The document discusses trade issues facing the United States and proposals to address them. It argues that America's persistent trade deficits have cost the economy jobs and growth potential. Several trade problems are outlined, including currency manipulation, foreign consumption taxes, state-owned enterprises, and lack of a U.S. trade strategy. Alternative approaches are proposed that emphasize balanced trade, neutralizing unfair trade practices, and prioritizing national manufacturing and security needs over narrow trade deals. The Coalition for a Prosperous America advocates policy reforms to reduce trade distortions and help American producers compete globally.

1. Smart Trade: Fixing
America’s Economy
Michael Stumo, CEO
Coalition for a Prosperous America

2. About CPA
Mission: Balanced trade - eliminate the trade
deficit. The biggest potential source of jobs and
growth for America
Members: Manufacturing, agriculture and
worker organizations and companies.
Representing the interests of 2.7 million
households through our association and
company members.

3. CPA: Representing American Producers
Brian O’Shaughnessy Joe Logan Bob Baugh
Revere Copper Products Ohio Fmrs Union AFL-CIO
Pam Potthoff Kevin Kelley
Burl Finkelstein
Women Involved in Rochester Technology and
Kason Industries
Farm Economics Manufacturing Assn

4. Biggest Trade Problems
Persistent Trade Deficit - 20 years
Currency Manipulation
Foreign Consumption Taxes (border adjustable)
State-Owned Enterprises
Lawful foreign subsidies and barriers
Lack of a U.S. trade and manufacturing
strategy

5. Why is the trade deficit
a core issue?
“Recession” = Contraction of GDP
Net Imports/Trade Deficits
Biggest Most Volatile
subtract from GDP
GDP = C + I + G + NE
Investment
Net Exports:
Consumption Total Exports minus
Total Imports
Government Procurement

7. How much GDP loss?
...in 2001 the trade deficit was shaving at least
one percent per year off our economic growth.
This may not sound like much, but because
GDP growth is cumulative, it compounds over
time. ... America’s trade deficits since 1991
alone have caused our economy to be 13
percent smaller than it otherwise would be.
That’s an economic hole larger than the entire
Canadian economy.
- Fletcher, Ian, “Free Trade Doesn’t Work,”
(2011)

8. Industries We Have Already Lost
X Fabless chips
X Compact fluorescent lighting
X LCDs for monitors, TVs and handheld devices like mobile phones electrophoretic displays
X Lithium ion, lithium polymer and NiMH batteries
X Advanced rechargeable batteries for hybrid vehicles
X Crystalline and polycrystalline silicon solar cells
X Inverters and power semiconductors for solar panels
X Desktop, notebook and netbook PCs
X Low-end servers
X Hard-disk drives
X Consumer networking gear such as routers, access points, and home set-top boxes
X Advanced composite used in sporting goods and other consumer gear
X Advanced ceramics and integrated circuit packaging.

10. Have bilateral trade agreements helped?
Not really

11. But we’re moving to high tech, right?
Advanced Tech - We are a net importer since 2002.

12. Well, maybe the service sector will save us!
Maybe not.

13. Obama: “Double Exports”
Bush already
doubled exports.
Exports
increases under
Clinton. Our
exports have
grown almost
every year,
including to
China.

14. Labor Costs?
Hourly
Compensation
Costs in
Manufacturing,
U.S. Dollars,
2009
It’s not just cheap labor that’s the problem! The U.S. is actually
now a laggard in manufacturing wages among developed nations.

15. Persistent Currency Undervaluation
A Tariff and a Subsidy

16. NOT OVERTAXED; BADLY TAXED
The U.S. is not overtaxed
 EU15 -- 40.3% of GDP
 US -- 25.4% of GDP 40.3%
The U.S. is badly-taxed 35.0%
 Our tax system relies too
25.4%
heavily on non-border
adjustable income taxes
 This hurts Americans’
ability to save and invest
domestically
 US exports are taxed
twice
 US imports escape any
consumption tax

17. TRADE IMPACT OF BORDER TAX ADJUSTMENTS
The US tax system has
become increasingly out of
step with the rest of the
world
 More than150 countries
apply a consumption tax
to their imports,
doubling the tax burden
on US exports
 The same countries
rebate their tax on their
exports; the US almost
alone does not apply an
offsetting tax on its
imports
 Each year America’s two-
way disadvantage
amounts to an estimated
half trillion dollars
•

18. A $500 Billion Trade Distortion
Problem
• $143M Assessments on U.S. goods exports
• $254M Rebates to goods imports to U.S.
• $72M Penalty on U.S. services exports
• $48M Rebate to service imports to U.S.
• Total Trade Distortion: $500B
No other trade practice * 2008 numbers
distorts trade more. Source: Pat Choate, “Saving Capitalism”

19. Consumption Taxes
(Border Adjustable Taxes/Value Added Taxes)

20. Value Added Taxes are tariffs
$356 Billion trade distortion

21. How they use VATs
Tariff and a subsidy
Offset other costs like health care, income tax
Offset tariff reduction
Canada/Mexico: 15% VAT after NAFTA
Central America: 12% VAT after CAFTA
Korea: 10% VAT now. Later increase?
China: 19% VAT

22. State Owned Enterprises
“The state’s influence over China’s economy takes many forms
and covers a whole spectrum of companies from fully state
owned to those that are nonstate but maintain close ties to the
government. China’s state-owned and state-controlled
companies and industries are generally the largest ones in
China and are operated and managed by the central
government of the People’s Republic. They are an instrument
of state power as well as the centerpiece of China’s industrial
policy. They receive massive government sub- sidies and are
protected from foreign competition.”
* U.S. China Economic and Security Review Commission,
2011 Report to Congress, November 2011, p 40.

23. 21st Cent. Trade Agmt Principles
Balanced Trade/Net Exports
National Manufacturing/Security Strategy
Neutralize currency manipulation
Address foreign border taxes
Neutralize state owned commercial enterprises
Reciprocity - benefits vs. concessions

24. Contact info:
Michael Stumo, CEO
Coalition for a Prosperous America
tel: 413.717.0184
email: cpa@prosperousamerica.org
www.prosperousamerica.org
www.tradereform.org
www.cpabuyamerican.com