The following article by Scott Robertson comes from the American Metals Market, www.amm.com.
PITTSBURGH — The Coalition for a Prosperous America (CPA) has come out in support of the Reciprocal Market Access Act of 2009, but steel interests say that while the concept of reciprocity appears reasonable, making trade concessions while failing to gain foreign access is of no value to the United States.
Sheffield, Mass.-based CPA is a national non-profit organization representing the interests of 2.7 million citizens through its farmer, rancher, manufacturing and organized labor association and company members. Its stated goal is to achieve trade policy for the benefit of American citizens, farms, factories and working people.
The organization is in favor of the legislation, sponsored by Rep. Louise Slaughter (D., N.Y.) and Sen. Sherrod Brown (D., Ohio), stating that the bill will help solve the problem of the United States making tariff concessions in trade negotiations while failing to gain effective foreign ma rket access in return.
"Past trade agreements have provided U.S. competitors expanded market access to the lucrative U.S. market, which is the largest in the world, in return for access to foreign markets, which often turn out to be markets in theory only," John Hansen, a member of CPA’s board and the National Farmers Union board, said in a statement. "The result is American producers give up their own profitable domestic market share in exchange for access to long-shot foreign markets that may not be realized. While the U.S. dairy, hog and cattle industry continues to suffer horrific financial losses, our U.S. borders remain wide open to surging imports while foreign markets disappear into the fog. This is not a sound domestic economic policy."
CPA says the Reciprocal Market Access Act instructs U.S. trade negotiators to reduce or eliminate foreign market barriers commensurate with the reduction of corresponding U.S. tariffs, which it calls "a significant change" from current practice.
Additionally, CPA said if a foreign government doesn’t honor its commitment to remove its barriers, the United States can re-establish its tariffs quickly until the foreign barriers are removed. Such an enforcement mechanism is one of the missing pieces in U.S. trade policy, it said.
Thomas A. Danjczek, president of the Steel Manufacturers Association, Washington, said U.S.trade laws must be strengthened to help preserve the U.S. manufacturing base.
"Little or nothing was being done for U.S. basic manufacturing in the Doha Round. U.S. objectives in the Doha Round were primarily to help its service and agriculture sectors, a resounding failure due to lack of agricultural concessions from India and China," he said. "Some have suggested that U.S. international trade laws can provide sufficient relief to offset unfair trade practices resulting from subsidies and dumping engaged in by other countries. ButU.S. trade laws, while necessary, have not solved the problem. Market access is important, especially as currencies are adjusted."
While the United States is one of the most open markets in the world, its trade agreements haven’t required openness abroad, "despite illusory promises," Brian O’Shaughnessy, CPA’s chief co-chair and co-chair for manufacturing, said.
"Congress needs to instruct trade negotiators to secure real, verifiable and enforceable trade barrier reduction when we lower our tariffs," he said. "One reason the U.S. trade deficit is so large is that our negotiators fail to gain as much access as we give up, or because foreign governments erect new barriers to replace those they agree to lower."
That is a cycle CPA wants to stop. The organization believes the bill could help achieve that goal. "This bill will eliminate the fake reciprocity of past trade agr eements and allow quantifiable and enforceable reciprocity in future deals," Bob Baugh, CPA’s co-chair for labor, said. "We need to stop the practice of ceding market share to other countries’ producers without gaining actual market share in return."
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A lot of our current free trade agreements are actually protectionist agreements that help multinational corporations that setup shop in those countries to prosper while small businesses that make most of the manufacturing in the US is left to pay up to a 35% federal corporate income tax.
US Multinational companies lobby for these protectionist agreements that they call free trade to confuse people. Protectionist agreements like NAFTA and WTO do not count money printing by foreign central banks to keep exchange rates low, VAT taxes, various non-tariff barriers, and requirements that to export in some countries you have to setup a joint venture with local partners so that your technology can be copied as protectionism.
It would make sense to drop the federal corporate income tax rate to like 5% and impose a VAT tax on imports to rebate US exporters. Remember VAT taxes and such practices like money printing out of thin air to keep your exchange rate low is not considered protectionism by WTO.
Additionally, before there was a personal income tax in the US; the government received most of its revenue from tariffs and taxes on imports. Does it make sense today that we get taxed heavily for working to make a living while foreign goods come in for free.
Even worse, a lot of these foreign goods got subsidized by US exporters because in order to export to a lot of countries we have to pay taxes to foreign countries for them to accept are goods in which this money is transfer directly to their own country’s exporters. So in effect American exporters are paying for their own demise in some instances. Additionally, a lot of countries subsidize their industries by their governments and central banks giving them tax money and newly printed money.
-We have a 35% federal corporate income tax rate on any business revenue over 18.333 million dollars for domestic producers
-Inflation at home caused by Congress, Federal Reserve and Commerical Banks causing prices to rise because of increasing money supply causing complaint from business that Americans cost too much. Complaints of American labor costing too much leads to more calls for open borders and more types of visas for foreign workers.
-Protectionsim from countries that keep their exchange rate undervalued by printing money. No matter how productive and innovative a country is, by a competitor country undervaluing their exchange rate, it will always be cheaper to produce in that country. So every US citizen can have 5 degrees each and still won’t be competitive.
-Too much focus by Congress on education as the problem to trade deficits and not inflation of money supply and protectionist trade agreeements from NAFTA, WTO and bilateral agreeements.
-Protectionism where we compete with exporters whose Government and Central Banks give aid and new money to their exporters so that they can remain competitve.
-Protectionism where to export in some countries you have to setup a joint venture with local partners so that they can copy the technology.
-Protectionist VAT taxes where US exporters have to pay foreign governments tax for them to accept are exports which causes prices of US goods overseas to rise. If weren’t bad enough, foreign governments transfer the tax money to their exporters which in effect US exporters are causing their own demise by subsidizing their competition.
-Protectionist policies of WTO and NAFTA that don’t count VAT taxes, various non-tariff barriers, and undervalued currencies as protectionism.
-US Congress that signs too many bills for new regulations not read, laws that impose high taxes on investment, encourages consumption, and spends to much leading to futher inflation.
-Giving tax breaks to outsource instead of reducing corporate income taxes and imposing VAT taxes on imports that can be rebated to US exporters like other countries. Remember for example VAT taxes not considered protectionism according to NAFTA and WTO policies.
-Over half of Congress has an education in law and doesn’t probably understand economics.
-Fallacy that trade deficit can be fixed by weakening dollar when there are market access issues. The dollar can be weakened all it wants and if protectionist measure against US are still applied like VAT taxes and others, then not many more US products will enter that market. Its important to note that the US dollar has been depreciating steadily since the 1970s and trade deficits have gotten worse because of currency pegs, VAT taxes, protectionist WTO, NAFTA agreements and non-tariff barriers like to export in some countries you have to setup factories with local partners so that the technology can be copied.
-Fallacy that wages are cheaper in other countries because of American uncompetitiveness. Wages are cheaper in other countries because of larger labor supply and less capital in some instances. Even with cheap wages, if a country is running a large trade deficit, the country with a trade surplus should have a currency appreciating steadily where even though wages may still be cheap, based on exchange rates it should be extremely more expensive to import from.
-Fallacy that all insourcing is good. Some insourcing is good if high technology is brought to US and provides US workers with new skills. Unfortunately most insourcing is for assembly manufacturing where most of the high tech manufacturing goes on overseas. Additionally companies that insource use transfer pricing techniques where they mark the price they pay for goods from parent company units higher to avoid paying taxes Furthermore insourcing companies use profits earned from their protected home markets to expand in US and sell sometimes products below cost to put American companies out of business. Even more, many local and state governments offer huge subsidies for foreign producers to setup shop in US where local US producers have to pay up to a 35% federal corporate income tax and various state and local taxes. Lastly any knowledge and patents gained from experimenting with production processes in the US at these foreign owned plants goes to the foreign companies.