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CPA Says Mexican Low Wages, Border Taxes Devalue American Workers, US Should Consider Abandoning NAFTA

June 28, 2017
Washington~ Michael Stumo, CEO of CPA testified today at the Trump Administration NAFTA hearings and charged Mexico with devaluing American workers through its low wages and border-adjustable taxes that unfairly favor Mexican production, and said the US should not be afraid to “walk away” from NAFTA. However Stumo added that because Mexico and Canada are not running global trade surpluses, they are partly a “distraction” from America’s core trade problems which are caused by surplus nations.

Summary of CPA NAFTA Testimony:

NAFTA negotiations could reasonably be considered a distraction from fixing the America's overall trade performance. Remedies lie in our domestic currency, tax and competitiveness strategies more than in negotiations and compromise with other countries.

Our trade deficit is driven by trade surplus country strategies to overproduce, under-consumer and rely excessively upon US consumers for growth. These countries are primarily China, Germany, Japan and South Korea. Canada and Mexico are not global trade surplus problem countries.

Our bilateral trade deficit with Mexico is largely due to their very low wage rates, a core problem that devalues American labor and is difficult to fix with mere negotiations. The problematic sectors are automotive, electronics and machinery, industries we would like to grow in the US. Ag trade performance has been poor as well, especially in cattle, beef, fruits and vegetables.

CPA studies have found the dollar overvalued by 25.5% in relation to a trade balancing equilibrium price. Dollar overvaluation makes American exports exceedingly non competitive while subsidizing imports. 

Foreign border adjustable taxes burden our exports as well, we should enact one here to neutralize that disadvantage.

NAFTA infringes upon our sovereignty and displaces many domestic laws which otherwise govern trade. Because trade agreements are unsuited to fix the fundamental trade imbalance problems, and because tariff retaliation fears are unfounded, the US should not be afraid to walk away from NAFTA to craft a largely domestic trade and competitiveness strategy without asking permission from others.

 You can read CPA's testimony in full here

About CPA: The Coalition for a Prosperous America is the nation’s premier organization working on the intersection of trade, jobs, tax and economic growth. We represent the interests of 2.7 million households through our agricultural, manufacturing and labor members.


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