range from a low of 10% to a high of 24%, averaging 17%. The U. S. is the only member country that doesn’t have a VAT.

A VAT is a border adjustable consumption tax on goods and services. This means that virtually all of our trading partners tax our exports with their VATs, when our goods cross into their country, and rebate their VATs when their companies export. VATs are essentially a tariff by another name. Our trade agreements, such as NAFTA, CAFTA, and KORUS do not address VATs, and the WTO rules allow VATs. This means that U. S. companies are at a disadvantage in the global marketplace, so that so-called free trade has become “unfair trade” for U. S. companies.

According to Alan Uke’s book, Buying Back America, the United States now has a trade deficit with 88 countries. Of course, some deficits are small, but some are enormous, such as China. Our top six trading partners are: Canada, China, Mexico, Japan, Germany, and South Korea. These six countries represent 64% of our total trade deficit, but China alone represents 46% of the U. S. trade deficit of $688.4 billion. Our 2013 trade deficit with China was $318.4 billion, and we are on track to equal that in 2014.

Some may claim that we are still the leader in advanced technology products, but this is no longer true. The U. S. has been running a trade deficit in these products since 2002, which has grown to an astonishing average of $90 billion per year since 2010.

So how do our trade deficits add to the national debt? One way is that many products, especially consumer products, which were previously made in the U. S., are now made in China or other Asian countries, so we are importing these products instead of exporting them to other countries. The offshoring of manufacturing of so many products has resulted in the loss 5.8 million American manufacturing jobs and the closure of over 57,000 of manufacturing firms. These American workers and companies paid taxes that provided revenue to our government, so now we have less tax revenue and pay out benefits to unemployed workers, resulting in an escalating national debt.

Let us consider whether or not our most recent trade agreements have been beneficial to the U. S. The Korea U. S. Free Trade Agreement (KORUS FTA) went into effect on Mach 2012. The Office of the   U. S. Trade Representative for the Obama Administration touts, “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos, exports are up for a wide range of our agricultural products, and exports are up for our services.” However, the reality is that our imports continued to exceed our exports, and the U. S. trade deficit with Korea jumped from -$13.62 billion in 2011 to -$20.67 billion in 2013, which is a 64% increase in only one full year.

The U. S. has fared better with CAFTA-DR, the Central America-Dominican Republic trade agreement, which was signed on August 5, 2004. The trade balance with Costa Rica went from a plus of $188.2 million in 2005 to a deficit of $4.7 billion in 2013, but the Guatemala and Honduras trade balance went from deficits of $302 and 495 million to surpluses of $1.642 billion and $2.97 billion. The Dominican Republic trade balance stayed positive, growing from $115 million to 1.97 billion. If you balance out the deficits and surpluses, the U. S. comes out ahead for these countries.

Now we are faced with the prospects of an even more encompassing trade agreement, the Trans-Pacific Partnership (TPP), for which the Obama administration has conducted negotiations behind closed doors through the offices of U.S. Trade Representative Ron Kirk without any involvement with Congress.

Eleven nations have participated in the negotiations: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan announced its intention to join the agreement last spring. Because the TPP is intended as a “docking agreement,” other Pacific Rim countries could join over time, and the Philippines, Thailand, Colombia, and others have expressed interest.

What makes this agreement of even greater concern is that President Obama is seeking Fast Track Authority under the Trade Promotion Authority. Both Democrat and Republican Representatives in the House have expressed concern over delegating Congress’ constitutional authority over trade policy to the Executive Branch. I won’t repeat the points I have already made in my previous blog articles published last year on the dangers of the Trans-Pacific Partnership agreement and granting the president Fast Track Authority; however, I urge you to read my January article, “We Must Stop Fast Track Trade Authority from Being Granted!”

Beyond stopping Fast Track Authority and the Trans-Pacific Partnership from being approved, we need to focus on achieving “balanced trade” in any future trade agreements. Until we change the goal of trade agreements, we should refrain from negotiating any trade agreement. The last thing we need is to increase our trade deficit more than it already is. In addition, we need to pass legislation addressing the predatory mercantilist activities of our current trading partners, such as currency manipulation, product dumping, and government subsidies. We should consider comprehensive tax reform that includes a border adjustable tax to address the unfair advantage caused by the rebate of VAT taxes. We should enact countervailing duty laws and County of Origin labeling on all manufactured products, including food.

I urge you to call your Congressional representative and Senators now to urge them to oppose granting Fast Track Authority and approving the Trans-Pacific Partnership Agreement.

Posted in Economy, Jobs, Manufacturing, Trade Policy | No Comments »

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