The Coalition for a Prosperous America met with representatives from the U.S. Department of Commerce on October 21, 2009.  We sent this letter as a follow-up, which describes the topics discussed. 

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Dear Messrs. Siger and Sullivan:

Thank you for meeting with us on October 20, 2009.  All of us attending from the Coalition for a Prosperous America (CPA) appreciated hearing your thoughts and future plans.

We are pleased that the Administration has placed a high priority on enforcing trade agreements and trade laws.  It is hard to justify the position that trading partners should not abide by those rules.  Lack of enforcement hampers public confidence, and our confidence, in U.S trade policy.  However, enforcement is insufficient alone to solve the trade deficit problem.

We fear that current federal government views on international trade strategy may be akin to fighting the last war when our competitors are fighting the next war.  The old idea of tariff reduction and economic openness is not without merit, but trading partners have usurped the benefit of those concessions through alternate means.  The result is a massive trade deficit and offshoring of jobs that are now unavailable to fill in an economic recovery.

We discussed three major issues:

(1) Foreign Value Added Taxes:  The value added tax disparity is quantifiably the biggest trade distorting mechanism that exists in the world.  Our CPA business members lose sales abroad because they cannot overcome the foreign VAT border charges even when they otherwise underbid foreign competitors.  Other countries send their products here with the benefit of a substantial subsidy because of the foreign VAT rebate.  While a domestic VAT is, as you said, a Treasury issue, it is within the purview of DOC to express its views on the trade distorting effects of foreign VATs.  We ask that you consider doing so.

(2) Currency Misalignment:  As a single factor, currency misalignment may be second only to the VAT as a major trade distorting practice.  The imbalance of payments resulting from currency misalignment, particularly in East Asia, is well recognized as an underlying cause - if not the underlying cause - of the recession.  Remedying the balance of payments problem requires remedying currency misalignment.  While currency is also a Treasury issue, DOC again can and should weigh in on the economy harming/trade distorting effects. 

(3) State-Managed Economies:  U.S. trade policy has wrongly been predicated upon an assumption that other countries are free market economies.  They are not.  The majority of trading partners have state-managed economies.  Trade distorting subsidies in those countries are massive and that many forms.  U.S. trade strategy must account for those subsidies to avoid the negative results we currently are experiencing.

Thank you again for your time.  We would like to follow up with you, as you suggested, perhaps with a January 2010 meeting.  Thank you.

/s/

Brian O'Shaughnessy, Chief Co-Chair and Co-Chair for Manufacturing

Bob Baugh, Co-Chair for Labor

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