Tom Walsh of The Detroit Free Press cites recent remarks by NAM President John Engler in today’s column, “U.S. needs to boost its exports,” and asks the necessary question: Why don’t we do more to boost manufacturing exports?

Complacency, mostly. America was the biggest, most affluent, most productive economy in the world for so long, many manufacturers saw no need to hustle their wares abroad.

But today, U.S. consumers aren’t spending so freely. Global competition is fierce, and studies show that active exporters are more innovative than the stay-at-home crowd. So we need to get serious about exports.

That means dialing back U.S. constraints on exports, such as cumbersome licensing requirements that date to Cold War security issues, as U.S. Commerce Secretary Gary Locke proposed last week and NAM supported. Corporate income tax rates, research and development credits and other tax issues need revisiting with the aim of boosting U.S. export competitiveness.

Complacency? Really? Organized labor represents a powerful political force against trade and exports. It’s not complacency that drive the union bosses toward protectionism, it’s misguided self-interest and an almost tribal “us against them” attitude.

But agreed on the Walsh’s prescriptions, 100 percent.

In “Nuts-and-bolts advice for the new manufacturing czar,” The Milwaukee Journal-Sentinel’s business columnist, John Torinus, previews Wednesday’s press briefing by Rockwell Automation’s CEO, Keith Nosbusch, who propose a comprehensive national manufacturing strategy. (Rockwell’s news release.)

Torinus discusses the possible appointment of Ron Bloom, the White House’s person in charge of the automotive restructuring, as a White House manufacturing czar; he names several manufacturing leaders he regards as more qualified than Bloom, a former investment banker and Steelworkers union executive.

Torinus then proposes policies to compromise a manufacturing policy.  The first four suggestions:

• Keep the pressure on the Chinese government to harden the yuan. Henry Paulson got it done in the Bush administration when the yuan rose about 20% against the dollar. That was a big help to U.S. exporters, the most important job and wealth creators for the country.
• Push for balanced trade on a bilateral basis with China, so their exports to the United States are better matched to their imports from the U.S. The gigantic trade imbalance with China is one of the biggest destabilizing forces on the U.S. economy. It has to be fixed.
• Understanding that the U.S. cannot sustain itself with a lopsided service economy - we have to make things, too - drop or eliminate the corporate tax on manufacturing. Other countries have dropped corporate taxes without triggering trade pact violations. If necessary, go to a value-added tax on goods as a replacement, a consumption tax on consumers.
• Promote Toyota-like lean disciplines across the whole manufacturing sector, much as Wisconsin government is attempting to do. Persuade union leaders to support lean disciplines and junk work rules that get in the way.

There’s a lot to like in his list for strengthening the manufacturing economy. You could add other items, to be sure, such as enacting tort reforms to bring the cost of the U.S. legal system in line with other leading manufacturing countries. In the process, speak out against the campaigns by the alliance of trial lawyers and “consumer activists” that ignore risk and demonize safe products and ingredients. (Since we’re reading the Journal-Sentinel, the campaign against BPA comes to mind.)

Torinus says the “manufacturing czar” strategy repeats the Bush Administration’s practice. Not quite. There the advocate was an Assistant Secretary of Manufacturing and Services in the Department of Commerce. Admittedly, that’s post has a much lower profile than a White House point person, but it does require the vetting and accountability that accompanies Senate confirmation.

Thanks to the Van Jones debacle, we’re about to see a new round of debate about the wisdom of manufacturing czars. On Fox News Sunday this morning, Sen. Lamar Alexander (R-TN), a member of the Republican leadership, responded to a question about the radical-cum-green-jobs czar by calling White House czars “an affront to the Constitution”: “When you take all these people that make policy close to the president and the White House … and aren’t approved by the Congress, you’re just adding fuel to the fire by those who think Washington is taking over everything.”

We imagine most manufacturers would welcome a strong advocate in the White House to promote U.S. industry. Still, czars, prelates or factotums aside, most important are the policies the Administration and Congress pursue. First, as NAM President John Engler likes to say, “Do no harm.” And after that, there’s a lot of good substance in Torinus’ list, and we look forward with interest to the Rockwell briefing.

The old political saw is that personnel is policy. Sure. But in the case of the manufacturing economy, the primary strategy should be to have policy be policy. Good policy being good policy, that is.

The National Association of Manufacturers is active in a broad-based coalition, PACE, which stands for Promote America’s Competitive Edge, which includes major U.S. businesses with international operations. Among the revenue provisions being considered to pay for an expansion of health care coverage are dramatically higher taxes on those corporations for earnings made overseas. The tax hikes would be extremely damaging to U.S. competitiveness.

A PACE letter signed by 280 companies and associations has just been sent to members of Congress, outlining the deletrious impact. Excerpt:

American companies with worldwide operations directly employ 22 million American workers and support an additional 41 million U.S. jobs through their supply chain and through the purchases of goods and services by their employees. A steep corporate tax hike on worldwide American companies, especially during a severe recession, will hinder our ability to protect and create American jobs and will slow our nation’s economic recovery.

The current U.S. international tax system has evolved over decades in a manner that attempts to keep worldwide American companies on a nearly level playing field with competitors in other nations. Meanwhile, other leading economies are moving to make their corporate tax systems more competitive. As a result, the United States lags behind and is increasingly isolated from the rest of the world.

The U.S. business community supports closing tax loopholes and prosecuting those who cheat on their taxes. However, the current international tax rules including deferral, check the box and foreign tax credits are fundamental tax provisions, and are integral parts of the US tax system – not “tax loopholes.” It is inaccurate and misleading to represent them as such.

That’s right. And politicians who decry “tax incentives for shipping American jobs overseas” are engaged in cynical populism.

The letter is a very clear introduction to the dynamics of international taxation and U.S. competitiveness. Highly recommended.

And here’s the news release.

While promises to increase taxes on businesses, particularly those with operations overseas, may play well on the campaign trail, it’s clear that, when the dust settles, the rhetoric has no basis in reality. 

In today’s Washington Post, columnist Geoff Colvin does a good job of dispelling any notion that U.S. corporations are up to no good when it comes to the tax code.  In fact, the tax changes proposed by the Administration represent a major change in long-standing tax policy designed to “level the playing field” in a global economy where most countries tax business income at a lower rate.  At the end of the day, these proposals amount to a hefty tax increase on U.S. multinational companies.  The international tax changes, combined with other tax increases like the repeal of “LIFO” and the new carbon “tax and trade,”  are bad news for all of us.  As any economist knows, corporations don’t pay taxes, we—customers, shareholders and workers— do.

Millionaire taxes, income tax surcharges, temporary tax increases, etc. What behavior do they spur?

Tax Foundation, “Maryland Wonders: Where’d the Millionaires Go?”

The evidence on both sides has primarily been anecdotal, focusing on California and New Jersey, which have had the taxes the longest. Now anecdotal evidence is coming in from Maryland, which imposed its new tax brackets in 2008. On May 13, Maryland Comptroller Peter Franchot (D) wrote in a letter that the number of tax returns reporting income over $1 million has dropped by a third. More to the point, revenue from those earners has dropped by $100 million.

Then again, no reason to be an elitist about it. From Marta Mossburg, Washington Examiner, “It’s not just millionaires fleeing Maryland taxes.”

Maryland’s “millionaires’ tax” flopped. It was doomed from the start.

Anyone taking Economics 101 could have predicted that those best able to avoid Maryland’s new 6.25 percent marginal tax rate on income over $1 million would. They are the ones best able to choose where to live and to pay accountants and lawyers to lower their tax burden.

Market losses no doubt contributed to one-third fewer people filing taxes in that income bracket in Maryland by April 15, as supporters of the legislation say. So did those filing extensions. But they and the Republicans yelling “I told you so” miss a bigger issue: Everyone is leaving Maryland, not just the rich.

NAM President John Engler often makes the point that in years past — think the ’90s — states were in a struggle with one another over recruiting businesses and employers, frequently citing their competitive tax structures (or incentives) to woo major companies. Now, that recruiting struggle is international, with nations going after employers with the same arguments about competitive tax structures.

NAM news release, May 4, “NAM Calls New Taxes on Corporate Foreign Earnings a ‘Disastrous Proposal’”

Der Spiegel, “Russia’s Factories Gear Up for Efficiency”

Take Chelyabinsk Forge-and-Press: It remains Russia’s only producer of the huge wheels used on the Ural truck. And for years after the collapse of the Soviet Union, the plant had few other customers. But in 2005, owner Valery Gartung, a former engineer at the factory and now a member of Parliament, put his 21-year-old son, Andrey, in charge. “Everybody was shocked,” says the junior Gartung, who holds a management degree from South Ural State University in Chelyabinsk but had little practical experience.

And…

On the shop floor today you wouldn’t know the world is suffering an economic crisis. Workers proudly show off metal links produced for Koch, a German manufacturer of conveyor belts. In April the factory signed up ZF, a German company that builds transmissions and other parts for the likes of BMW and Mercedes-Benz. The Russians will make transmission gears for trucks. “The most important thing is that we now make far, far more kinds of parts,” says Alexander Gorkushka, a section head in the forge.

Heritage Foundation: “Obama International Tax Plan Would Weaken Global Competitiveness”

From The Irish Examiner, “US drops reference to Ireland as a tax haven“:

THE White House has dropped any reference to Ireland from a fact sheet that accompanied President Barack Obama’s announcement of his crackdown on tax havens.

Ireland was explicitly linked to havens that the fact sheet said helped corporations evade taxes. But by late on Tuesday, the reference to Ireland, and two other countries, had been removed.

The fact sheet originally cited Ireland, the Netherlands and Bermuda as three small countries where, in one year, a third of all foreign profits of US corporations came from.

For a comparison of the fact sheet before and after, go here.

Meanwhile, we’re still looking for U.S. news coverage. You would think there would be a story along the lines of: “After vigorous protests from the Irish and Dutch governments, the White House has retracted its charges that the countries are ‘tax havens’ where U.S. companies seek to hide their profits.”

From The Irish Echo Online, the U.S.-based publication of Irish news, “Obama tax move targets Ireland too”

May 6, 2009 Washington, D.C. — President Barack Obama placed Ireland straight in the crosshairs this week as he took aim at reforming corporate tax laws regulating overseas profits generated by U.S. companies.

And there were indications from Dublin that the Irish government was prepared to battle what is clearly more bad news for the country’s embattled economy by calling for help from sympathetic members of Congress.

“The economy has been dealt a serious blow with the U.S. government signaling it is to target €2.5 billion of Irish tax revenues in broad economic reforms,” the Cork-published Irish Examiner reported.

From The Irish Herald, “Obama to visit Ireland.” Good timing!

To be fair, the story is based solely Congressman Richard Neal (D-MA) saying, you bet he’ll come. And it is a safe bet. Rep. Neal had interesting things to say about the President’s news conference on taxation.

“Ireland should not have been on that list,” he said, before pointing out the significance of the fact President Obama did not mention Ireland at his press conference about tightening up tax rules. Asked whether Ireland could rely on him to lobby the US government, Congressman Neal was hesitant, but did indicate that he is not keen to see all of these companies being forced back into the States. “That’s a pretty heavy lift” he said. “The idea is to keep American companies competitive in a global economic environment.”

And, as noted below, the White House quickly retreated and retracted the targeting of Ireland (and Holland and Bermuda). Now if the President would do the same for U.S. corporations with international operations.

From the Royal Netherlands Embassy in Washington, “The Netherlands: attractive location for foreign investors, but not a low-tax country“:

On May 3rd, the White House presented a fact-sheet titled ‘Leveling the playing field’, which states among other things that The Netherlands is a ‘low-tax country’. That led to some misinterpretation.

Dutch Ambassador to the USA, Renée Jones-Bos, conveyed this message to the White House, the Treasury Department and the Department of State. The White House has adjusted the fact sheet accordingly.

Seems like a pretty fundamental mistake. All the news reports we’ve seen have been based on comments from Dutch government sources. Will the White House or Treasury comment?

From Dutch News:

The United States is to remove the Netherlands from its list of tax havens after protests from the Dutch ambassador in Washington, junior finance minister Jan Kees de Jager told reporters late on Tuesday night.

On Monday US president Barack Obama had announced a series of measures to shut down offshore tax havens which could have implications for American firms with Dutch subsidiaries.

A briefing note attached to the announcement stated that 83 of the 100 largest US corporations have subsidiaries in tax havens, most notably the Cayman Islands, Bermuda, Ireland and the Netherlands.

The Dutch government reacted angrily, with officials noting its corporate tax rate is 25.5 percent, about average by European standards and lower than the United States’ 35 percent. A finance spokesman for the Dutch government said the Obama Administration will remove the Netherlands from the list.

The above story, “Obama pakt Nederland aan” is from the Algemeen Dagblad, a major daily. The headline is, more or less, “Obama Takes on the Netherlands.” (proceeds, tackles, picks on) It’s big news in Holland.

Here’s more, a story that just moved from AFP, “US To Remove Netherlands From “Tax Haven” List - Minister”

THE HAGUE (AFP)–The U.S. is to remove the Netherlands from a list of corporate tax havens where it figured owing to a “misunderstanding”, the Dutch finance ministry said Wednesday.

“It is a misunderstanding that the United States regrets. It has never considered the Netherlands as a tax haven nor as a country that imposes particularly low taxes on companies,” ministry spokesman Marcel Homan told AFP.

“The White House has informed us that it will edit the list today.”

Restoring our ties with Europe, one country at a time.