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CPA Written Testimony: NAFTA Negotiations

June 12, 2017

The Office of US Trade Representative requested comments from interested parties regarding a June 27, 2017 hearing regarding NAFTA Renegotiations. This is CPA's official written testimony submitted in response.

Summary

The US needs to rethink trade agreements and unilateral trade policy options to better connect them with improved trade performance through increased US production, wages, and broadly shared economic prosperity. The NAFTA renegotiation process is a chance to do so.

NAFTA, the North American Free Trade Agreement, has caused significant economic harm to the United States. America’s trade deficit with both NAFTA signatory countries has mushroomed and US wage growth has stagnated for non-college educated workers. This result shows that mere reciprocal tariff reduction, or even disproportionate tariff reduction by Mexico, does not automatically translate into improved trade performance.

Currency manipulation/misalignment and global consumption tax distortions are more meaningful to US trade deficits and economic health than trade deals and should be addressed first.  America’s overall objectives for NAFTA renegotiation should include (a) reducing the trade deficit, (b) growing the US goods production base, (c) improving wages and (d) growing our economy.  CPA suggests more detailed objectives below. 

The United States should not be afraid to walk away from and terminate NAFTA if our national economic interests are not achieved. Tariff rates will not rise due to mere NAFTA withdrawal without further government action. US law, which was supplanted by NAFTA and other trade agreements, can fill most all gaps left by any elimination of NAFTA rules especially given America’s market power derived from being the world’s largest economy and importer.

CPA’s testimony below includes an economic review of NAFTA (Section 2), recommended renegotiation objectives (Section 3) and a discussion of post-NAFTA trade policy options in the event of withdrawal (Section 4).

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  • Sent you e-mail through prosperousamerica answering everything including census bureau data files.
  • Hello Lawrence: Here is one method for contacting me through a web site that I did. Here is the contact page.
    http://www.tppbadforus.info/index.php/contact-us

    When you write the commodity of energy. A simple question. Does this include oil? For the import of high technology items like computers and Smartphones. Which of your listed commodities by percentage would this be under?

    Thank you.
  • The percentages by commodity were developed on a spreadsheet from U.S. Census Bureau data. I tracked ten years of hard data from 2006 to 2015. During this time the data shows that energy has improved while all other major commodity trade deficits have become worse. I can e-mail the spreadsheet to your e-mail address.
  • Lawrence, overall I think your comments are very good. However, you have a sentence, “By commodity it is 43% clothing, 23% automotive, 19% energy, 11% electronics and only 4% steel.” Where do you get these percentages from?

    Some of our imports today that are being ignored are our finished products that involve high technology. For example, Computers, Monitors, Keyboards, Printers, Smart Phones, and other products. We do at least produce made in USA apples, pears and peaches. However, technology to produce bananas with the U.S. being a Banana Republic might be a bit to sophisticated for the U.S. now. Sarcasm!

    The U.S.A. technology needs to improve today for made in USA goods. Yes, our tax system with a level playing field of taxation would help our U.S. production. Namely, since we tax our productive workers and companies we should also have a tax on imported goods. Otherwise to avoid taxes and pay less than a 2% tax on the production of goods, the goods are imported rather than made in the U.S.A. In contrast what U.S. taxes does your company pay during its production cycle?

    I wonder if our U.S.A. Representatives understand math today and have ever studied accounting? Hopefully at least 4th grade math and at least see the difference between plus + and minus – symbols. I think a passing grade fourth grade math student could understand how the trade balance of a nation is calculated which is exports minus – imports equaling trade balance. Hopefully our Congressional Representatives can also understand this math.
  • I will not conduct any business directly into Mexico because of their technical landmines that could invoke fines that could cost me my business. This needs to be fixed.
  • My company produces the highest quality non-perishable food products in the world. My complete mixes are trans-fat free, preservatives free, soy free, and GMO free. Many are made in a separate gluten free facility. Last year I met with sixteen international buyers at two international food buyer’s missions. We achieved zero new international sales after offering significant discounts. This proved to me that we cannot balance our trade accounts by just increasing exports. Exchange rates and the myriad of international sales regulations and biases are stacked against U.S. small businesses.

    Since 1998 and renewal of MFN China, the trade deficit has been the main driver for the Federal deficit. The trade deficit sucks half a trillion dollars out of our banks every year. It eliminates more than 50 million jobs and makes our taxable economy too small. We boost bank reserves and pay for the Federal deficit with “quantitative easing” that is in fact an eventually fatal economic addiction. 50% of the trade deficit is from China, 8% from Mexico, 9% from Japan, 10% from Germany, and 24% from other countries. By commodity it is 43% clothing, 23% automotive, 19% energy, 11% electronics, and only 4% steel. We need a three to five year increased indexed tariff system on imports by country that exceed our exports until they are equal. Tariff free trade is only free when it is balanced. This is not protectionism of an industry or a business. This is protectionism of our economy that could collapse. Any idea of trade wars should be forgotten as irrelevant. Right now the accumulated Federal deficit is diving straight down in a fatal trajectory. If we do not turn it around, the result will be a global catastrophe of frozen liquidity for all transactions.