Washington, Silicon Valley push for global trade

November 1, 2010 4:23:43 PM PDT
As the Bay Area and the entire country continue to struggle with a sluggish economy, more than 1,300 Silicon Valley executives gathered at the Santa Clara Convention Center to focus on boosting global trade. There is probably no better example than Silicon Valley tech companies to demonstrate the critical role of trade in terms of sales, profitability and employment.

Silicon Valley executives are arguing for a tax break that they claim could help accelerate much needed jobs and they took their case directly to the U.S. commerce secretary on Friday, but the proposal may not fly.

Some of the biggest companies in Silicon Valley make much, if not most, of their profits overseas today -- Apple, Brocade and McAfee are among them.

Apple earlier this week launched a Chinese version of its online store to sell iPods, iPads and iPhones to a fast growing consumer market in the urban centers of Beijing and Shanghai.

The principal speaker at the Silicon Valley Leadership Group's annual luncheon event was U.S. Commerce Secretary Gary Locke, who focused his remarks on growing exports to stimulate the moribund economy.

A number of CEO's complained to Locke that a 21 percent tax rate prevents them from bringing that money home. It's called repatriation.

"Repatriation of earnings -- taxing them to bring them back to create jobs -- is a penalty and other countries don't have that," says SunPower CEO Tom Werner. He went on to say, "So what would you do with your money? Do you want to send it in for taxes or bring it home to create jobs?"

The amount of money sitting overseas is significant. Secretary Locke is familiar with the importance of trade to the West Coast economy as the former Governor of Washington state, which is also an important gateway for trans-Pacific cargo.

"Somewhere there is between $900 billion and $1.2 trillion sitting offshore," says Brocade CEO Mike Klayko.

Locke spoke to the Silicon Valley Leadership Group event about boosting exports, but the tax issue is a hard sell in Washington.

"The non-partisan congressional budget analysts on Capitol Hill relied on by Democrats and Republicans in the Congress see most repatriation proposals as adding to the deficit," says Locke.

CEO's in Silicon Valley say they could use the money sitting overseas to create jobs and to invest in research and development.

"So many top-notch products are actually designed right here, and we want to keep that going because that is ultimately what brings in the returns on what is a knowledge-based economy here," says Synopsys Founder and CEO Aart de Geus.

Locke also pointed out another impediment -- the WTO, or the World Trade Organization. Countries must abide by rules to foster a level playing field so no country has a competitive advantage.

While business leaders in Silicon Valley are anxious for changes on the trade front, they recognize that there may be changes in Congress next week, so they'll have to wait until after the election.


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