Congress forces USPS to subsidize mailers in China and gouge Americans nearly six times as much to send the same package

Billions of dollars of goods are imported from China into the United States every week, and very little is exported to that communist monolith from small businesses in our country.

Most of our exports are from giants like: Boeing selling planes, Wall Street hawking financial services, or Hollywood offering pablum movies censored by the Chinese dictator-for-life and his all-seeing minions.

Is our huge trade deficit because entrepreneurs in China are just born smarter, work harder or are more thrifty, patient and all-seeing?

The answer is none of the above.

As usual, the problem is an always supplicant Congress, embracing big business, promoting their monopoly at the expense of the little guy or gal.

Most of us have seen pictures of cargo ships filled with China’s products unloading into our West Coast ports. Shipping containers are relatively inexpensive and cost just as much sailing from China to the U.S., as from the U.S. to China.

A small business can’t afford to fill shipping containers.

Instead, American exporters mail packages, and that’s where folks here get screwed by their own government as well as by China’s import duties and taxes.

Pretend you have a one-pound book worth $30 to mail in China to a customer in the United States. Using their mail, your package will arrive in about seven days at a cost of $7.31.

Suppose the book is damaged? You can mail it back to the sender and get a refund.

However, that means you have to pay the USPS postage – $46.71. If you are not in a hurry you can save money and it will be delivered in about seven weeks at a cost of $24.06 on a slow boat to China.

It’s not fair trade when one party is charged $46.71 and the other gets subsidized to only pay $7.31.

In 2011, Congress ordered the the U.S. Postal Service to make special agreements with the national postal carriers of China and Hong Kong to allow tracking-enabled packages not exceeding 36” or weighing more than 4.4 pounds to be sent to the U.S. at bargain basement rates. This shipping option – the ePacket – has rates so low that it’s cheaper to ship small parcels from China to an American city than it is to mail that same parcel within our country.

USPS subsequently extended the same deal to South Korea and Singapore. The plan was to increase imports into our country and help Asian countries at our expense.

Unlike the United States, China subsidizes its postal system so costs are minimal in that country. At the same time, USPS is subsidizing mail from China to keep prices low for our Far East competitor.

If the huge disparity in mailing costs doesn’t make Americans noncompetitive in the Chinese marketplace, consider the impact of taxes and fees levied by each government.

Let’s compare the approximate cost of shipping a one-pound box of gold-plated jewelry to each country.

Shipping from China to the United States
Item cost : $300
Shipment cost : $8
Total amount: $308

Shipping from United States to China
Item cost : $300
Shipment cost : $46
Customs duty rate @35% = $121
Vat rate @17% = $59
Total amount: $525

A first step in lowering costs for America’s small businesses is to reduce the rate we pay to mail to China and raise the rate we charge them to deliver here. The current imbalance of $8 to $46 to mail the same package is almost 6 to 1 – an unbelievable gift to Chinese exporters.

This change alone will help small business compete, plus impact the nearly $4 billion in so-called “loses” that will be incurred this year by the post office.

Next week: We examine the De Minimis import value threshold, and how some slimy members of Congress want it to continue benefiting China’s exporters and restricting American business.

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

New NAFTA helps Mexico and Canada, not U.S.A. workers. Is The Trump confused – or just a sellout?

For years I thought that what was good for our country was good for General Motors, and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country. Our contribution to the nation is considerable.

– Charles E. Wilson, 1953

As president of General Motors, Wilson led the firm through World War II, then became Secretary of Defense under Dwight D. “Ike” Eisenhower in 1953.

Eisenhower later decried the Military-Industrial Complex (MIC), not mentioning Wilson, but the public got the message – huge firms were getting rich from Defense spending.

Nearly 70 years later, little has changed for the fortunes of giant automakers, except now they have exported much of their manufacturing to Canada and Mexico, cutting American workers. The new slogan is: What’s good for General Motors is very good for America’s neighbors. Continue reading “New NAFTA helps Mexico and Canada, not U.S.A. workers. Is The Trump confused – or just a sellout?”

Remember those 13 American colonies of Britain? Get ready for 50 American “colonies” under China

50 more stars?

The American Revolutionary War was really all about trade and the exploitation of colonies across the world by the British Empire. Nobody wanted to live under foreign subjugation, and you can’t blame them.

Today, we face a trade war with China that could set us back 214 years to colony status.

The British were the worst in trade with colonies. They even allowed a government-chartered corporation to build an army of 28,000 to rule India, so that nation’s conquered poor would supply cheap raw goods to Britain.

The London mills then turned cotton, for example, into expensive cloth, sold for top dollar. The people in India never shared in the wealth their country generated until freedom in 1947.

Another example of Britain’s avarice was the slave trade. While some 300,000 Africans were shipped to the American South, some 2.6 million were sent by the British to the Caribbean to harvest sugar. By the Civil War the 300,000 in America had grown in population to 3 million, but 2.3 million Caribbean slaves had died off, leaving just 300,000 survivors. Hell Britannia! Continue reading “Remember those 13 American colonies of Britain? Get ready for 50 American “colonies” under China”

Trump card is the minimum wage. My bet: he just lost any chance of winning the Republican Presidential nomination

serfIn the Middle Ages an average duke or earl’s property was about 38,000 acres, and the “little people” grew the food and paid taxes to these aristocrats of yore, and the humble were called serfs and lived like dogs to support the castles for the very few.

The present crony capitalism is different. Our aristocrats elect public officials, set prices by corporations, and there are no serfs, just the “working class.”

Today’s lords and masters also make the dukes of old look like the pikers that defended them. Donald Trump, for example, boasts about $9 billion in wealth. That wouldn’t just buy him 39,000 acres, but at $10,000 an acre, he could acquire 900,000 acres or 1,400 square miles – enough to fit all New York City’s boroughs inside – four times – and still have 200 square miles remaining for golf courses and towers. At that size, Trump’s land could hold 40 million inhabitants at NYC density.

Asked if he is in favor of raising the minimum wage this week:

trumpDONALD TRUMP: I can’t be, Neil (Cavuto). And the reason I can’t be is [that] we are a country that is being beaten on every front economically, militarily. There is nothing that we do now to win. We don’t win anymore. Our taxes are too high. I’ve come up with a tax plan that many, many people like very much. It’s going to be a tremendous plan. I think it will make our country and our economy very dynamic. But, taxes too high, wages too high, we’re not going to be able to compete against the world. I hate to say it, but we have to leave it the way it is. People have to go out, they have to work really hard and have to get into that upper stratosphere. We can not do this if we are going to compete with the rest of the world. We just can’t do it. – most recent Republican debate

Donald Trump has a mixed bag of economic solutions, many bereft of the international Continue reading “Trump card is the minimum wage. My bet: he just lost any chance of winning the Republican Presidential nomination”

Useless Trade Assistance to be funded by cuts to Medicare

tpp

When Americans lose their job because it goes overseas due to trade deals, the victims can receive Trade Adjustment Assistance, a program that is supposed to help young and old find new jobs. Nice work if you can get it.

Some Democrat lawmakers and virtually all Repubs have praised this billion dollar effort since NAFTA began moving work to Mexico.

In 2008, Kara M. Reynolds of American University conducted a study that clearly showed workers who receive trade assistance did no better than regular laid off workers. Also, her study found that workers laid off  from trade deals like the TPP on average make 30% less at their new jobs.

Continue reading “Useless Trade Assistance to be funded by cuts to Medicare”

China has destroyed our factories and jobs because of its unfair import VAT policy, not just currency manipulation

BL-US-china-tradeAlmost 80% of the Senate (78-20) just voted for a measure that would cite foreign nations for manipulating the value of their currency, although the enforcement of any penalties was not and will not be addressed. But the real purpose of the vote was to give Democrats license to vote for Fast Track authority without seeming to be enemies of the middle class worker and the small businesses of the United States. The illusion will probably stick, as many hail this “bipartisan” action as the way to markedly reduce unfair trade practices – particularly by China.

Even the Washington Post, owned by Amazon’s CEO, explained: “… economists say such ma­nipu­la­tion is no longer prevalent and that the longtime poster child of currency ma­nipu­la­tion — China — has gradually stopped doing it.” So much for reality, when politicians have a chance to curry favor with big multinational benefactors for campaign cash and future lush (two martini lunch, anyone?) private sector jobs.

Continue reading “China has destroyed our factories and jobs because of its unfair import VAT policy, not just currency manipulation”