Federal Newswire
How did the Coalition for a Prosperous America come together?
Michael Stumo
After I graduated from Law School, I worked on a big antitrust and price fixing case around 2006-2007. We were figuring out in the agriculture sector that this trade thing isn't working out…like it was supposed to. All these foreign export market access opportunities were not materializing.
What was really happening is we were giving up domestic market share, and [that] is where we made our money…The math wasn't adding up, [and] this is a big issue.
We were looking for some friends and ended up getting in touch with manufacturers who said the same thing. At the time actually, some of the labor organizations were saying it too: We're losing domestic market share.
The international market share has really great numbers and promises but it isn't working out, so we worked together and formed CPA.
Federal Newswire
Organized ag labor and manufacturing used to be separated and now they’re starting to intersect. What prompted that?
Michael Stumo
Yeah, it took some give and take from the agriculture side. [Some were] pretty willing to work with everybody. Actually some of the manufacturers–small to mid-sized–had tried to do some reform in the National Association of Manufacturers, the big US manufacturing organization. They ended up using the voting process inside NAM and failed.
They would get some things passed, but then the board, which was controlled by multinationals, would veto it and it wouldn't go anywhere.
They were deciding, “Well, we won't go here, let's look for something else they hadn't found.” And then labor had sort of done its fair trade thing for a while, which is mostly focused on labor and environmental rights, not so much on the trade deficit–and mostly the industrial unions.
There's really three big sets of unions: the service workers, which aren't so trade dependent, the public employees unions, also not trade dependent, and the industrial unions [such as] miners, steel workers, and auto workers. [They] decided to form the organization.
Getting through a lot of strong personalities, I had to be a sort of counselor a lot of times to keep people together and focused. It worked out. We've continued for quite a few years now.
Federal Newswire
Does the coalition represent a form of populism for resisting globalization?
Michael Stumo
It's a very different world now. Our view–I call it “trade and industrial strategy”--is clearly the trend right now. It certainly wasn't in 2007 and 2008, when it was all free trade, borderless goods, borderless capital globalization, financialization.
Even with the financial crash, we thought, “okay, they'll figure it out now.” Well they didn't. We were naive at the time. They figured out that over-financialization is a bad idea.
You have to have a real economy with real production and jobs. But this [is] free trade versus protectionism. I call it the American system of economics, which started with Hamilton and Henry Clay, where you intentionally use tariffs, export subsidies, and low-cost loans…to build a country. That was how they did it from the founding to the 1930’s.
This free trade versus whatever the name is - protectionism or industrialism or productivism-- is a long debate. It's 200 years old. The US rejected free trade in terms of intentional development. Most other developed countries have done it, from Germany, Japan, South Korea, Taiwan and even China in their own way.
Nobody's used free trade to get from poor to rich. But in the 1930’s it became tariff cutting until NAFTA and Ross Perot in 1993-1994, and then China joining the WTO in 2000 with big protests around both of those. We came in later than that.
When we were there, the Washington consensus of both parties was “ whatever you call neoliberal globalism is the way to go.” That was the case [with] W. Bush and then Obama.
At that point we were really the shrill voice in the cheap seats. We were unique in looking at the economics rather than just the labor and environmental rights in these agreements, which classic fair traders did.
We didn't have a very good audience for a while.
Federal Newswire
We have a Select Committee on China in the House of Representatives, but how else have things changed since 2016?
Michael Stumo
During the Obama years Michael Froman was US Trade Representative…they pushed the South Korea, Peru, and Colombian trade agreements. Then it was really the Democrats [who] were split, and all Republicans voted for them except for eight or nine at that time.
The Democrats were more favorable to this sort of blue collar approach to trade. Then the Trans-Pacific Partnership came up, and Trade Promotion Authority, which was labeled “Obama Trade.”
The Freedom Caucus was against that. There were some Presidential power things, and we actually worked with the Tea Party very closely to point out all the sovereignty problems, not only the economic.
[We] worked very hard and [at one] point [had] up to 85 House Republicans against it. That was almost 10 times the Korea agreement. We worked with the Right and the concerns of sovereignty and our economy.
At the first vote of TPA, Boehner was Speaker and Paul Ryan was Chair of the House Ways and Means Committee. They lost the first vote. Then they did a parliamentary maneuver and won the next vote. That was a big watershed.
Then-candidate Hillary Clinton had to disown it. Senator Bernie Sanders was handily hammering her in the 2015-2016 campaign. We had really helped ramp things up, and we were a big part of it.
Then of course Trump, who had been pro-tariff and pro-economic nationalism since the 1980’s, was calling for tariffs on Japan.
One of our board members helped the transition team. We fought the Chinese for years, and U.S. Trade Representative Robert Lighthizer did the same. He got in, and they started doing 232 national security tariffs and 301 China tariffs, and the only one defending them was us.
Federal Newswire
Were you met with more of an open door policy at USTR?
Michael Stumo
Yeah. We weren't terribly welcome in the Michael Froeman US Trade Representative's office. But even then, Bob really had his way of doing things. He's a very smart fellow and very politically savvy.
They hit on the national security aspects,On Veritas, I’d be careful. They have which the GOP, Senate and the House, to the extent they are free trade supporters, which they were at that time. As the ground was shifting under them and they're still there, a lot of them didn't care where things were made just as long as it's cheap. Cheap consumption rather than strong production. That's really the hinge point, but national security is more important, so they hit the 232 national security tariffs and then the 301.
Everyone thought China engagement was a great thing in 2015. In 2016 and 2017 he's an isolationist, but they did that huge 201 intellectual property theft report that was very well documented. Nobody has ever said that's wrong. They always tried to distract [from it]. It was never challenged in and of itself and it still has legs, and then of course General Secretary Xi since then has made it quite clear that…he's gone from hide and buy to what he is now. He took it from there.
But we put out economic reports and everything about how the economy isn't going to crash. Inflation won't be a problem. There's going to be growth from this. We're going to reshore and that's what happened. But you had the globalist Peterson Institute, the Economist magazine, and everyone shrieking like the New York Times, and the anxiety-ridden apocalyptic claims were quite something. They didn't occur, and then we came to Covid, and we saw that supply chains matter, having production matters. 72 countries had export controls properly holding critical goods for their own citizens, which is their sovereign right and duty, and then you've got to do it right.
Then of course the Ukraine-Russia war was another supply chain. So we had Trump come in, we had the populace move his way. They're fighting over the blue collar populace, they're moving toward the Republicans, and then they're getting mugged by reality with the supply chain stuff and the national security goods and data.
Federal Newswire
What are your coalition's top priorities when it comes to China?
Michael Stumo
Well, our priorities are very big, and they're not being implemented right now. You need, in our view, a combination of exchange rate reform, which is something very hard to understand and nobody's talking about. But really if I were king, it's the holy grail for rebalancing things. It's actually small government industrial policy exchange rate management, but Treasury, the Federal Reserve, and Wall Street don't agree. We have an insanely strong dollar policy, which no other country in the world has as strong of a currency policy that makes in order to grow their economy.
…On industrial strategy you need a combination of tariffs and industrial subsidies. Tariffs can do a lot sometimes when they've been targeted. People have small yard high fence kind of things. I don't buy into that that much. In many ways you need to be broader. But certainly we would have broad tariffs, and President Trump in his current campaign has called for universal tariffs all the way around. We're just releasing a report on how pro-growth that is; it's on our website right now.
A different version of tariffs, if it was me we would have tariffs to raise revenue. These 301 China tariffs are raising fifty billion a year in revenue, which is as much as the gas tax. If we had China's most favored nation status reformed and put them in our non-mfn trade category, we'd estimate another two hundred billion dollars in revenue per year, which gets to almost what corporate income tax revenue is. It's around $300 billion, and it hits a low of around $225 billion. $250-400 and then use some of that money to boost up industries that we really want to have, such as pharma.
Some things if we decide we just absolutely can't lose it like key defense sectors, but maybe biotech, AI, whatever you want to choose. But there's some that you have to have the suppliers upstream to do some subsidies there, but put the tariff walls up, because look, you cannot have a white collar high wage society while being thrown in direct competition with several billion blue collar low-wage workers. You need some insulation, and that's what the tariffs are in the subsidies, otherwise you'll just blend all the global labor rates into one, and we'll be unhappy in India, and China will be happy. That's why you have a lot of problems here with people pretty upset with how things have been.
So exchange rate management to get a currency, the strong dollar, down to a trade-balancing price. That's a little ways away, but Bob Lighthizer agrees with that, but he understands it's not going to happen next week, tariffs and then industrial subsidies put together, and that's a revenue neutral kind of a situation. You get new revenue from tariffs, where you get money from people that are bringing things in, and then you're spurring what we have, and you get to scale economies to scope new innovation. You take a lot of labor out with automation, and that's why you didn't get inflation for the 301 tariffs, because people got to scale here. We can actually do a really good job with most things, except maybe cut and sew of fabrics.
But the 201 tariffs on solar, here were safeguard tariffs under Trump for solar and clothes washers. They spurred a bunch of investment in those items without inflation, and prices kept falling for consumers. 232 tariffs for steel after a year of volatility, steel prices came down to the way they were pre-tariff, because our industry invested another $22,000,000,000. It's hard to figure out what that means. It's a lot. It's a huge amount of new capacity. Very efficient, very clean, and so we never saw inflation from steel tariffs, and the international trade commission confirms this, they just did a March report. We didn't see it, and then China 301’s, the consumer never saw the inflation. You had to have China or the importers cut margins or else the big stateless multinationals bringing it in had to cut their margins.
Federal Newswire
There’s a lot of scare rhetoric from the White House or big newspapers on the discussion of decoupling, derisking, and divesting from China. How would you reframe this in a more positive light?
Michael Stumo
Well, we're doing it now. Exports from China to here are down a lot, and exports in China is sort of digging its own grave in a way, so we're doing it now. The President's actions did start it. Look at the chattering class, the laptop class, they're not ready for the voters. There was just a poll released yesterday by Reuters/Ipsos that showed 66% of Americans want to increase tariffs on China right now. The voters are ready for it, and they would vote for a candidate. It would make a positive difference for them, but choosing a Presidential candidate that wanted to raise tariffs on China so they get it. I represent some farmers; even during the 301 tariffs, farmers, ranchers, and cattle ranchers were supportive. They got it.
Trump did take some of the new revenue from the China tariffs and compensated farmers for what they lost - $12,000,000,000 one year and $13,000,000,000 another year, and then settled out no more, but we're getting $50,000,000,000 a year out of it. So it’s a nice revenue source for the US government. The voters are there, but right now you've got to do China…
That's how we won the Cold War, and the Soviet Union - we decoupled or didn't fully couple with them to the extent we were coupled with Europe. Reagan decoupled, he cut off trade, capital market flows, and they couldn't borrow in dollars, [so it] caused the oil price to decline by deregulating the wellhead and convincing the Saudis to pump up two million barrels a day more of oil. Because every billion was every dollar less and oil was $1,000,000,000 off of Soviet revenue, which was a total of either $16 or $32 billion a year, so it was big, and they ended up throwing in the towel, because they ran out of money and couldn't support the satellite states.
Of course, they're back in a different form. China is bigger, but they don't have internal consumption to drive their growth or are too poor internally. The real estate has crashed there. Infrastructure building has run its course. They're too much overridden with debt, and all they have is exports, and now that's crashing. They could be in a tipping point and going into their lost decade like Japan now.
But there's a big world out there. We got a lot of production we can do here. It is pro-growth to produce a lot more yourself, because a nation is great not because of what it consumes, but by what it produces, and to the extent you can't let third world countries do it. I don't call them allies, I call them fair weather friends. Regardless, that's the way I see it. I think the country is ready, and I think it's like the iPhone. I mean it's like Trump came in, and he said things that the chattering class thought was wrong, but he got the vote, and I think it's still ready right now even more.
Federal Newswire
Are there members of your coalition who have been affected by unfair trade, that the average U.S. citizen wouldn’t readily think of?
Michael Stumo
Well sure, [there’s] manufacturing, [but] it depends on the country. People [think] agriculture is a big nut exporter, and they're really not. Corn and soybeans are, maybe wheat and barley, but the rest of it's not. It's more poultry. But that's actually what people think about, but you've got produce not seafood. On average, ag is a net zero. They're not a big importer, and so cattle is [not a big export to] China. It's actually Canada and Mexico just flooding our market, taking out our cattle ranchers.
They have a big problem actually with NAFTA and USMCA. Same with produce, fruit, vegetables. A lot coming in from Mexico, or pre-NAFTA or pre-us they were doing a lot better. They lost a lot of market share in that way. It's taken a big toll and made rural communities poorer, and more desperate, with more drugs, crime, and broken families.
For manufacturing, it tends to be China, but you do have some differences. In agriculture, where the tension could seem to be [and what] you saw during the Trump years with China 301 tariffs, they allegedly did, in some ways, cut off agricultural imports from the US. They are a big buyer of our stuff, but that's like what we saw with the steel tariffs. You had volatility for two years and the price came back down, the government has documented that.
The same thing in agriculture. The world's stomach didn't change because its trade diverted from China. Brazil sold more to China, we sold more to Europe, and ag kind of recovered, because you rewired the system a bit. Plus during that time, one half of China's pigs died from China's swine flu. China has half the pigs in the world anyway, so 25% of the pigs in the world died, and that was one reason they didn't buy so much corn as soy.
But you do have Mexico, it is more of an auto parts issue. We get most of our auto parts from there. Actually right now with China exports declining, Mexico is our biggest trading counterparty right now. I don't say trade partners, because there is an inherent rivalry there. So I don't like that word. There are those differences, but overall we've held it together that we want to produce more in this country.
Federal Newswire
Do you think we should prohibit in our country what the Chinese prohibit in their country, in the sense of reciprocity?
Michael Stumo
It depends a lot on the audience of course, in that you have Left and Right audiences valuing different things. From the right, the national security tends to be [the focus], especially the older line Conservatives where national security has always been [a priority]. The new blue collar Conservatives, too, [where] China's the big driver of everything right now. We need to win against China. Reciprocity does work in many cases.
Personally, and I'm not necessarily a target audience, [but] there is a little bit of difficulty with it, because the globalists have used reciprocity for a while in these trade agreements. They'll do things…very lawyerly. It looks the same on paper, but it never translates to the ground. Reciprocal tariff cuts [where we] always ended up being the biggest importer anyway. They overproduce, and we absorb their overcap capacity and take out our employment. It's a bit too lawyerly for the endgame for me, but I get it as an argument.
We had reciprocity with food safety regs where they could ship in beef, pork, and seafood, and they would have harmonized reciprocal food safety rules to us. But it was just on paper. It was imported shrimp, and there's a lot of problems with some of this imported food that would never make it through here.
Same with pharmaceuticals from India, generic drugs. They claim to have an India equivalent of the FDA. The same reciprocity in the market access sounds good but is lawyerly, and it never turned out, so I have a little hiccup with that.
The environmental side is big on the left in that China's the biggest driver of CO2 type emissions in the world. They put up two coal plants every week in December of 2022, while Biden thinks engagement in China as a partner on climate change [is good for decreasing] CO2 emissions. It's clear to me [that’s] ridiculous, but our consumption of Chinese goods is driving it, and also we're shipping it with very highly polluting cargo ships across the Pacific, some of which pollute like several thousand cars all at once.
So there's that part, the pro-worker part, which the administration is using, and just pro-growth. I mean showing that tariffs and industrial strategy is a way to grow the economy, and if you gut yourself with cheap consumption from anywhere, you end up with a financial economy, plus tourism, home health care, and restaurants. That's not a good economy. So I think it depends on the audience.
Federal Newswire
Where does your organization fall in with the forced labor of the Uyghur people and those kinds of human rights issues?
Michael Stumo
Forced labor has long been in Trade Loss [since] the 1930’s, it's always been a fig leaf. They throw a lot of fig leafs in to cover up, to put some nice lipstick on a pig to change metaphors for a moment. Since the 1930’s it has been unlawful to import goods made in whole or in part with forced labor into the US, and [it] has never been enforced. Maybe here and there, but if you did, you were a protectionist and [people would ask] “is there really forced labor there?”
So [with] the Uyghur genocide now…the Trump administration and the Biden administration both have acknowledged that. We did have the Uyghur Forced Labor Prevention Act, which upped that. Prior to 1930’s law they were doing something with it, insufficient in my view but certainly more than before. [But] it hasn't had the potential, and it's a big deal. Earl Blumenauer, the Ranking Member on the House Ways and Means trade subcommittee, a big climate guy, talks about climate all the time and importing Chinese solar panels. [He] wants to save the climate, but not on the back of forced labor. So in his mind forced labor is more important than climate. We need to do it another way. So it's become a lot more powerful than the fig leaf. It has been and it will become more powerful.
Federal Newswire
Where can our readers go to continue to follow your work and the work of your Coalition?
Michael Stumo
Our website is www.prosperousamerica.org and we have an economics team doing research on how industrial strategy and tariffs can grow the economy. We have a lot of commentary, positions, and news on everything we just discussed today from national security to the steel industry, to forks and knives, and all kinds of things, because we do have members in many industrial sectors.
