This morning the NAM and the Global Business Dialogue hosted a discussion about the Environmental Goods Agreement (EGA) negotiations underway at the World Trade Organization (WTO). NAM’s Linda Dempsey, Vice President for International Economic Affairs, spoke about the benefits to manufacturing of a broad EGA, mentioning that, “increased trade and global engagement is vital for our manufacturers. With only a 9 percent share of the global $11 trillion market in manufactured goods trade outside our borders, manufacturers can and should be able to expand commercial opportunities.
The clock continues to tick and we are now more than three months pas the expiration of the Miscellaneous Tariff Bill (MTB) at the end of the 112th Congress and as a result, manufacturers both large and small have seen their costs spike substantially this year. The 113th Congress must act quickly in order to reverse this tax increase on manufacturers in the United States.
Companies of all sizes benefit from the MTB to help level the playing field for manufacturers in the U.S. The MTB cuts costs by reducing or eliminating tariffs on critical manufacturing inputs that are not available in the United States. The lack of action by Congress on an MTB is hurting manufacturers’ cost-competitiveness, thereby threatening jobs and economic growth.
For Lasko Products in Pennsylvania, the MTB is a critical tool that helps them compete. In a challenging global market, the MTB helps Lasko stay competitive by reducing their costs.
“There are 675 American workers at Lasko facilities benefiting from the MTB program,” said Ed McAssey, Chief Operating Officer at Lasko. “The MTB allows Lasko to compete against low-cost imports of household electric fans from China. We are the last American producer of portable oscillating fans and have been able to stay in this business with the MTB program and heavy investment in capital equipment and tooling. If Congress fails to act quickly and renew the MTB, it will put American jobs in our factories at risk. We hope Congress will act expeditiously to preserve American jobs and our investment.”
Each day that passes without the MTB means higher tariffs for manufacturers in the United States – like Lasko. For three decades, Congress has acted in a bipartisan, bicameral fashion to pass this common-sense legislation. The time for them to act on the MTB is now.
As the last Miscellaneous Tariff Bill (MTB) package expired at the end of the 112th Congress, manufacturers began to see their costs go up. Congress failed to pass a new package which lead to the expiration of duty suspensions on more than 600 products critical to manufacturers in the United States.
The MTB provides manufacturers a duty suspension on inputs not available in the U.S. that are critical to the manufacturing process. In its simplest terms, it helps to level the playing field for manufacturers and supports jobs. Currently, it is 20 percent more expensive to manufacture in the U.S. compared to our major trading partners, this is why a tool like the MTB, which lowers costs, is critical to our competitiveness.
One company that sees the MTB as essential to competitiveness is BASF. BASF is the world’s leading chemical company – The Chemical Company. Its portfolio ranges from chemicals, plastics, and performance products to crop protection products. BASF has more than 100 facilities in 31 states across the country and more than 15,000 employees in the U.S. alone. The MTB is critical to BASF’s competitiveness in the automotive, printing, packaging, telecommunications and agriculture markets.
“The MTB helps BASF remain competitive in the agriculture market which continues to see increased competition and more choices for customers,” said Ron Eva, BASF global sourcing and contracting manager. (continue reading…)
As the 112th Congress came to a close in early January they failed to pass a new miscellaneous tariff bill (MTB) package that would prevent taxes from increasing on manufacturers in the United States. The MTB provides tariff relief to manufacturers on critical inputs that are not available in the United States, helping manufacturers better compete and create jobs.
Exxel Outdoors is a manufacturer that would benefit from a new MTB package. Exxel makes outdoor products such as sleeping bags, tents and hunting and fishing apparel. They are the only company that produces mass-market sleeping bags domestically, at their factory in Haleyville, Alabama. Exxel Alabama manufacturers over two million family-style sleeping bags annually.
Exxel’s sleeping bag production requires the use of materials and inputs that aren’t available domestically. The MTB would help Exxel lower costs, enabling the company to better compete against growing global competition.
“We depend on raw materials that just cannot be sourced here in the U.S. to manufacture our sleeping bags domestically,” said Harry Kazazian, founder and CEO of Exxel Outdoors. “We have approximately 100 employees at our Haleyville facility, and we have plans to expand our operations and add more jobs here. Passage of the MTB would help us keep costs down, allowing us to be more competitive with other countries and to expand faster.”
Kazazian is hopeful that Congress will act as quickly as possible to pass the MTB to help manufacturers create jobs. Exxel faces competition from all over the world, and is already 20 percent more expensive to manufacture in the United States compared to our largest trading partners. The MTB would help to bring those costs to manufacture in the U.S. down.
Kazazian stated, “We need Congress to act expeditiously to help create American manufacturing jobs at a critical time for our economy.”
The San Antonio Express editorializes, “Swift action needed on NAFTA trucking deal,” emphasizing the economic costs of delays, that is, Mexico’s continued imposition of tariffs on U.S. manufactured goods and agricultural exports.
During its brief existence, the test program put to rest environmental and safety concerns about authorized Mexican trucks. Mexican truckers in the program actually had a better safety record than their American counterparts.
Mexico has agreed to drop half the tariffs when a test program is finalized. The remaining tariffs would be eliminated when trucks begin to roll.
Removing the tariffs will benefit U.S. exporters. Implementing the trucking provision will benefit U.S. consumers and holds the promise of making San Antonio a transportation hub for cross-border trade.
End this self destructive trade war. After 16 years, it’s time for the United States to live up to its NAFTA commitment.
President Obama and Mexican President Felipe Calderon announced a tentative agreements Thursday under which the United States would finally implement the cross-border trucking program required by U.S. signing of the North American Free Trade Agreement. The announcement is excellent news for U.S. farmers and manufacturerers whose products have suffered from retaliatory tarifs from Mexico.
As the National Association of Manufacturers’ Aric Newhouse said in a statement: “The United States is a global leader in ensuring enforcement of trade laws, and we need to lead by example – by coming into compliance with our NAFTA obligations on Mexican trucks. The NAM has led the effort in urging the Administration to reach an agreement to end these costly tariffs.”
Houston Chronicle and San Antonio Express News, “Deal would lift U.S. roadblock on Mexican trucks,” quotes two Texas business leaders talking about the positive, practical implications of the agreement.
“More than 15 years ago NAFTA was signed declaring free trade and removing obstructions to the flow of goods between Mexico and the United States,” Jeff Moseley, president and CEO of the Greater Houston Partnership, said in a statement. “With the compromise announced today, the full potential of NAFTA can come to fruition and Houston can hopefully grow its annual trade with Mexico currently at $16.2 billion.” …”We are pleased,” said Free Trade Alliance San Antonio president and CEO Kyle Burns. “It is unfortunate that it took billions of dollars in retaliatory tariffs to force the U.S. government into living up to its international obligations.
“We are hopeful that this latest program will lead to the successful conclusion of this issue, which should have been fully implemented in 2000. Mexico is showing good faith in our efforts. It is now up to the United States to follow through on our latest commitments and stop hiding behind safety concerns that are unfounded, as the initial pilot program proved.”
- Wall Street Journal, “US, Mexico Agree to Settle Truck Feud“
- Yakima Herald, “Mexico tariffs may end“
- San Diego Union Tribune, “US, Mexico reach truck deal“
We can’t say the Mexican trucking dispute is over, but we can now say that, at last, the end appears to be in sight. Almost two years after Mexico imposed retaliatory tariffs on billions of dollars of American manufactured goods exports, the Obama Administration has released a long-awaited “Concept Document” that provides a foundation that, if it can be successfully turned into a mutually acceptable proposal, will lead to compliance with our NAFTA commitments and the removal of Mexico’s retaliatory tariffs on billions of dollars of U.S. exports.
While release of the interagency document is an excellent development and very good news, we are not out of the woods just yet. It will take substantial effort on the part of the Obama Administration and Congress to work through the concepts in this proposal and create a final agreement acceptable to all parties. Public comments will be solicited. And, of course, the Mexican government will need to be an integral part of any agreement. A solution will need to ensure that Mexican and American cross-border trucking takes place in a manner similar to the existing cross-border trucking that has existed between the United States and Canada. The good news is that a successful solution will speed commerce and increase productivity and efficiency in supply chains.
But only after a final agreement is reached and we are compliant with our NAFTA commitments will the tariffs be removed. And Mexico’s retaliatory tariffs have had an significant impact on a wide variety of industrial sectors across the entire country. For two years, manufacturers around the United States have faced these retaliatory tariffs on their exports to Mexico. As a result, our competitors from Canada, Latin America, China and elsewhere have had an opportunity to increase their market share in Mexico at our expense. We need to move swiftly toward a solution so the tariffs can be eliminated.
Still, we appreciate the efforts put forth by the Administration in its interagency process to develop and release this concept document. The proposal released today will form the basis on which discussions between the United States and Mexico (with input from Congress and a public comment period) will take place. We strongly encourage all parties involved to buckle up, buckle down and get moving. Every day that passes means unnecessary barriers to American exports remain in place.
Department of Transportation release, “U.S. Cross-Border Trucking Effort Emphasizes Safety and Efficiency“
Reuters, Dec. 30, “Brazil’s incoming president to hike tariffs“:
SAO PAULO — Brazil’s incoming President Dilma Rousseff is planning aggressive measures including targeted tariff increases and tax breaks to address damage caused to manufacturers by the country’s overvalued currency …
Brazilian Finance Minister Guido Mantega has warned of a “currency war” as countries, including the United States and China, attempt to depress their currencies’ value and take other measures to boost local production and exports.
Mantega told reporters on Thursday the consequences from the recent rise in the real “will be dealt with from January by the next government, probably (via) measures in the trade sector.”
Reuters, Dec. 13, “Developing nations agree tariff cut to boost trade“:
BRASILIA (Reuters) – Nearly a dozen developing countries led by Brazil and India will sign an accord this week to cut tariff barriers and boost trade among themselves, a senior Brazilian government official said on Monday.
Negotiations under the Global System of Trade Preferences Among Developing Countries were relaunched in 2005 in an attempt to diversify developing countries’ trade revenue and reduce their dependence on rich countries.
Around 43 countries are signatories to the original GSTP agreement from 1988, and 11 countries will sign the updated accord in southern Brazil this week.
I suppose I could blog my 18 hour flight home tomorrow, but that probably won’t be very exciting for most readers. We’ll be on a Boeing aircraft, with American in-flight movies, American soft drinks, beer, snacks and wine, and an American flight crew. So hey, I guess I can work some trade-related content into my flight home!
In fact, Boeing, the American entertainment industry, American food and drink brands, and services industries will all benefit from the U.S.-Korean Free Trade Agreement. Removal of tariff and non-tariff barriers will benefit manufactured goods like aircraft and processed foods. IPR protections will benefit American movies, music and software and the FTA opens the Korean market more than any previous FTA that the United States has previously signed.
Strong services language in the FTA will ensure that American companies that provide services — financial, insurance, express delivery, professional services — have remarkable new access to the Korean market and strong guarantees that protect their participation.
And wine? Here’s a cautionary tale about what happens when you put trade agreements on pause:
In 2001 the U.S. had a 5 percent share of Korea’s wine market, and Chile had zero percent. In 2004, when Chile enacted its FTA with Korea, the U.S. and Chile both had 9 percent market share in Korea’s wine market.
Korea’s tariffs on wine went to zero for Chile but remain very high for the United States. And last year, Chile has 30 percent of Korea’s wine market, the U.S. only 15 percent.
Time out on trade means time out on exports, jobs, growth, and new opportunities.
- Oct. 15, “In Korea, an Approaching and Crucial Deadline for Trade“
- Oct. 14, “In Korea: Trade Pact’s Strong Defense of Intellectual Property Rights“
- Oct. 13, “From the DMZ: Freedom Villages and Flagpoles“
- Oct. 13, “U.S.-Korea Ties Build on Trade, Trust and Defense of Freedom“
- Oct. 12, “In Korea, Infrastructure, Consumer Spending, and Opportunities“
- Oct. 11, “In Korea, Business and Manufacturing Delegation Seeks Trade Opportunities“
Following up Monday’s announcement that the Mexican government would be “carousel-ing” some of the products targeted for retaliation under the cross-border trucking case, the official revised list was published this morning – and the new tariffs will take effect later this week.
The total value of the exports targeted by these tariffs is more than $2 billion in 2009 – which, you will note, was one of the worst years for American exports in a long time, given the impact of the recession. Based on 2008 figures, the value would be more than $2.5 billion.
In this spreadsheet we have highlighted the new products, the associated dollar value of Mexico’s imports from the U.S. for 2009, and listed the tariff percentage.
The biggest impact comes in new agricultural and processed food products. Manufacturing in America embraces many different sectors of production, and one of the largest and most important is the food processing industry. Here, we have seen the Mexican government impose tariffs of 10-20 percent on products like chocolate, ketchup, chewing gum and cheese — all products of the manufacturing sector, made in American factories by American workers.
At the same time, we see new tariffs imposed on other manufactured goods, including industrial polishes, adhesives, trench diggers, rubber gloves, floor coverings, stainless steel containers, and gas masks.
While the NAM is pleased to see a number of industrial products removed from the revised list – including carpets, telephones, metal furniture, and various paper products – the list of manufactured goods facing tariffs as a result of the Obama Administration’s lack of progress on resolving the cross-border trucking dispute remains long. Mexican school children will be paying more for their education this fall, given that printed exercise books, paints, ballpoint pens and pencils are on the list, facing 15 percent duties. Also still on the list are key home products like refrigerators, coffeemakers and dishwashers; consumer goods like toothpaste, deodorants, aftershave, and suntan lotion (and toilet paper); home furnishing goods including curtain rods and desks, and industrial goods including gas filtering machines.
All in all, it’s a cornucopia of American-made products facing punitive tariffs in Mexico this week. Not just manufacturing but farmers will feel the pain as well – the significant addition of pork, apples, oranges, sweet corn and grapefruits total well over $700 million in U.S. exports. But manufactured goods are hit, and hit hard. And hit just as hard are the American factory workers who make these products – most of which have a significant export market in Mexico, our second largest trading partner.
It’s past time to fix this problem and get our goods moving back over the border that we made duty-free in 1994 with NAFTA.