Tie national health care into global trade strategy to help heal economy
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Our country needs a global trading strategy to deal with trading partners who manipulate their currency, place one-sided tariffs on our products and utilize other tactics of modern-day mercantilists to move jobs to their countries. Our country also needs a national health care plan to deal with exponentially rising health care costs. It may surprise you that these issues have solutions so closely related.
My company, Revere Copper Products, finds it difficult to compete globally for several reasons. Let’s start with health care, which represents about 10 percent of our fabricating costs.
Any product shipped abroad must pay an average 18 percent Value Added Tax or VAT to the foreign federal government. Nearly every country in the world uses VAT tariffs to gain a trade advantage — except the United States. These countries then use the VAT revenues to pay for the health care costs of their citizens. So the workers at Revere have to produce at a cost that pays for their own health care as well as those of the workers they are competing against.
In order to compete globally, production of goods and services located in the United States can no longer afford to carry the burden of health care costs. These costs must be paid by consumers of goods and services, including imports. The only sensible way to do this is to employ VATs to fund a national health care plan.
VAT revenues are also used by other countries to reduce their corporate and payroll taxes. These taxes are 20 percent higher on U. S. producers than their foreign competitors. Foreign governments use VATs to encourage manufacturing and job growth, while our government punishes U. S. producers with higher taxes. Such taxes are real. I know because Revere pays them. Every other country also rebates the VAT tariffs, plus any sales taxes, as an export subsidy.
Nobody knows how many manufacturing companies have shut down nationally but since 2000, more than 30 percent of the manufacturing facilities that Revere shipped product to domestically have shut down. Health care costs are not the only reason.
Let’s assume the production cost of manufacturing a product in China is 100 yuan, as its currency is known. When the government of China manipulates the exchange rate of its yuan for U. S. dollars to maintain a rate of 7 to 1, the production cost in China is artificially set at $14.28. This is a misalignment of about 40 percent. But if the free market were to determine the exchange rate was really 4 to 1, then the production cost in China would be $25. So a domestic U. S. producer who can manufacture that product for $20 is competitive in a global free market but not competitive in the real global protected market with such 40 percent currency manipulation.
Currency manipulation, health care and VATs add 70 percent to the cost of producing anything grown or made in the United States, including services.
The artificially strong dollar is undermining our manufacturing base and destroying domestic food production in just the same way. While it does allow U. S. consumers to buy foreign goods cheaply, the corresponding cost to our economy is severe, because we are exporting jobs to Asia and importing unemployment. This has outsourced 4 million manufacturing jobs to other countries, led to the $700 billion trade deficit and is why China owns so much of our country.
We must force governments that misalign their currencies to pay duties to offset their manipulation as long as they continue this practice. This correction could be spread over three years. This will cause some price increases, but foreign manufacturers would feel pressure to hold prices in order to maintain some market share.
In the same way, U. S. producers would try to gain market share by keeping prices low, especially with spare capacity and high unemployment. Smaller price increases would enable producers of U. S. goods and services to regain market share and increase employment. This will bring jobs back to America and increase household earnings.
During the same time period, a national health care plan that removes that burden on production in the United States funded by a VAT would add strength to the dollar as it improves the competitive position of producing anything in this country. This would add further jobs.
Such steps require a global trading strategy tied to a national health care plan. So far, we are the only major country in the world without either. Indeed, constructive global warming and energy policies need development as a component of a U. S. global trading strategy. That’s the cure for our economy.
M. Brian O’Shaughnessy is chairman of Revere Copper Products and has testified as an expert witness before Congress and the International Trade Commission six times on international trade and energy. He also serves as chief co-chairman of the Coalition for a Prosperous America.
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