Presentation on theme: "Rebuilding American Manufacturing"— Presentation transcript:
1Rebuilding American Manufacturing Wayne State UniversityJune 5, 2012Keynote Address byM. Brian O’Shaughnessy
2Coalition for a Prosperous America CPA is a coalition of domestic manufacturing companies, organized labor and farmers and ranchersIts membership represents 1.8 million households in the USAIts objective is balanced trade through a National Economic StrategyM. Brian O’Shaughnessy serves CPA asChief Co-Chair
6Revere Copper Products, Inc. Revere was founded by Paul Revere in and is the oldest basic manufacturing company in the USARevere produces copper and brass sheet, strip and coil; copper busbar; and, copper alloy extruded shapesMost Revere customers are manufacturing companies in the USASince 2000, more than 30% have shut down & moved offshore mostly to China
12The Paul Revere silver bowl Now made in ChinaToday, Oneida buys the silver bowl, silver flatware and other products from ChinaHow can China produce that silver bowl over there and ship it over here and compete?
13The 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?
15First, let’s first look at the benefits of producing that silver bowl WRONGFirst, let’s first look at the benefitsof producing that silver bowlinChina vs. USA…as China manipulates its currency…
16The Paul Revere Silver Bowl Assume production cost of 元 100if made in China@ manipulated exchange rate of 元 6.3 to $1, the production costin China is $15.87@ free market exchange rateof 元 3.8 to $1, the production costin China would be $26.3116
17Currency manipulation for apples grown in China… works the same wayfor apples grown in China…
18In other words, the government of China manipulates its currency to subsidize the cost of manufacturing and farmingin China18
19The manipulation of its currency reduces the competitiveness of every other product, good and service in the world when compared to its production in China.
20It’s not only currency Tax structure Health care Environmental StewardshipGovernment loans not repaidPiracy of intellectual property/reverse engineeringOther Subsidies
21Currency 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
26What is economic growth? GDP = C + I + G + NEBiggestMost VolatileInvestmentNet ExportsConsumptionGovernment Procurement
27What is economic growth? Consumption runs about 70%, Investment about 10% and Government Procurement about 20%Net Exports adds to GDP or economic growthBut we are experiencing Net Imports which subtract from GDPThese numbers are cumulativeNet 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 examplegiven to Revereby a customer)
29CENTRIFUGAL CHILLER COST COMPARISON Material Labor
30CURRENCY MANIPULATION WITHOUT 40%CURRENCY MANIPULATIONMaterial Labor
31Currency 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”
34Some Countries Using VAT Tax to Support Factory, Farm & Service Jobs AustraliaAustriaBelgiumBrazilCanadaChinaCzech RepublicDenmarkFinlandFranceGermanyGreeceHungaryIcelandIndiaIrelandItalyJapanKoreaLuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalRussiaSingaporeSlovak RepublicSpainSwedenSwitzerlandThailandTurkeyUnited KingdomNotes: 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.
36TRADE AGREEMENTSThe 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 AgreementsSometimes they manipulate their exchange rate with the USA to offset any reductions in their trade barriers
37VAT Hikes Keep Aggregate European Trade Barrier Constant Total EU Trade BarrierAvg. EU VATAvg. EU Tariff AMTAC
38TWENTY 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.
39TWENTY FIRST CENTURY TRADE PRINCIPLES 1. Balanced Trade2. National Trade, Economic andSecurity Strategy3. Reciprocity4. State Owned Commercial Enterprises5. Currency6. Rules of origin
40TWENTY FIRST CENTURY TRADE PRINCIPLES 8. Border Adjustable9. Perishable and Cyclical Products10. Food and Product Safety and Quality11. Domestic Procurement12. Temporary vs. Permanent Agreements13. Labor
41TWENTY FIRST CENTURY TRADE PRINCIPLES Please go to: tradereform.orgto learn more and sign upyour organization or associationin support of these principles
42So you can appreciate that this is more thana currency problem.
43This results in a price war that American factories and farmers cannot win.
44How can a US producer compete if it must carry the burden of the health care costs of its workersand its foreign competitor does not?
45Revere’s fabricating costs About 10% of Revere’s fabricating costs are for the health care of its people and their familiesIf you buy a product made from Revere copper or brass, you are paying for the health care costs of our peopleIf you are buying a foreign product, you are not paying for any US producer’s health care
46What about Revere’s exports? Of course, the cost includes the health care costs of Revere peopleThe foreign country’s VAT imposed on Revere’s exports helps pay for the national health care cost of that nationSo, 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…
47Creation of a national health care system funded by a VAT is critical to the health of farming and manufacturing in the USA.
48Financing the federal government Today the US government is financed<1% by taxes and duties on importsToday the government of China is financed >21% by taxes and duties on imports.
56They have to choose between their companyandtheir country.
57So, the looming question is, “What should be done to counter this offensive and protective behavior by China and other nations?”
58LESSONS FROM HISTORYOur nation was not founded on free trade between nationsFree speech, freedom of religion, freedom of the press, yesDemocracy does not equal free trade between nationsCapitalism does not equal free trade between nationsIn the beginning, the US Federal Government was financed mostly by duties & tariffs on imports
59LESSONS FROM HISTORYFrom 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 oursThen GB adopted Free TradeThe US continued mercantilist policiesThat’s when our economy roared past GB
60ECONOMIC POLICIESToday the US has adopted Free Trade as an economic policyChina has adopted a mercantilist economic policy
62Free Trade doesn’t equal democracy Teddy Roosevelt, “Thank God, I’m not a Free Trader!”
63FREE TRADEIf we continue on this path, we will lose our precious freedomsFirst we lose manufacturing jobs and service jobsThen we lose our middle classRich vs. poor for the crumbsNo ability to sustain national defenseThe result is the loss of our liberty
65Sounds like our nation needs advice from the real world…
66A New Economic Strategy Free Trade within our bordersMercantilism not Free Trade must guide our international trading strategyNational Security is a priorityControl import qualitySome form of national health care that lifts the cost off of job providersSome form of Social Security that lifts the cost off of job providersSmart taxes not dumb taxes