21 October 2008

Notes from National DEC Conference

This article appeared in the 21 October 2008 edition of the “Export ABC’s” column in “The Journal of Commerce”. It is written by Frank Reynolds, president of International Projects, Inc., an export management company.

Delegates from most of the Commerce Department's 58 District Export Councils gathered at Palm Springs earlier this month for the National DEC Conference. 

The DECs provide private sector support to Commerce Department export promotional activity. This annual event brings senior management from Commerce and the U.S. Commercial Service together with leading exporting and international service-providing DEC members to develop export strategies.

Following a pattern set in 2007, the conference followed a trade policy-related framework called “The Great Debate.” Proponents and opponents of such controversial topics as free trade agreements debated with each other and fielded questions from very engaged attendees. …

There was much going on, but four important but often overlooked facts came out in the discussions. The first three came from Lloyd Wood, representing the American Manufacturing Trade Action Coalition.

First, the rush to massive importing and subsequent overseas outsourcing actually began in the early Eighties when the United States had no free trade agreements. It was exchange rate-driven, and with the dollar trading at 265 yen and the equivalent in other major world currencies, domestic production simply could not compete with imports. Keep this in mind when considering free trade agreements. It also helps explain the meteoric growth of China's exports as Beijing closely manages exchange rates.

Second, the Doha Round of World Trade Organization trade negotiations is intrinsically flawed because countries can self-describe themselves as “developing” or “developed.” 

“Developing” countries, such as China, have more latitude with things like foreign exchange….

Third, U.S. exporters are at a huge disadvantage when competing with countries that have a value added tax regime due to the simple fact that these taxes are forgiven for exports. This makes their export pricing as much as 21 percent lower than comparable domestic selling prices with the same net return to the seller. Since the U.S. taxes profits rather than sales, the most our exporters can get is a waiver of state sales tax -- say, from 4 percent to 8 percent at most -- and then only for states that tax sales.