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. 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

4. 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

6. How much GDP loss?
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)

7. 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.

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

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

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

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

13. Persistent Currency Undervaluation
A Tariff and a Subsidy

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

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

16. 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
•

17. How they use VATs
Tariff and a subsidy
Offset other costs like health care, income tax
Offset tariff reduction
Mexico: 15% VAT after NAFTA, none before
Central America: 12% VAT after CAFTA
Korea: 10% VAT now. Later increase?
China: 19% VAT

18. NOT NECESSARILY OVERTAXED; BUT 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

19. 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.

20. 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

21. 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.cpabuyamerica.com