VAT is another big reason our factories are closed, and the good jobs have gone overseas

While the public is focused on tariffs and pundits are bemoaning the dangers of a “trade war,” our foreign competitors have the last laugh every day, watching our factories close and our colleges over-qualify future pizza delivery peons.

It doesn’t have to be that way. In fact, it’s easy to see a solution.

Here is one unfair trade example. Germany and the European Union charge a 10% tariff on cars they import from the U.S. We only charge 2.5% on cars imported from there into our country.

19% VAT in Germany on imports

That misses the bigger part of the story. In addition to their 10% tariff, Germany, for example, charges an additional 19% import Value Added Tax (VAT), bringing the total to 29% tax paid to the German government for expenditures that include “socialist” universal healthcare, expanded retirement benefits and subsidized higher education.

The U.S. has no VAT for public services. Business lobbyists oppose that tax system, complaining it is onerous to implement, but never explaining how they successfully do it in places like Romania, Slovenia or Turkey.

The result is an auto made and sold in the U.S.A. for $50,000 will cost $64,500 to buy in Germany. A $50,000 car made in Germany will cost $51,250 here. Surprise – not too many American cars on the Autobahn, but no shortage of dealers here for BMW, VW, Mercedes, Audi, Porsche and Opel.

Germany boasts 857,336 highly-paid workers in the truck and auto industry. That’s 3.5 times as many as the Big Three in this country. General Motors employs 97,000 people in the U.S. while Chrysler has 56,900, and Ford, 85,000 – a combined total of 239,000.

U.S. auto workers earn about $34 an hour – new hires far less. German auto workers average $67 an hour ($129,000 annually).

As an aside, while our streets seem clogged with foreign cars, did you ever wonder why there are so few foreign trucks?

The same politicians – who decry tariffs – decided decades ago to protect the American truck industry and imposed a 25% tariff (still in effect) on imported trucks. That tariff successfully keeps away foreign price competition from F-150 and Silverado pickups.

Even if we negotiate the elimination of all tariffs by all nations, the VAT will continue to strangle America’s ability to export goods.

In the EU example on this page most countries hover around 20% on imported goods from any nation outside the European Union. If we had the factories, that EU VAT would hit every tv, computer, refrigerator and espresso machine exported to them.

The Coalition for a Prosperous America (CPA) is asking Congress to improve the federal tax system to promote US trade competitiveness.

The group favors a strategic consumption tax:

…such as a Goods and Services Tax (GST), to improve America’s trade competitiveness. Currently, foreign governments charge US exporters value-added (VAT) taxes—averaging 17 percent globally—at their borders.

Most of these countries have reduced tariffs over the last 45 years—but replaced them with value added taxes. They use this new revenue to reduce other taxes and costs, and to fund national pension systems and health care.

The US is virtually alone in not collecting value added taxes on imports.

CPA said Congress should fix this foreign trade advantage “through an innovative and strategic consumption tax called a Goods and Services Tax.”

But Americans, especially the poor and working class, should not pay more taxes. Congress should therefore, at the same time, reduce or offset other domestic taxes and costs such as payroll taxes.

CPA suggested that a 13 percent GST could raise $1.4 trillion in revenue and fund “a full credit against payroll taxes, reduce personal income taxes, and provide a credit for healthcare costs.

US manufacturers would benefit from the cost reduction and receive a 13 percent GST rebate when exporting. Foreign companies would pay a 13 percent GST tax sending bringing goods into the US.

This sounds reasonable. The only folks who would oppose it are multi-national firms, who are sending our jobs and factories overseas, but those are the powers that seem to run Congress and have exerted extreme influence in the White House the past six administrations.

Click here for the text of CPA’s letter to the House Ways and Means Committee.

China also hits us with imported VAT, which could be as high as 16% standard, plus 3% National Education, 2% Local Education, 6% City Maintenance and 3% Construction services – a total of 30%.

Tariffs are hefty and additional.

Chinese VAT rates

Rate Type Which goods or services
16% Standard All other taxable goods and services since 1 May 2018
10% Standard Retail; entertainment; hotel; restaurants; catering services; real estate and construction, telephony calls; postal; transport and logistic. Since 1 May 2018
6% Standard Financial services and insurance; telephony and internet data; IT; technology; consulting.
3% Chinese National Education Tax
2% Chinese Local Education Taxes
6% City Maintance & Construction
3% Construction services

Double Cross of U.S./Mexico trade deal underway, which will make fools out of American consumers

The new United States-Mexico-Canada Agreement (USMCA) was signed November, last year, by the President with warm enthusiasm from Congress. The promise was a no-tariff zone, free trade, American prosperity, all good for big business and consumers.

Unfortunately, our Negotiator-in-Chief was trumped by Mexico. This House of Cards trade deal will create even larger deficits ($566 billion in 2017), and enhance China’s position as the world’s biggest exporter of goods – currently $2.26 trillion, about 1.5 times the U.S. or Germany.

To understand this fiasco, consider two elements.

Number one is that the average Jill doesn’t buy goods from China. American businesses do. And they buy at very low prices and sell at huge profits to the American market.

Consider the $100 phone made in China that costs you $1,200. Or sunglasses here at $550, that are $14 to import. And even our children are ripped off for sneakers that cost our companies $11 to import and are peddled here for $280 – on sale!

Importing from China guarantees huge profits for the modern business that will change suppliers to save a dime on a million-dollar purchase, or fire its older employees, just to save on health insurance premiums and seniority raises.

Number two is that the United States is working on a fair trade agreement with China. And if that doesn’t pan out, both countries will continue tariffs to protect domestic production, which will put a huge squeeze on American imports from China.

Now, back to USMCA.

U.S. imports in billions of $

Mexico looked at this deal with Donald Trump and his merry munchkins and decided it was flawed.

This conclusion may or may not have been a surprise to Trump’s chief negotiator, Steven Mnuchin, Treasury Secretary, and a director of Sears Holdings from 2005 to 2016. This avowed defender of the average American consumer is also a featured attendee of the Trilateral Commission, a former Hollywood producer and Executive VP at Goldman Sachs.

What did the Mexicans learn?

Luz Maria de la Mora, Mexico’s undersecretary of Foreign Trade of the Ministry of Economy, explained it this way at the Liánméng 2019 Forum:

If we want to remain competitive, we need to find ways that the Chinese investment will also come to Mexico, because we need to complement trade flows and imports we do in China. We need to bring to the region for China to continue to participate in these commercial flows.

De la Mora said Mexico should promote this type of mechanism with China and other countries to strengthen the country and, in some way, “face the protectionism (against China) that comes from the United States at this time.”

“We have to see the positive side; this is also opening opportunities for Mexico,” the undersecretary said.

We reached an agreement with clear rules, and we are ideally positioned to be the world’s production and export platform to the U.S., so I think this is also an opportunity between China and Mexico. We seek to reinforce those bonds and that shared production that we need so much and that I also believe our economies deserve.

We need to seek to build an agenda, and that is my responsibility, and I assure you that we are going to work with the Chinese authorities to seek to improve that regulatory aspect that allows us to have greater fluidity, he added.

In short, Mexico will import goods from the dictatorship of China, sell items to U.S. businesses without tariffs or quotas, making a fortune as the middleman, and subverting any agreements we make directly with the Chinese. The mad rush for imported products and overseas manufacturing will continue.

The only way the American worker and consumer will benefit from a new trade policy is if we cut imports of manufactured items and bring factories back to this country to create living-wage jobs.

The GOP/Chamber of Commerce plan ignores workers, focuses on balancing the U.S. current account, and offers these goals:

  • Export more agricultural products and create slave-wage jobs & encourage border jumping.
  • Tighten “intellectual property” rules to increase profits for Hollywood producers – no jobs added.
  • Expand our financial services and banking services to China, a Wall Street bonanza.
  • Provide more legal services to China – because we need more lawyers here?
  • Finally, produce to export amazing TV commercials like: “Liberty, Liberty, Liberty……Liberty”

Military wants $124 billion ($300 million each) to buy planes to equal China’s J-20 ($40 million each); elites want to cut Social Security to pay for this!

Jeff Bezos could go on Medicaid if he played it correctly, but the average working Jill can’t

Medicaid rules changed when President Barack Obama pushed through the Affordable Car Act (ACA) and he ensured that the very rich could join low-cost Medicaid, while the working class had to pay high medical expenses, either at work with private insurance or retired under Medicare.

While I’m sure Jeff Bezos would never stoop his mightiness to rub elbows with regular folks on Medicaid, it is amazing that he could so by following these steps: Continue reading “Jeff Bezos could go on Medicaid if he played it correctly, but the average working Jill can’t”

Prophecy in 1994 – rebuffed by that Trilateral whiz Charlie Rose – is fulfilled 25 years later

How unfair trade has ruined economy!

Television’s historic moments include: America’s landing on the moon, the assassination of President John F. Kennedy, the tearing down of the Berlin Wall and for some, various Super Bowl touchdowns, and for others, multi-millionaires accepting honors from the Academy of Motion Picture Arts and Sciences (AMPAS).

An interview in 1994 of Sir James Goldsmith by recently humiliated PBS legend Charlie Rose is never on the list of great TV moments, but it should be.

Rose – longtime darling of the Trilateral Commission (TC) and the Council on Foreign Relations (CFR) – was ecstatic with the Bill Clinton administration and the globalism the President promoted with NAFTA and other trade treaties.

Goldsmith was one of the world’s richest men. He believed that America would lose its middle class when manufacturing moved overseas, and he argued that so-called free trade would eventually reduce America to a third world country.

In the video above from 25 years ago, the usually cordial Rose grows angrier as the interview continues, and when Goldsmith overwhelms him with facts, Rose adds Laura Tyson, Clinton’s economic whiz, in an attempt to shout down Goldsmith.

There are amazing predictions of job loses, and Goldsmith muses that American workers will be competing with four billion workers around the world, most earning about 2% of our average wage. He also predicted the world will be involved in mass migration from poor to rich countries, as they search for better wages.

While Rose and Tyson argued in the video that American factories will only open in foreign lands to produce for foreign consumption, Goldsmith explains that the factories will produce overseas at dirt wages and import these goods here.

That was before virtually all production of appliances, electronics and clothing moved overseas, and Made in China was this nation’s most favored label.

Rose and Tyson scoffed at the suggestion that auto production would move to Mexico.

The United States now imports 4 million vehicles a year from Mexican plants. We produced 3.1 million cars in America in 2017, and China manufactured 24.8 million cars the same year – up from just 7 million in 2008.

Goldsmith said that when faced with the choice of cheap foreign labor, corporations would see no viable choice, and the American worker would lose bargaining power. Who needs to pay for American labor, plus vacations, FICA, health insurance, overtime, when the minimum wage is 59 cents an hour in Mexico, and a fraction of even that in China?

Goldsmith predicted that we would lose jobs with trade treaties like the General Agreement on Tariffs and Trade (GATT). Later events proved him right. America removed tariffs and quotas, but other nations have continued usual business practices, blocking our imports, while we allow free access to U.S. markets.

The above is a long video – some 56 minutes. It can be watched in snatches, and you are excused for yelling at the screen when Laura and Charlie try to talk over Goldsmith.

Rose, 76, is no longer on TV. Most of his awards have been withdrawn after 37 women accused him of abusive behavior and sexual harassment.

His downfall began in November, 2017, when eight women, who were employees or wanted to work for Rose, accused the news emperor of contriving to be naked in their presence, groping them, and making lewd phone calls.

Tyson is currently a member of the Board of Trustees at UC Berkeley’s Blum Center for Developing Economies. She has published a number of books and articles on industrial competitiveness, trade, and also on the economies of Central Europe.

Goldsmith was a critic of the mass media. After he started the Referendum Party in 1994 to withdraw from the European Union, he mailed a VHS video cassette film to some five million homes in Great Britain “to allow him to address the electorate free from the editorial control of the nation’s mainstream media.”

Goldsmith died in July, 1997, and is probably best known as the man who retired from his financial empire and liquidated his assets, when he correctly predicted the Black Monday stock market crash in 1987.