Posts Tagged ‘Trade deficits’

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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The High Cost of Trade Deficits

Tuesday, April 9th, 2019 
 
 

Free trade has resulted in enormous trade deficits in goods for the United States for over 40 years. Our last year of a positive trade balance was 1975. At best, free trade has benefited 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.

Even with the tremendous resources we have, what was once the world’s largest manufacturer of products has accumulated $14.379 trillion worth of deficits in goods for all countries since 1991.

A fact sheet generated by the Coalition for a Prosperous America for 2018 show ten countries account for 97% of our trade deficit: China, Mexico, Japan, Germany, Ireland, Vietnam, Italy, India, South Korea, and Malaysia. Our trade deficit with China alone was $419 billion, representing 47.9% of our trade deficit.  Since 1991, we have accumulated over $9.144 trillion worth of trade deficits with just the top four countries. If we had fair trade, we would not have these constant trade deficits.  The drastic effect China has had on our trade deficit is demonstrated by the fact that in 2001 when China joined the World Trade Organization, we had a total $412 billion deficit in goods, but in 2018, we had a $879 billion deficit in goods. 

 

For every $1 billion of trade deficits in goods, it’s been estimated that 6,000 – 7,000 jobs are lost, at about $80,000/job. This means that 8 – 10 million more Americans willing to work could have a comfortable middle-class job in America. Instead, we lost 5.8 million manufacturing jobs from the year 2000 to 2010. 

 

In terms of purchasing power, workers’ wages in the U.S. have been stagnant since the 1970s. The significant collapse in the income of average Americans can be attributed to the vast decline of jobs in the U.S. manufacturing sector. This is the reason average U.S. wages have fallen over time, especially since 2001. From 2001 – 2013, the average U.S. wages fell by 3.5%. In contrast, as Chinese workers flocked to cities for manufacturing jobs, wages have grown substantially, averaging an 11 percent increase per year from 2001 to 2015. 

 

According to the Pew Research Center, 61% of American households were part of the middle class in 1971, but by 2015, only 50% of Americans were part of the middle class. “In 2002, China’s middle class was only four percent of its population. A decade later, this number had climbed to 31 percent, constituting over 420 million people. In contrast, in 1999, only 2% of the Chinese population was a part of the middle class, but by 2013, 39% of the Chinese population was in the middle class.

 

Since China joined the World Trade Organization, the bi-partisan, 12 member U. S.-China Economic and Security Review Commission (USCC) has been required to submit annual reports to Congress. These reports document China’s non-compliance with the WTO and the effect it has on the U. S. economy.

For example, the 2007 report included a case study of the local impact of trade with China on North Carolina. The USCC report stated “the accelerating decline in North Carolina’s manufacturing employment is due in large measure to increasing competition from imports mostly from China . . . The combination of China’s 2001 admission to the World Trade Organization (WTO), which gave it quota-free access to U.S. markets for its textile and clothing exports, and the subsequent U.S. grant of Most-Favored (Trading) Nation status that lowered most tariffs on Chinese imports, battered North Carolina’s textile and apparel industries, and they never recovered.”

Because a greater proportion of North Carolina’s workforce had manufacturing jobs than any other state, North Carolina’s workforce was more vulnerable to competition from imports than the workforces of other states. North Carolina’s manufacturing economy was made even more vulnerable by its concentration in the import-sensitive sectors of textiles, apparel, and furniture. North Carolina is one of the southeast states that had a large number of textile companies, and as a result, North Carolina has been the most impacted state in the nation by layoffs due to trade. Between 2004 and 2006, almost 39,000 North Carolina workers were certified by the Trade Adjustment Assistance program as having lost jobs to trade, more than 10 percent of the U.S. total of 387,755. 

According to the Social Science Research Institute (SSRI) of Duke University in North Carolina, there were 2,153 textile and apparel plants in North Carolina employing 233,715 people in 1996. By 2006, the apparel industry had experienced a 70% decline in jobs and 55% loss of plants. The textile industry by comparison had only lost 63% of jobs and 32% of plants from 1996 to 2006. 

The loss of these well-paid manufacturing jobs in North Carolina’s textile industry may have resulted in families losing their homes and/or being forced to relocate to other areas of the country to find jobs. Taking lower paying jobs in their own communities may have resulted in families no longer being in the middle-class income range. And, those who have not been able to find any work or only part-time work may have even dropped down to the poverty level.  It is not just people losing jobs and not being able to find other employment that pays as well as their former jobs, “hundreds of small towns throughout North Carolina impacted by plant closures are dying.”

Remember that it takes taxes paid by three to four working Americans to pay for the unemployment benefits of a non-working American. 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 benefitting the one percent of large multinational corporations to the detriment of the 99% percent of smaller American companies.

China, Germany, Japan, and many other countries have built their currency value around making certain all of their countrymen have a good job, even if that destroys America’s work force. As a result, these countries have maintained constant trade surpluses with the U. S. for many years, which would not have happened if we had fair trade.

 

It is impossible for the U.S.to remain competitive if our currency is not fairly valued. In order to move manufacturing jobs back to the U.S., we need to move our currency value down by at least 27% because the currency of Germany and Japan are undervalued by about that same amount.  China has rigged its currency between 15%-40% below its fair value since joining the WTO, and this gives a subsidy to their imports to the U.S. and imposes a direct cost on U.S. exports to China.

Devaluing our currency would allow many more products that we import from overseas to be made here. Unfair trade practices of currency manipulation, government subsidies, product dumping, and state-owned enterprises have allowed China to buy our raw materials and our low-cost energy to become the largest producer in the world of paper, aluminum, and steel even though labor costs are small compared to the cost of raw materials, energy, and transportation.

We need to focus on eliminating our trade deficits and achieving balanced, reciprocal trade in all future trade agreements. The last thing we need is to increase our trade deficit more than it already is.

 

In addition, we need to continue on the path of returning more manufacturing to America by reforming 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 be able to simultaneously reduce our trade deficit and the national debt.

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Will the TPP Stop Japan’s Currency Manipulation?

Tuesday, August 16th, 2016

The answer is a resounding “no.” The Trans-Pacific Partnership Agreement will not stop Japan’s currency manipulation or that of any other partner country because TPP has no provisions regarding currency manipulation misalignment in its text. The problem of currency manipulation is similar to the U. S. budget deficit that keeps being kicked down the road by one Congress after another.

In this case, it is negotiators of the U. S. Trade Representative’s office who have ignored the explicit instructions of Congress with regard to handling the problem of currency manipulation in one trade agreement after another. Despite explicit Congressional instruction in the Trade Promotion Authority Act of 2015, there is no currency provision within the TPP itself.

What is currency manipulation? According to Wikipedia, currency manipulation is “a monetary policy operation. It occurs when a government or central bank buys or sells foreign currency in exchange for their own domestic currency, generally with the intention of influencing the exchange rate.” Simply put, currency manipulation is the devaluation of a country’s own currency to make their exports cheaper and imports more expensive. In practice, foreign governments buy U. S. dollars to reduce the value of their currency to make their goods cheaper than U. S. goods.

Why is it a problem? According to Michael Stumo, CEO of the Coalition for a Prosperous America, “Foreign currency manipulation is trade cheating because it is both an illegal tariff and a subsidy. The U. S. economy cannot produce jobs and wealth without addressing this problem.” Former Secretary of the Treasury, Paul Volcker, explained, ‘In five minutes, exchange rates can wipe out what it took trade negotiators ten years to accomplish.”

The Peterson Institute Policy Brief of December 2012, “Currency Manipulation in the US Economy and the Global Economic Order” states, “More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1 trillion in recent years. This buildup of official assets—mainly through intervention in the foreign exchange markets—keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding trade deficits are spread around the world, but the largest share of the loss centers on the United States, whose trade deficit has increased by $200 billion to $500 billion per year as a result. The United States has lost 1 million to 5 million jobs due to this foreign currency manipulation.”

Why hasn’t currency manipulation been addressed in past agreements? A recent white paper issued by the Coalition for a Prosperous America explains:

“Since December 1945, currency manipulation has been prohibited under the rules of the International Monetary Fund. Article 4, Section 1 (iii) of the IMF Articles obliges members to: “avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members….” This obligation is designed in part to serve one of the fundamental objectives set forth In IMF Article 1:  the expansion and balanced growth of international trade.

The framers of the post-World War II international system understood that imbalanced trade was mercantilism and sought a monetary system that would avoid one-sided trade results…One country, the United States, has run trade deficits for more than 40 years and has amassed more than $17 trillion in foreign debt. By no stretch of the imagination can this be the sort of ‘balanced growth of international trade” that the IMF rules are supposed to foster.’ ”

Thus, the IMF has had the authority to enforce Article 4 obligations for over 70 years, but in practice, it has only held regular forums “to persuade key members to adjust their policies…The use of mere moral persuasion has failed to produce meaningful results, rendering the IMF increasingly irrelevant. Earlier this year the Congress directed U.S. negotiators to seek to put teeth into the IMF obligations. ”

Instead, as reported by the Coalition for a Prosperous America, “the Treasury negotiated a ‘Joint Declaration of Macroeconomic Policy Authorities’ that largely restates existing obligations, fails to include any additional enforcement tools, and merely adds yet another consultation process. The Joint Declaration:

  • “Entails a ‘confirmation’ that each TPP country is “bound” under IMF rules to “avoid  manipulating exchange rates or the international monetary system in order to prevent effective Balance of payments Adjustment  or to gain an unfair competitive advantage.
  • Specifies that each macroeconomic authority is to ‘take policy actions to foster an exchange rate system that reflects underlying economic fundamentals and avoid persistent exchange rate misalignments. Each Authority will refrain from competitive devaluation and will not target its country’s exchange rate for competitive purposes.
  • Requires regular reporting on foreign exchange intervention and reserve holdings.
  • Establishes regular consultations among the macroeconomic authorities. This will be in addition to the periodic meetings of IMF officials, APEC, the G-7, the G-20 and bilateral consultations.”

Therefore, nothing has changed in 70 years ago. If they haven’t complied in the past, how could they be expected to comply with their IMF obligations in the future? Is another forum going to be of any value?

In the case of Japan, its government has strategically reduced the yen’s value to give its companies a massive global price advantage. Since Shinzo Abe became Japan’s prime minister in December 2012, the Japanese currency has fallen by 55%, and he has been a full participant in IMF meetings. Three years ago, one U.S. dollar bought 76 yen. Today, one U.S. dollar buys 105 yen, down from a high of 120 yen at the end of 2015.

This manipulation subsidizes Japan’s car companies who can now undercut U.S. competitors and make a bigger profit without innovation or quality improvements. The Japanese government’s currency manipulation gives Japanese automakers as much as $7,000 more profit per car.

Toyota, the world’s largest carmaker, does not want the party to end. An article by David Fickling of Bloomberg on May 12, 2016, stated,  “Foreign-exchange effects will pull about 935 billion yen from Toyota’s operating income in the coming 12 months, assuming that the yen will strengthen to 105 to the greenback, relative to about 109 at present. ”

In my recent article on the U.S. International Trade Commission (USITC) report, “Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors,” I quoted the following:  “U. S. passenger vehicle imports would increase by $4.3 billion above the baseline upon full implementation of the agreement (table 4.15). Imports from Japan would increase by $1.6 billion, and imports from NAFTA partners would increase by $1.8 billion, making up the majority of the increase.”

No wonder that the American Automotive Policy Council, Inc. (AAPC) issued the following press release on May 26, 2016 regarding the USITC report, which states in part, ” We hope that Congress will carefully review this report, specifically how the ITC has measured the impact of the proposed Trans-Pacific Partnership on the U.S. auto industry and American manufacturing. American automakers remain concerned about possible currency manipulation by TPP trade partners, including Japan. AAPC, as well as economists from across the ideological spectrum, agree that the U.S. government should include enforceable rules prohibiting currency manipulation in its trade agreements to produce a positive economic impact on American manufacturing.”

Do you think that the Obama’s administration claim of “strict monitoring” of foreign currency manipulation will be enough? In May 2016, Japan’s finance minister, Taro Aso, said he will act to prevent the currency markets from working, telling Japan’s parliament he was “prepared to undertake intervention” in the foreign exchange market if the yen strengthens. So, a U.S. “move to put Japan on a monitoring list ‘won’t constrain’ Tokyo from intervening to manipulate the value of their yen.”

According to Michael Stumo, “There is ample precedent for taking strong action to correct currency misalignment in conjunction with past major trade agreements. The Tokyo Round and the Uruguay Round were each preceded by a realignment of currencies to reduce imbalances in the world economy. If the Joint Declaration indeed would make any difference in the real world of trade, one might expect it to come into effect immediately. Instead… Joint Declaration will take effect if and when the TPP enters into force.”

The bottom line is that economic and trade negotiators together have failed to produce even a modest step forward toward an effective, enforceable currency provision. As currently written, neither the Joint Declaration nor the TPP will stop currency manipulation by Japan or any other country. The only effective alternative would seem to be enactment of the Currency Reform for Fair Trade Act (H.R. 820) or its equivalent, the Trade Facilitation and Trade Enforcement Act of 2015 (H.R.644). Either would mandate the use of WTO-consistent remedies to offset injurious currency manipulation. This modest first step toward confronting mercantilist currency policies is long overdue.

 

 

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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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How to Fix America’s Economy

Tuesday, March 19th, 2013

 

Last week, I participated in the “Fly-in” for the Coalition for a Prosperous America (CPA) in Washington, D. C.  I was part of several teams that held 105 meetings with legislative assistants for Congressional Representatives and Senators.

We presented informational flyers on the following topics that would help fix America’s economy:

Trade Deficits – In 2012, the U. S. trade deficit was $735 billion, and our trade deficit with China hit an all time high of over $300 billion. This means that we currently consume more than we produce, and we need to reverse this dynamic and produce more of what we consume.  The goal for successful trade is balanced trade, not more trade.  We aren’t going to solve this problem with just doubling exports while we continue to increase our imports at a faster rate.  Trade deficits are our biggest jobs, growth and fiscal problem.  Congress should establish a national goal for balancing trade by the year 2020. Persistent trade deficits are not “free trade, but are “dumb trade.”

Foreign Currency Cheating – currency manipulation is trade cheating because it is both an illegal tariff and a subsidy.  China, South Korea, Japan, Taiwan, and Singapore have manipulated their currency values.  However, China’s currency is estimated to be at least 35% undervalued so our exports to China cost 35% more than they should to the Chinese.  In the past two Congresses, one bill addressing the problem passed the House, and one bill passed the Senate, but we need a similar bill to pass both Houses and be signed into law.  Senator Levin is introducing a new bill this week.

The ENFORCE Act – we need to stop the evasion of countervailing and antidumping duty orders by such means as “transshipment” where goods covered by an Order are shipped to a third country before import to the U.S., with falsified U.S. customs documentation claiming the product to be origin of that third country. Other goods covered by an Order are shipped directly with fraudulent paperwork claiming that they were produced in a country that is not covered by the Order or have incorrect import classification codes or inaccurate descriptions that falsely identify the imports as goods that are not subject to an Order.

The ENFORCE Act would establish a formal process and reasonable deadlines for action when the Customs and Border Protection is presented with an allegation of evasion, require CBP to report on its enforcement activities, and order the retroactive collection of duties on entries that illegally evaded duties.

Country of Origin Labeling (COOL) – On March 8, 2013, te USDA announced it is proposing a new COOL rule that will comply with the WTO request to provide more information to consumers and/or reduce the burden on imported product.  The    proposed rule would require labels for muscle cuts of meat to identify the country where each of the three production steps – birthing, raising, and slaughtering – occurred.

Foreign Border Taxes (aka Value Added Tax – VAT) Over 150 countries have at VAT, but the U. S. is one of the few countries that doesn’t.  VATs are “border adjustable” and range from 13% to 24% (average is 17%).  This means that our exports are taxed with a VAT when our goods cross that country’s border. Thus, when we negotiate a trade agreement that lowers or eliminates tariffs, a VAT can be added by our trading partners that is a “tariff by another name.”  Trade agreements do not address VATs when tariffs are lowered, and the WTO allows VATs.  Other countries use the VATs to reduce their corporate taxes to help their manufacturers be more competitive in the global marketplace. VATs are rebated to manufacturers in foreign countries for products that are exported, and the result is a $500 billion hole in U. S. Trade.  We need reject trade agreements that do not neutralize the VAT tariff and subsidy and consider implementing a U. S. consumption tax system to erase this foreign advantage and reduce domestic taxes on income and jobs.

Trans-Pacific Partnership – We need “Smart Trade” not “Dumb Trade” so a summary of CPA’s “Principles for a 21st Century Trade Agreement” was presented that would fix past mistakes in trade agreements. CPA recommends that new trade agreements must include the following principles to benefit America:

  • Balanced Trade
  • National Trade, Economic and Security Strategy
  • Reciprocity
  • Address State Owned Commercial Enterprises
  • Currency Manipulation
  • Rules of Origin
  • Enforcement
  • Border Adjustable Taxes
  • Perishable and Cyclical Products
  • Food and Product Safety and Quality
  • Domestic Procurement
  • Temporary vs. Permanent via renewal or sunset clauses

In the past, Congress has used Trade Promotion Authority to give the executive Branch directives on which countries to negotiate with and what terms to seek in the negotiations. “Fast Track” provisions that prevent Congress from amending any agreement and requiring an accelerated timeline for the vote have also been included. However, the Executive Branch ignored most of the provisions of the 2002 TPA and Congress had no role in the negotiations. Thus, CPA recommends that “Fast Track” provisions not be included because Congress should retain its trade power.

I also took the opportunity to provide copies of my blog article on the dangers to our national sovereignty that the current draft of the Trans-Pacific Partnership Agreement includes. I enjoyed meeting other businessmen and women from other parts of the country that have similar concerns about the direction of our country and are working to fix our country’s economy.

It was a pleasure to take advantage of my rights as a citizen to express my opinions and those of an organization of which I am a member to our elected representatives in government. If more American businessmen and women would take the time to do the same, we would be more successful in our efforts to fix our trade and national deficit problems and create jobs for more Americans.

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