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Rebuilding American Manufacturing Wayne State University June 5, 2012 Keynote Address by M. Brian...
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Transcript of Rebuilding American Manufacturing Wayne State University June 5, 2012 Keynote Address by M. Brian...
![Page 1: Rebuilding American Manufacturing Wayne State University June 5, 2012 Keynote Address by M. Brian OShaughnessy.](https://reader035.fdocuments.net/reader035/viewer/2022062618/5513d5a15503463a298b5341/html5/thumbnails/1.jpg)
Rebuilding American Manufacturing
Wayne State UniversityJune 5, 2012
Keynote Address byM. Brian O’Shaughnessy
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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
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Tradereform.org
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My remarks today particularly on
a New Economic Strategy
reflect my own views and
have not been considered by CPA
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Revere Copper Products, Inc.
• Revere was founded by Paul Revere in 1801 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
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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...
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…a silver bowl designed by Paul Revere
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That’s as American as apple pie? Right?
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WRONG…
…ON TWO COUNTS!
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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?
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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?
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It’s the cheap labor, right?
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WRONG
First, let’s first look at the benefits of producing that silver bowl
in China vs. USA
…as China manipulates its currency…
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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
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Currency manipulation
works the same way
for apples grown in China…
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In other words, the government of China manipulates its currency to subsidize the
cost of manufacturing and farmingin China
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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.
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It’s not only currency
• Tax structure • Health care • Environmental Stewardship• Government loans not repaid• Piracy of intellectual property/ reverse engineering• Other Subsidies
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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
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That’s how China competes…
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…AND THAT’S AS CHINESE AS APPLE
PIE !
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What is economic growth?
• An expansion of GDP
• A recession is a contraction of GDP
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What is economic growth?
GDP = C + I + G + NE
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What is economic growth?
GDP = C + I + G + NE
Consumption
Investment
Government Procurement
Net Exports
Biggest Most Volatile
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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
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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 Revereby a customer)
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CENTRIFUGAL CHILLER COST COMPARISON
Material Labor
0
20
40
60
80
100
USA China
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WITHOUT 40%CURRENCY MANIPULATION
0
20
40
60
80
100
USA China
Material Labor
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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”
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WITH VAT REBATEOF 17%
0
20
40
60
80
100
USA China
Material Labor
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Traded Products & ServicesVAT Impact at $100 Value
USAVAT = 0
MexicoVAT = 15%
GermanyVAT = 19%
$119$81$85
$115
$85
$81
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Some Countries Using VAT Tax to Support Factory, Farm &
Service Jobs
Australia
Austria
Belgium
Brazil
Belgium
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.
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Countries Not
USA
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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
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VAT Hikes Keep Aggregate European Trade Barrier Constant
0%
5%
10%
15%
20%
25%
30%
1968 1973 1988 1996 2006
Total EU Trade Barrier Average EU VAT Rate Average EU Tariff Rate
Total EU Trade Barrier
Avg. EU VAT
Avg. EU Tariff AMTAC
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TWENTY FIRST CENTURYTRADE 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.
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TWENTY FIRST CENTURYTRADE PRINCIPLES
1. Balanced Trade2. National Trade, Economic andSecurity
Strategy3. Reciprocity4. State Owned Commercial Enterprises5. Currency6. Rules of origin
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TWENTY FIRST CENTURY TRADE PRINCIPLES
8. Border Adjustable 9. Perishable and Cyclical Products10. Food and Product Safety and Quality11. Domestic Procurement12. Temporary vs. Permanent Agreements13. Labor
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TWENTY FIRST CENTURYTRADE PRINCIPLES
Please go to: tradereform.org to learn more and sign up
your organization or association in support of these principles
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So you can appreciate that
this is more than
a currency problem.
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This results in a price war that
American factories and farmers
cannot win.
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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?
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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
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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…
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Creation of a national health care system funded by a VAT is critical to the health of farming and manufacturing in the USA.
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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.
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But this is more than an economic battle.
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The importance of a strong domestic manufacturing base to national security and
national defense cannot be overstated.
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Revere was founded with $10,000 loan from the US Navy to supply copper sheets to sheave
the USS Constitution
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Personally I admire the culture of China
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…and it’s people
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But make no mistake about it,
China is waging a mercantile war on the world
and the world is sleeping.
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WALL
STREET
MULTINATIONALS
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They have to choose between
their company
and
their country.
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So, the looming question is, “What should be done to
counter this offensive and protective behavior
by China and other nations?”
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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
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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
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ECONOMIC POLICIES
• Today the US has adopted Free Trade as an economic policy
• China has adopted a mercantilist economic policy
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ECONOMIC POLICIES
Mercantilism eats Free Trade
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Free Trade doesn’t equal democracy
Teddy Roosevelt,
“Thank God, I’m not a Free Trader!”
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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
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Conclusion
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Sounds like our nation needs advice from the real world…
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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
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Tradereform.org
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Wake up, America!
Visit: reverecopper.com and learn more