My response: I'm sure I don't know the full extent of it, but below are only a few of the ways.

While many characterize the changes that would stop the subsidies as protectionism, it's actually about ending "reverse protectionism."  Considering the growing U.S. trade deficit, it's clear that the U.S. does not have a problem with "protectionism" and that, to the contrary, "reverse protectionism" is winning. Ending "reverse protectionism" is not protectionist.

What's somewhat amazing is that these subsidies are so entrenched that they're not even recognized as warping the playing field. The field is so uneven that it has led to an exponentially-increasing trade deficit that will destroy our economy. If foreign countries want access to our markets, they can help pay for the systems that support that access.

Summary:

1. Companies can defer paying taxes on income from foreign subsidiaries ... indefinitely.
2. Tax loopholes, such as moving headquarters to a tax haven.
3. Allowing R&D and other investment tax credits for companies that move manufacturing off shore ... the U.S. doesn't fully benefit.
4. Corporations engage in flawed transfer pricing schemes to avoid U.S. taxes, e.g., they sell components to foreign subsidiary with very low profit markup, and buy back product after manufacture with a very high foreign profit markup.
5. Not including labor & environmental standards in trade pacts is a subsidy. The costs of environmental degradation and injuries to workers are externalized onto the public at large. Without standards, democracy is undermined: individuals don't value and "purchase" clean environment & workplace safety, governments do; if a government isn't a democracy, it doesn't represent the interests of its citizens.
6. Corporations are allowed to write-off the cost of shutting down a factory in the U.S. when it transfers the work to a factory in a foreign country.
7. Corporations are allowed to write-off the cost of bringing new foreign employees to the U.S. and requiring its U.S. employees, as their last duties before being fired, to train the foreign employees to do their jobs.
8. Excessively high real interest rates set by the Federal Reserve Board in the 1980s encouraged manufacturing to go offshore, because investing in real assets has yielded lower returns than investing in financial assets. This led to the leveraged buyouts of the 80s and the weakening of the manufacturing sector.

Businesses avoid taxes whenever they can and they influence legislation to avoid taxes whenever they can. They leave it to the public at large (especially to those who work for a wage, rather than those who reap dividends and capital gains) to pay for the systems and services that allow businesses to make their returns.

For much more detail, see below and in A Systems Thinking Perspective on Manufacturing & Trade Policy:

The ones Kerry notes are (from http://www.johnkerry.com/pdf/tax_reform.pdf):

1. Current tax laws allow corporations to defer paying U.S. taxes on income earned by their foreign subsidiaries, providing a substantial tax break for companies that move investment and jobs overseas. Today, under U.S. tax law, a company that is trying to decide between locating production or services in the United States or in a foreign lowtax haven is actually given a substantial tax incentive not only to move jobs overseas, but to reinvest profits permanently, as opposed to bring them back and re-invest in the United States.

2. Current international tax loopholes allow American companies to escape taxes by taking advantage of complicated international tax rules. These abuses include "corporate inversion" where an American company moves its headquarters to a tax haven like Bermuda to avoid taxes, certain types of cross-crediting that encourage companies to shift income and jobs to low-tax havens, restricting tax avoidance through hybrid structures, and other abuses.


These are real, but they are only two of the particularly egregious subsidies. Here are others I note in A Systems Thinking Perspective on Manufacturing & Trade Policy:

3. The U.S. allows R&D investment tax credits to companies that do not retain their complementary assets (e.g., manufacturing) in the U.S. This is a problem because, when a nation that subsidizes an innovation does not retain the manufacturing, it does not fully profit from the innovation.

The nation does not fully profit because it cedes a large portion of the profits to the nations that do the manufacturing. Continuing such subsidies is a form of "reverse protectionism." The dynamic is explained in detail in the section of a Systems Thinking Perspective on Manufacturing Base Restoration on "Why innovation alone isn't enough: Profiting from Technological Innovation").

 

Here is a summary of Teece's rationale:

The more easily innovations can be imitated, the more an innovating firm risks ceding a significant share of the returns from innovation to customers, imitators and owners of complementary assets (e.g., manufacturing). To prevent this, the innovating firm itself must focus on protectable innovations, focus on products /services for which the necessary complementary assets are already under its control, or establish appropriate plans for contracting/leasing or integrating the necessary complementary assets. Managers must become adept in understanding their organizations and markets as dynamic systems.

For the same reasons that control of complementary assets, such as manufacturing, are important to companies, they also matter to innovating nations. In regions of weak appropriability, innovating firms without the requisite manufacturing and other specialized capabilities may fail and, similarly, innovating nations may allow competing nations to capture the lion's share of the profits from the innovation.

Transfer pricing is when the U.S. corporation sells, say components to be assembled, to its foreign subsidiary with a very small markup for profit. Then the foreign subsidiary does further assembly and manufacture and sells the product back to its U.S. corporate parent with a very large markup for profit. The U.S. company sells the product in the U.S. at a price that yields only a small profit due the high cost to it from its foreign subsidiary. This allows the foreign subsidiary to retain the profits and pay low taxes in the foreign country compared to taxes that would be paid in the U.S.

The U.S. could require accounting standards that disallow obviously fraudulent transfer pricing schemes whereby corporations move profits to foreign subsidiaries to take advantage of the lower taxes in foreign countries (resulting from tax wars). Allowing such transfer pricing schemes is a form of "reverse protectionism."

5. Corporations are allowed to write-off (deduct the expense) the cost of shutting down a factory in the U.S. when it transfers the work to a factory in a foreign country. 

6. Corporations are allowed to write-off (deduct the expense) the cost of bringing new foreign employees to the U.S. and requiring its U.S. employees, as their last duties before being fired, to train the foreign employees to do their jobs.

7. Not including labor and environmental standards in trade pacts is a form of subsidy.  This is "reverse protectionism" and a subsidy because the costs of environmental degradation and injuries to workers are externalized onto the public at large.

Just as intellectual property protections protect private capital, labor and environmental standards protect social capital, or quality of life, built up over centuries. They protect our ability to further increase social capital. With inadequate trade protections for labor and environmental standards, which must be strictly monitored and enforced, our (labor and environmental) social capital is now being undermined and will continue to seriously erode. Note that "free trade" proponents don't have a problem working toward enforcing intellectual protection restrictions because they protect private capital, rather than social capital.

In countries without constitutional democracies (especially in dictatorships) and without the technical competence and financial means to perform sound science, citizens cannot properly value their environment; the market doesn't set prices for the environment, governments do.

The lack of democracy and effective political institutions affects the ability of nations to make sound economic decisions.  (Thompson and Strohm, 1996):

However, if one does include the environment in the theory of comparative advantage, an important caveat is in order. This caveat is, of course, that the market does not set prices for the environment and that is, therefore, a task for government. It is quite possible that the government will price the environment incorrectly (by which we mean that it fails to require the full internalization of the costs of environmentally harmful practices). If that should happen, then it is still true that countries will tend to export the goods that use intensively factors of production that are relatively cheaper. But it is no longer true that trade patterns reflect relative scarcity, nor that trade is unambiguously welfare increasing.

Also, developing countries lacking the capability to perform sound science cannot properly evaluate impacts on health and the environment (Yoshino, et al., 2002):

The Federal Reserve Board setting excessively high real interest rates (in the past) has encouraged manufacturing to go offshore. Why invest in real assets for returns when one can invest in financial assets? This led to the leveraged buyouts of the 80s and the weakening of the manufacturing sector. (See the section on "The Economic Environment and National Economic Policy" in Systems Thinking Perspective on Manufacturing Base Restoration).

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Cutting taxes, that is, engaging in tax competition with other countries and among regions in the U.S., to attract companies is the standard recommendation of those who wish to promote economic growth. Indeed, tax competition is lauded by the CATO Institute (Edwards and de Rugy, 2002), which sees this as a desirable way to limit government.

        

Tax competition does attract companies and it does limit government, but the consequences are serious. The result is taxes that are insufficient to cover the long-term costs of roads and schools. This leads to infrastructure backlogs and calls for even more growth "to increase the tax base" and pay for infrastructure. Unfortunately, while there is a short-term tax benefit from growth, taxes remain insufficient to cover the long-term costs of growth; and the cycle continues.