FTC: Made In The USA Comments Concerning James B. Mathes--P894219 American Export Association® P. O. Box 420189 Tel: (713) 266-4886 July 4, 1997 Office of the Secretary Subject:Made in USA Policy Comment Dear Mr. Secretary: I graduated from the American University's School of International Service in 1969 with a Master of Arts Degree. I had a core concentration in international business. I have been in international business over thirty years, fifteen years with the U.S. Department of Commerce in export promotion and fifteen years in the private sector in export sales and marketing. I believe I have solid credentials to comment on the Proposed Use of U.S. Origin Claims. I will get right to the meat of my argument. Under other circumstances, I would support a “Made in the USA” policy that allowed for direct foreign content of 20%. However, I believe the United States of America is in an international economic war for markets (money) that we are losing, as indicated by the massive and protracted negative balance of international trade in goods. I enclose two of my most recent monthly letters to Representative Dick Armey on the subject. Therefore, the reality of circumstances facing the United States is perilous, indeed. There are Americans who care deeply enough about the condition of America’s manufacturing sector to seek out “Made in USA” products under the belief they are playing a part, however small, in the protection if not survival of our economy. Because I believe the United States is at war, economically, we must have all policies directed to the goal of winning it. One weapon we have is the “Made in USA” policy. It is for this reason I urge you to decide against a new standard for “Made in USA” claims. Sincerely, Ben MathesJames B. Mathes /ptD3F107.WPS Removing barriers to sales · Houston · Monterrey · Maracaibo American Export Association® P. O. Box 420189 Tel: (713) 266-4886 The Honorable Dick Armey Dear Mr. Armey: Independence Day - 1997. But are we independent? With this letter, I ask you to abandon support of the flat tax idea and to adopt Congressman Archer’s idea for a national consumption tax to replace the income tax system. What is called the "global economy" is actually international economic warfare for markets (money), and the United States is losing - and losing big. The one best way our country can take the offensive and win is by adopting a national consumption tax system that favors exports of goods and disfavors imports. The United States trade deficit in goods is $66 billion through April, which, at this rate, will be $198 billion for all of 1997, a 6% increase over 1996, an all time high. Trade in goods is critically important because it reflects the condition of our manufacturing sector, the source of the best paying jobs. We are not independent. Japan is said to hold $291 billion in U.S. Government Treasury bills. How do you think Japan accumulated that amount? Japan acquired it through its massive trade surplus in goods with the United States. On Monday, June 23, the Dow Jones industrial stock market average dropped 200 points after Japanese Prime Minister Ryutaro Hashimoto said in a speech at Columbia University that Japan's central bank might sell its U.S. Treasury bills if the United States can't keep currency exchange rates stable. The very next day the stock market regained most of its losses after Mr. Hashimoto's aide said his remarks were taken out of context. Mr. Armey, only a national consumption tax system will save our country from foreign economic domination. Help us regain our independence. Sincerely, Ben MathesJames B. Mathes cc: Representative Archer; Senators Gramm and Hutchison Removing barriers to sales · Houston · Monterrey · Maracaibo American Export Association® P. O. Box 420189 Tel: (713) 266-4886 The Impoverishment of the United States of America July 4, 1997 Dear Fellow American: While we celebrate our nation's independence in 1776, our country is losing $550 million a day because of the deficit in merchandise trade. For all of last year, our country went into debt to foreigners at a rate of $509 million a day. Since 1976, we have accumulated an international merchandise trade debt of $2 trillion, and we have a net deficit of $63.45 billion in foreign ownership. (Japan has a net surplus of $720 billion.) The “global economy” is an international economic war for markets (money). Even our so-called Allies want our markets. We are losing our independence. Thousands of our armed forces have died in battles to keep us free since 1776, but free for us to impoverish “America the Beautiful” by a wanton spending on foreign products? The merchandise trade devastation is an imported calamity. It is complex and complicated Its causes encompass diverse political and special interests. It has a direct link to the decline of our middle class and of the good paying manufacturing jobs it had. To ensure our life, liberty and pursuit of happiness we must stop the merchandise trade deficit and start a trade surplus. An end to the merchandise trade deficit will be difficult to achieve, but we must do so, and we can. Here's how:
Good foreign trade policy lies between "economic nationalism" and "free trade." The main problem is imports, but U.S. exports need attention, too--a subject for another time. Many domestic problems also impact on the merchandise trade. What can you do? Ask your Congressman and Senators to support Congressman Archer's national consumption tax plan. Buy American products. Support the Buy America Foundation for $15.00 a year (215/886-3646). Ben Mathes D1F104.WPS Removing barriers to sales · Houston · Monterrey · Maracaibo American Export Association® P. O. Box 420189 Tel: (713) 266-4886 Memorial Day, 1997 The Honorable Dick Armey Dear Mr. Armey: I thank you for your reply to my letter concerning tax reform and the trade issue. While I see some truths in your arguments, they are not strong enough to dissuade me from supporting a national consumption tax system. Such a system, although imperfect, would be superior to our current system or to a flat tax system. As my experience is in international trade, I will keep my argumentation only to the trade issue. In point, you state, "The only way to change the trade deficit, then, is to change our savings rate." What do you mean by "change the trade deficit?" While one cannot disagree with your "immutable law" that states money saved is money not spent, it does not follow that an increase in savings rate in the U.S. will change the trade deficit in a way that stops it and then reverses it. In 1996, the United States had a net outflow on average of $509 million a day because of the deficit in merchandise trade. (The net outflow on average for all trade was $313 million a day.) What impetus do you foresee that will cause the American people to increase savings to the magnitude needed to stop that degree of outflow? The outflow resulting solely from importation of crude petroleum was on average $145 million a day in 1996. Do you believe an increase in savings will cause the American public to consume less petroleum products? The key question is not the amount but the difference between exports and imports. Do you believe that a reduction in purchases (because of savings) would pertain only to imported products? A reduction in purchases would pertain also to U.S. - made products. This, in turn, would cause the loss of jobs-jobs that produce personal income for consumption. Do you believe our manufacturers could increase sales in foreign markets to offset losses in the U.S. market, and thereby retain those jobs? In your argument, you quote Adam Smith in his statement that "the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce." You were once an economist by profession; yet you approach the U.S. trade deficit problem from the position of an academician and not as a businessman. I recall Peter Drucker who has stated that a remarkable achievement of American capitalism is the development of mass, efficient distribution. I hardly think Adam Smith foresaw the economic power modern international companies have in shifting resources around the world to deliver the goods. As you know, our deficit with China has climbed from nothing a few years ago to $40 billion in 1996. How do you think that has happened? Do you see a multitude of Chinese salesmen selling their products in our country? No. What you see is American companies taking designs to China and having products made there with low-cost Chinese labor, and then utilizing their capabilities for distribution in the United States, flooding our market with low-cost Chinese products. You argue that Americans benefit from acquiring lower cost goods, regardless of the source. I disagree. I do not need to take this space to recount for you the specific kinds of products once made in the United States that are now predominantly made abroad. In the last several years, we have heard of downsizing. Everyone gives attention to "what, who, how, when and where" downsizing happens. Even you in Congress talk of "retraining" those who are downsized. Does anyone ask "why" down-sizing occurs in the first place? Companies down-size, i.e., eliminate jobs, because they do not make sales (create income) to pay for employees. True, automation accounts for a certain percent of the reduction in jobs, but not the high percent of it. Foreign jobs manufacturing our imports down-size American jobs. In fact, we are familiar with American goods that have been down-sized out of existence because of imports. You conclude your letter to me: “That's how the American people became the wealthiest on earth....” How do you define wealth? We have amassed an accumulated $2 trillion merchandise trade deficit over the last twenty years, mainly with Japan, while Japan has amassed an enormous trade surplus. Japan is now the world's largest creditor nation and we are now the world's largest debtor nation. Is this wealth? As an economist, you are familiar with the government's statistics on money income of families and the percent of distribution. In current (1994) dollars, an analysis shows that 43% of U.S. families were middle class (income between $25,000 and $50,000) in 1970, but now only 32% of the families are middle class. In absolute numbers, families with income over $50,000 increased from 13.5 million in 1970 to 25.7 million in 1994; the middle class stayed at about 22 million; families with income less than $25,000 increased from 16 million to 21 million. In other words, nearly two-thirds of American families have not become wealthy. You cite the fact that exports of goods and services have increased from $216 billion in 1983 (my statistics show $266) to over $835 billion today (which was 1996, by the way). But you fail to mention that imports have increased, too, from $323 (then a $57 billion deficit) to $949 billion in 1996 (now a $114 billion deficit). If one cited only merchandise trade, one would see an unbelievable deficit from $67 billion in 1983 to $186 billion in 1996. This statistic is important. Merchandise trade reflects the competitive condition of the U.S. manufacturing sector, the sector that has traditionally provided the better paying jobs for the middle class and even for the under class. In your letter to me you question my assertion that the U.S. is about to experience a "financial calamity." To summarize: due to our merchandise trade deficit, our country has transferred $2 trillion of our wealth to foreign countries; we are losing our middle class and growing an under class; our country is the world's largest debtor; our country has lost on average $567 million a day in 1997 due to the merchandise trade deficit ($364 million for all trade). There is no end in sight. When will it end? What will the end look like? I say it will be a financial calamity. Finally, I suggest that you and I disagree on the premise. Your premise is that our tax system should be “export/import neutral.” I disagree. My premise is that our tax system should favor exports and disfavor imports. There exists today a world economic war for markets (money), even with our so- called allies. The United States is losing and losing badly because of our tax system-and other policies, I might add, a subject for another debate. No realistic increase in savings, no realistic increase in exports will overcome our country's systemic disadvantage. Foreign countries use the VAT tax system as a nation's subsidy for the cost of export trade. (Conversely, they impede or encumber imports with statutes, regulations and procedures.) Congress has no alternative but to put our country on a war footing and do likewise. The "global economy," is not military action. The American people do not perceive it as an economic war, but they see the consequences of it and sense something is wrong. Sooner or later they will make the connection to imports sufficiently to demand action by Congress. A national consumption tax system is the action needed to stop the merchandise trade deficit, begin creating a surplus, and produce a victory for the United States. Sincerely, Ben MathesJames B. Mathes cc:Representative Archer; Senators Gramm and Hutchison D1F109.WPS American Export Association® P. O. Box 420189 Tel: (713) 266-4886
Ben Mathes D1F103.WPS 5/25/97 Providing service for members to reduce cost of market development. |