By Taylor Sholler, Americas public policy, SEMI
On February 28, President Donald Trump gave his first address to a joint session of Congress. While not quite a State of the Union address, the President’s wide-ranging remarks conveyed significant policy implications for the tech sector and the U.S. business community as a whole. In an hour-long speech echoing much of the rhetoric heard in his campaign for the Oval Office, Trump referenced transformative proposals on trade, immigration, taxation, and a host of other issues that SEMI members should take note of.
Trump: “I believe strongly in free trade, but it also has to be fair trade. It has been a long time since we had fair trade. The first Republican president, Abraham Lincoln, warned that the “abandonment of the protective policy by the American government will produce want and ruin among our people." Lincoln was right, and it is time we heeded his advice and his words. I am not going to let America and its great companies and workers, be taken advantage of anymore.”
Much has been said within the business community about the President’s seemingly mercantilist trade policies. In his short time in office, the President has withdrawn from the world’s most commercially significant trade negotiation -- the Trans-Pacific Partnership (TPP), suggested a unilateral rewrite of the trilateral North American Free Trade Agreement (NAFTA), threatened paralyzing barriers on Chinese exports, and suggested the World Trade Organization (WTO) should be wholly ignored. In his inaugural address, Trump similarly stated, “We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.”
Incoming U.S. Trade Representative (USTR) Robert Lighthizer and a wide swath of Administration officials including Commerce Secretary Wilbur Ross have repeatedly stated that free trade remains a core principal for the White House but it has not been illustrated to this point. The President’s remarks to Congress ignore the benefits global competition and commerce have provided both U.S. companies and consumers when they are able to acquire better and cheaper products. An export-intensive industry such as ours must work to dispel such protectionist trade policies.
Trump: “I am going to bring back millions of jobs. Protecting our workers also means reforming our system of legal immigration. The current, outdated system depresses wages for our poorest workers, and puts great pressure on taxpayers.”
America’s immigration policy has historically invited the world’s smartest and most innovative minds to come, learn, and do business in the country. In his address, President Trump alludes to a plan which would hinder, if not significantly alter, that practice. The Administration has proposed a reformation of the nation’s immigration policies, including those covering H-1B work visas. The rules as drafted would likely tighten quotas, impose limitations on foreign students, eliminate spouses’ ability to apply for work, and enact measures curtailing the tech industry’s options to attract and keep talent.
While the President’s executive authority has yet to pay particular attention to high-skilled immigration, the Administration’s broad framework suggests that agencies like the Departments of State and Homeland Security would be asked to study all costs from immigrants for public services, the potential cost savings, and rule changes in the public interest. In opposition to this, a study published last year by the National Academies of Sciences, Engineering and Medicine found “little to no negative effects on overall wages and employment of native-born workers in the longer term.” Rather, the study found that high-skilled immigrants, particularly those in technology and science, had a significant positive impact on Americans with skills, and also on working-class Americans. They spurred innovation and helped to create many additional jobs — something well understood in the micro- and nano-electronics industries.
Trump: “Right now, American companies are taxed at one of the highest rates anywhere in the world. My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone. When we ship products out of America, many other countries make us pay very high tariffs and taxes, but when foreign companies ship their products into America, we charge them almost nothing.”
In his address, the President asked for change but failed to specify his plans for reformation. The Administration is expected to outline a comprehensive tax reform plan in the coming weeks and should closely mirror the proposal drafted by Congressional Republicans. The GOP plan would exempt taxation on exports while instead taxing imports under an innovative destination-based cash-flow tax with border adjustment (BAT). It would lower the corporate tax rate from 35 percent to 20 percent, eliminate levies on all U.S. exports, and impose a 20 percent tax on imports. This proposal would offer significant benefits to members exporting from the U.S., while proving difficult for those members shipping equipment or materials into the country. In addition, the GOP plan would allow for immediate depreciation of capital expenditures while preserving the always important R&D tax credit. SEMI will continue to closely monitor all tax policies as they pertain to our membership and welcome input from companies in any region on the issue.
Because of these ongoing challenges, SEMI maintains an active industry advocacy program in Washington D.C. and beyond. Companies interested in SEMI’s work on these issues are encouraged to contact Taylor Sholler, senior manager, Public Policy, at email@example.com.
March 14, 2017