1. Rebuilding American Manufacturing
Wayne State University
June 5, 2012
Keynote Address by
M. Brian O’Shaughnessy

2. Coalition for a Prosperous America
CPA is a coalition of domestic manufacturing companies, organized labor and farmers and ranchers
Its membership represents 1.8 million households in the USA
Its objective is balanced trade through a National Economic Strategy
M. Brian O’Shaughnessy serves CPA as
Chief Co-Chair

3. Tradereform.org

4. My remarks today particularly on a New Economic Strategy
reflect my own views and
have not been considered by CPA

6. Revere Copper Products, Inc.
Revere was founded by Paul Revere in and is the oldest basic manufacturing company in the USA
Revere produces copper and brass sheet, strip and coil; copper busbar; and, copper alloy extruded shapes
Most Revere customers are manufacturing companies in the USA
Since 2000, more than 30% have shut down & moved offshore mostly to China

8. Oneida Ltd For years, Revere shipped copper
coils about 20 miles to another manufacturing company named
Oneida Ltd.
Oneida cut and formed the copper
Then plated silver on the form to produce...

9. …a silver bowl designed by Paul Revere

10. That’s as American as apple pie? Right?

11. WRONG…
…ON TWO COUNTS!

12. The Paul Revere silver bowl
Now made in China
Today, Oneida buys the silver bowl, silver flatware and other products from China
How can China produce that silver bowl over there and ship it over here and compete?

13. The American Apple Pie America now imports apples from China
So you really can’t say “…as American as apple pie…”
How can apples from over there be refrigerated, shipped and still compete with apples grown just down the road?

14. It’s the cheap labor, right?

15. First, let’s first look at the benefits of producing that silver bowl
WRONG
First, let’s first look at the benefits
of producing that silver bowl in
China vs. USA
…as China manipulates its currency…

16. The Paul Revere Silver Bowl
Assume production cost of 元 100
if made in China
@ manipulated exchange rate of 元 6.3 to $1, the production cost
in China is $15.87
@ free market exchange rate
of 元 3.8 to $1, the production cost
in China would be $26.31 16

17. Currency manipulation for apples grown in China…
works the same way
for apples grown in China…

18. In other words, the government of China manipulates its currency to subsidize the cost of manufacturing and farming
in China 18

19. The manipulation of its currency reduces the competitiveness of every other product, good and service in the world when compared to its production in China.

20. It’s not only currency Tax structure Health care
Environmental Stewardship
Government loans not repaid
Piracy of intellectual property/
reverse engineering
Other Subsidies

21. Currency manipulation on top of these subsidies can reduce costs as much as 80% when producing in China This happens without even considering the cost of labor

22. That’s how China competes…

23. …AND THAT’S AS CHINESE AS APPLE PIE !

24. What is economic growth?
An expansion of GDP
A recession is a contraction of GDP

25. What is economic growth?
GDP = C + I + G + NE

26. What is economic growth?
GDP = C + I + G + NE
Biggest
Most Volatile
Investment
Net Exports
Consumption
Government Procurement

27. What is economic growth?
Consumption runs about 70%, Investment about 10% and Government Procurement about 20%
Net Exports adds to GDP or economic growth
But we are experiencing Net Imports which subtract from GDP
These numbers are cumulative
Net Imports in recent years adds up to a decline in economic activity in the United States equal to the economy of Canada

28. (this is a real world example
Let’s take a look at how the rest of the world uses taxes and legal tariffs to fair trade the USA out of jobs…
(this is a real world example
given to Revere
by a customer)

29. CENTRIFUGAL CHILLER COST COMPARISON
Material Labor

30. CURRENCY MANIPULATION
WITHOUT 40%
CURRENCY MANIPULATION
Material Labor

31. Currency Reform for Fair Trade Act (HR 639)
Companion bill passed Senate Similar bill passed previous House HR 639 being held up by Republicans President Obama clearly against Romney wants China labeled “Manipulator”

32. WITH VAT REBATE
OF 17%
Material Labor

33. Traded Products & Services
VAT Impact at $100 Value
USA
VAT = 0
$85
$81
$115
$119
$85
$81
Mexico
VAT = 15%
Germany
VAT = 19%

34. Some Countries Using VAT Tax to Support Factory, Farm & Service Jobs
Australia
Austria
Belgium
Brazil
Canada
China
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
India
Ireland
Italy
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Russia
Singapore
Slovak Republic
Spain
Sweden
Switzerland
Thailand
Turkey
United Kingdom
Notes: 150+ countries have a Value Added Tax (VAT) or border adjustable tax which discriminates in favor of domestic production of goods & services. One province in India boasts of a VAT tax over 50% in promoting itself as a prime location for jobs.

35. Countries Not
USA

36. TRADE AGREEMENTS
The next chart shows what happens when the USA negotiates trade agreements that allow our trading partners to adjust VAT tariffs.
During the negotiations, the USA agrees to lower tariffs and our trading partners does likewise (in the best cases)
Then our trading partners raise VAT tariffs which are not included in the Free Trade Agreements
Sometimes they manipulate their exchange rate with the USA to offset any reductions in their trade barriers

37. VAT Hikes Keep Aggregate European Trade Barrier Constant
Total EU Trade Barrier
Avg. EU VAT
Avg. EU Tariff AMTAC

38. TWENTY FIRST CENTURY TRADE PRINCIPLES
CPA formed a coalition of domestic manufacturing, organized labor, farmers and ranchers to develop a set of trade principles that would not allow trade agreements that are so easily circumvented. Numerous other principles were added after discussions lasting months to establish a set of principles to guide the negotiation of future trade agreements.

39. TWENTY FIRST CENTURY TRADE PRINCIPLES
1. Balanced Trade
2. National Trade, Economic andSecurity Strategy
3. Reciprocity
4. State Owned Commercial Enterprises
5. Currency
6. Rules of origin

40. TWENTY FIRST CENTURY TRADE PRINCIPLES
8. Border Adjustable
9. Perishable and Cyclical Products
10. Food and Product Safety and Quality
11. Domestic Procurement
12. Temporary vs. Permanent Agreements
13. Labor

41. TWENTY FIRST CENTURY TRADE PRINCIPLES
Please go to: tradereform.org
to learn more and sign up
your organization or association
in support of these principles

42. So you can appreciate that
this is more than
a currency problem.

43. This results in a price war that American factories and farmers
cannot win.

44. How can a US producer compete if it must carry the burden
of the health care costs of its workers
and its foreign competitor does not?

45. Revere’s fabricating costs
About 10% of Revere’s fabricating costs are for the health care of its people and their families
If you buy a product made from Revere copper or brass, you are paying for the health care costs of our people
If you are buying a foreign product, you are not paying for any US producer’s health care

46. What about Revere’s exports?
Of course, the cost includes the health care costs of Revere people
The foreign country’s VAT imposed on Revere’s exports helps pay for the national health care cost of that nation
So, in order to compete, Revere people have to cover their own health care cost and those of the foreign workers they compete against!!!
That’s just as true for farm products whether you are considering taxes or health care…

47. Creation of a national health care system funded by a VAT is critical to the health of farming and manufacturing in the USA.

48. Financing the federal government
Today the US government is financed
<1% by taxes and duties on imports
Today the government of China is financed >21% by taxes and duties on imports.

49. But this is more than an economic battle.

50. The importance of a strong domestic manufacturing base to national security and national defense cannot be overstated.

51. Revere was founded with $10,000 loan from the US Navy to supply copper sheets to sheave the USS Constitution

52. Personally I admire the culture of China

53. …and it’s people

54. But make no mistake about it,
China is waging a mercantile war on the world
and the world is sleeping.

55. M U L T I N A O S W A L S T R E

56. They have to choose between
their company
and
their country.

57. So, the looming question is, “What should be done to counter this offensive and protective behavior by China and other nations?”

58. LESSONS FROM HISTORY
Our nation was not founded on free trade between nations
Free speech, freedom of religion, freedom of the press, yes
Democracy does not equal free trade between nations
Capitalism does not equal free trade between nations
In the beginning, the US Federal Government was financed mostly by duties & tariffs on imports

59. LESSONS FROM HISTORY
From 1850 to 1940’s duties & tariffs in the USA on some goods ran 30 to 40%
In 1850, Great Britain’s economy was much bigger than ours
Then GB adopted Free Trade
The US continued mercantilist policies
That’s when our economy roared past GB

60. ECONOMIC POLICIES
Today the US has adopted Free Trade as an economic policy
China has adopted a mercantilist economic policy

61. Mercantilism eats Free Trade
ECONOMIC POLICIES
Mercantilism eats Free Trade

62. Free Trade doesn’t equal democracy
Teddy Roosevelt, “Thank God, I’m not a Free Trader!”

63. FREE TRADE
If we continue on this path, we will lose our precious freedoms
First we lose manufacturing jobs and service jobs
Then we lose our middle class
Rich vs. poor for the crumbs
No ability to sustain national defense
The result is the loss of our liberty

64. Conclusion

65. Sounds like our nation needs advice from the real world…

66. A New Economic Strategy
Free Trade within our borders
Mercantilism not Free Trade must guide our international trading strategy
National Security is a priority
Control import quality
Some form of national health care that lifts the cost off of job providers
Some form of Social Security that lifts the cost off of job providers
Smart taxes not dumb taxes

67. Tradereform.org

68. reverecopper.com and learn more
Wake up, America!
Visit:
reverecopper.com and learn more 68