December 10, 2008

I Can Hold It In No Longer - Unfair Trade

A huge problem contributing to the domestics issues is Unfair Trade.

This VAT (value added Taxes)disparity is reliably estimated to place an extra $290-billion burden on American manufactured goods and $85 billion on U.S. services -- or roughly half our yearly trade deficit.

So America pays an extra $290 BILLION each year to export its goods to other countries. A major portion of that $290 BILLION is for autos exported.

If VAT countries trade with each other, it is a wash. Each country rebates the VAT for its exported products and imposes the VAT on imported products. There is rough parity. But in the United States, there is a free ride for foreign products produced under a VAT system -- because we do not levy a VAT at the border that compensates for the export rebate the product received at home.

But how does that really work against auto's?

Compare a German and American car, each offered to the consumer in its home market for $20,000. When the German car is exported to the United States, the VAT taxes are rebated, and it costs $17,885 here -- a price advantage of roughly 10% due only to the difference in tax systems, not corporate competitiveness.

The $20,000 American car exported to Germany is saddled with the VAT at the border -- which is imposed not just on the base price of the car, but the shipping and insurance costs as well -- and winds up costing $25,792 in Germany.

Posted by Quality Weenie at December 10, 2008 10:31 AM | TrackBack