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Exec says U.S. policies favor imports over our products Reports claim economy is in the pink, but factories are closing left and right

Brian O'Shaughnessy, the Harley-riding head of Revere Copper Products in Rome, N.Y., is an industrial rebel. His charge: U.S. policies are boosting imports -- and the profits of big multinational companies -- at the expense of the U.S. economy.

It's a familiar cry from labor and the left. But this criticism comes from the inner circle of U.S. business. O'Shaughnessy is a board member of the National Association of Manufacturers, the industry's biggest lobby group. His company, which traces its roots to Paul Revere, might be the oldest going concern in America.

Official figures say the U.S. economy is in the pink, but factories are closing left and right, and factory jobs are an endangered species. These are trends that upstate cities like Buffalo and Rome are deeply familiar with.

The problem isn't just cheap overseas labor, O'Shaughnessy argues. Instead, our own tax and trade policies are to blame for hollowing out the factory sector. Like Jack Davis, the Akron businessman who ran for Congress last year (and lost to incumbent Rep. Thomas Reynolds,) O'Shaughnessy says we can fix U.S. policy so local factories can compete again.

He isn't running for office, but O'Shaughnessy has other ways of getting his message out. His confrontation with the leadership of the manufacturing lobby made national news last summer. Also in 2006, he testified before the House Government Reform Committee.

Last week he visited The Buffalo News to talk about what ails U.S. factories -- and his ambitious remedy.

>Q -- Why are you on a mission to change U.S. industrial policy?

A -- Revere has seen one-third of its industrial buyers close their plants or move offshore since 2000. It had to close its own copper smelting plant in New Bedford, Mass., despite huge productivity gains.
>Q -- Aren't low wages overseas the fundamental problem, making it hard for U.S. factories to compete?

A -- No. Some imports from China now cost more for their shipping than they cost to produce. So, labor cost can't be the only issue.

>Q -- Then why are U.S. manufacturers having such a hard time com
peting?

A -- With respect to China, they are starting several paces behind the starting line. China sets an artificially low exchange rate for its currency relative to the dollar. This reduces the price of its goods in dollar terms. Estimates put their currency about 40 percent below its fair value. That means their exports get a 40 percent discount. Congress should pass a measure to make currency manipulation a violation of trade rules. (HR 782, the Hunter-Ryan Fair Currency Act of 2007.)

>Q -- You also call for a huge overhaul in our tax system. How would that help?

A -- Our current tax scheme is a tax on jobs. A value-added tax or VAT is paid by the buyers. The money is the same, but the VAT tax has an important difference. Unlike income taxes, it can be charged on imports as well as locally made goods and services. That means imports -- foreign production -- help pay for social programs. Most other countries charge a VAT for this reason; the U.S. is alone among industrial nations in not charging a VAT.

>Q -- You advocate putting the money into national health care, lifting the health care burden from employers. But doesn't this lead to a huge social welfare system and lower rates of economic growth, as in Europe?

A -- Our economy's growth is a reaction to overspending, made possible by enormous amounts of debt. This is a growing bubble -- the bigger it grows, the bigger the burst is going to be.

>Q -- But this plan does involve dismantling the current tax system, putting in national health care, and setting up programs to help low-income earners whose taxes would rise steeply under a VAT?

A -- Yes.

e-mail: fwilliams@buffnews.com

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