International trade policies and global manufacturing formed the centerpiece of the State of the Union speech delivered recently by President Obama.
The president highlighted a number of proposals and accomplishments: favorable taxation for manufacturers, an international minimum tax that companies with overseas profits would have to pay, additional enforcement unit to enforce existing trade agreements and opening of new markets with the approval of the free trade agreements with Colombia, Panama and South Korea.
Unmentioned in the speech but disclosed prior to it was a proposal to consolidate several agencies dealing with international trade. The proposals combine a number of tax proposals which have been made before and have not been adopted; it is not clear they will fare much better this time around. Additional trade enforcement is one of those ideas which sounds good in theory but tends to produce meager results at best.
Earlier, the president had also proposed the consolidation of the Export-Import Bank, the Overseas Private Investment Corp., selected SBA programs, The Trade Representative Office and the International Trade and Development Agency into the U.S. Commerce Department.
All of these proposals will impact our state’s economy. Recently the Hartford Business Journal reported that Ex-Im Bank provided financial support to some $363 millions in Connecticut exports. And the Middletown export assistance office, ably managed by Director Anne Evans, has been at the forefront of export support to our companies. It is therefore important that our congressional delegation take a close look at the legislation to insure that we do no harm to programs that are working.
I support the president’s proposal to merge the International Trade and Development Agency as well as the U.S. Trade Representative Office into the Commerce Department. The current fragmented structure and approach to foreign trade is no longer viable; we need one agency to coordinate all aspects of our trade policies.
And it makes sense to have the Commerce Department become the lead agency in international trade. The department already plays a pivotal role in foreign trade efforts. I am, however, opposed to the proposed merger of the Export-Import Bank, Overseas Private Investment Corp. and SBA’s export finance programs into the Department of Commerce.
The recent revelations about possible political influence in the $500 million loan by the Department of Energy to Solyndra should be enough to discourage this approach. We need to retain a strong, independent financing agency (such as is the case with Ex-Im Bank today) capable of exercising the credit decisionmaking process independent from the reach and influence of politicians.
President Obama can still achieve his primary cost reduction objectives by merging Ex-Im Bank, OPIC and SBA’s export finance programs into one independent entity that would be the sole point of contact for all export financing. The similarities between these programs far exceed the differences and the current structure only creates confusion for both the applicants and the lenders.
Consolidation is indeed the right course of action but let us not trade limited short-term cost savings for large long-term loan losses, which I fear may come about if we hand over financing decisions to politicians.
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Paul Pirrotta is president of Paul Pirrotta International in Glastonbury. Reach him through the company’s website at: http://italy-usatraderep.com/aboutus.html
