Free Trade

Not much is fair about free trade

Tax consequences are far less for foreign countries

There is a big difference between "Fair Trade" and "Free Trade". Free Trade means that China and others pay substantially less in taxes to do business in the U.S. than American companies.

It means they are free to use the strength of the dollar to close our manufacturing facilities and put millions of workers out of work. It means they are free to ignore patent and trademark laws and protections. Free trade means that China and others are free to ignore the environment and dump toxins into the water and air which soon will affect our air and weather and eventually our coasts. And free trade means foreign competitors are free to disregard trade agreements by closing their countries to U.S. products.

"Fair trade", on the other hand, would equalize the tax burdens of our domestic producers and competing imports. It would price the dollar at its fair trade value. It would enforce trademark, patent, and environmental laws and enforce trade agreements.

Fair trade would reward those companies that innovate, cut costs and invest in productivity. Fair Trade would achieve all the goals that Free Trade advocates espouse.

Until we ensure Free Trade is also Fair Trade, we are putting our economic future in peril.

Change needed soon

Structural changes are happening to our economy that will be impossible to reverse unless something is done soon. Our manufacturing is fleeing this country and relocating overseas. In the last two years, 2,000,000 manufacturing jobs were lost in this country leading to 6 million lost jobs in the service sector.

Most startling is how fast this erosion accelerating. The world wide web, our open borders, and transportation advances around the world have made it very easy for U.S. manufacturers to outsource overseas. It is cheaper to cut costs by importing rather than investing in manufacturing improvements at home.

Economists cry "foul" at the word tariff. But without adequate tariffs, our tax system discriminates against our domestic producers. As an example: for the year 2000, I calculated the amount of taxes my employer and our suppliers paid in the form of FICA (employer and employee), federal and state withholding, and corporate income taxes. These taxes totaled 30% of our sales. Thus, 30% of every sales dollar went to our federal and state governments in the form of taxes. If the same tool was imported from China, our federal government only collected 3.1% of the sale in the form of a tariff.

It is ludicrous that an imported tool only contributes 3.1% in taxes for the protection of our legal system and commercial codes, and the privilege of using our economic system, while our domestic producers pay around 30%!

Tariffs needed

In 2001 my employer’s sales fell by 25% due to the increased competition from imports. As a result, related tax payments fell by $1.2 million. What will happen to tax collections when as a nation we manufacture nothing? We will need tariffs to replace our lost manufacturing tax collections. Why not use tariffs now to preserve our manufacturing base? Perhaps tariffs would be more palatable if they were referred to as a user fee for our great economic, legal and social institutions.

Is it good for America to have $30+ billion trade deficits every month? Can we continue to have a $10+ billion monthly trade deficit with China without sacrificing our economic future? If we aren’t working and producing, we cannot remain the most powerful nation in the world. We need Fair Trade.

We can save the U.S. economy with the following Fair Trade steps:

- Lower the dollar before it starts a freefall that we will be powerless to stop.

- Stop domestic discrimination. Tax imports the same that our own manufacturers are taxed.

- Encourage U.S. manufacturers to upgrade productivity by creating an Investment Tax Credit of 15% to 25% on domestically produced tooling and machinery.

- Enforce the trade agreements now, not the 5 year moratorium that China has to comply with WTO provisions.

- Enforce copyright and trademark protections in violator's countries by restricting their exports.

- Use trade to make importers clean up their act- they are dumping toxins in the air and water without any regard to the environment.

As Fair Trade continues to be repressed and Free But Not Fair Trade is allowed to decimate our manufacturing, our wages will begin to equalize