Second, U.S. exporters are subjected to double taxation. They pay U.S. "direct" taxes, and then they pay a so-called "indirect" tax at the foreign border in order to get their products and services admitted. The VAT import tax is levied on the price of the "landed cost," which includes the costs of the product and transportation.
The Border Tax Equity Act accurately calls this discrimination against U.S. producers "arbitrary," "inequitable," and "a primary obstacle to more balanced trade relations between the United States and its major trading partners." The Border Tax Equity Act is designed to level the trading field by forcing other countries to eliminate their de facto tariffs. The bill would direct our trade representatives to negotiate a remedy for the VAT inequity on goods and services by Jan. 1, 2009.
Then comes the armored fist in the velvet glove. If the VAT countries refuse to agree to a reasonable negotiated solution by then, the United States would charge an offsetting assessment on imports of goods and services equal to the amount of VAT the foreign government rebates to its exporters. In addition, the United States would issue rebates equal to the amount of VAT taxes that U.S. exporters are forced to pay on goods they sell to other countries.
U.S. businesses have complained of this border-tax discrimination for 40 years, and Congress has repeatedly tried to resolve it by good-faith negotiations with VAT countries. But other countries continue to say, "No dice," while the WTO turns a deaf ear.
This differential fuels the trade deficit, cripples U.S. competitiveness, and provides a powerful incentive for U.S. companies to shift production and jobs overseas. Thousands of U.S. companies have shifted production to nations that use a VAT where they avoid the double taxation.
To those who say that this bill is not WTO compliant, we reply that it is the WTO's refusal to address this discrimination that proves its anti-American bias. It's time to speak up for American industry and jobs.
Phyllis Schlafly is a national leader of the pro-family movement, a nationally syndicated columnist and author of Feminist Fantasies.
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