New tariffs would level trading field

January 26, 2013 

The job or GDP recovery from the 2008 great recession has been tepid at best and came with a price tag of $5 trillion and counting. It is in large part an unintended consequence of free trade policies initiated by Reagan to successfully tame both inflation and muscle unions. What was then a panacea is now an albatross devastating our manufacturers and exporting our jobs.

Federal Reserve quantitative easings and ginormous budget deficits could and did achieve only so much. The only remedy left is the imposition of tariffs that will level the playing field with our trading partners that all adopted the VAT taxation in order to boost their exports to our unsuspecting shores.

Simply stated, a car with a retail price of $50,000 in Germany receives a 20 percent export subsidy (read VAT rebate) and can sell here ceteris paribus for $40,000, against the $50,000 cost of a similar car produced here. This VAT export subsidy also benefits and consequently fosters American manufacturers to produce abroad. The Jeep in China!

Unless and until Congress levels the international trading field by applying reciprocal tariffs on a country by country basis (20 percent with Germany in the above example), there is no way to mitigate the manufacturing and job gloom we today find ourselves in. An alternative could be to substitute our antiquated sales tax by our own VAT. Unfortunately it is not a politically palatable proposition ergo our children will end up paying the piper!

The writer lives in Murrells Inlet.

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