19 May 2009

Senate Bill Seeks Remedy for Taxes on Exports

The following is extracted from the 15 May 2009 edition of “The Journal of Commerce”.

U.S. Senator Lindsey Graham, R-S.C., introduced legislation Thursday that would require the United States Trade Representative to negotiate a remedy for the equitable border tax treatment on goods and services within the World Trade Organization by January 1, 2010.

Proponents of the bill, S.1043, say U.S. manufacturers and service providers face severe disadvantages in the global market as a result of foreign border-adjusted taxes such as value-added taxes. In 2007 foreign border tax schemes acted as a combined $474 billion trade barrier to U.S. exports and export subsidy for foreign competitors, said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition….

The VAT is a border-adjusted tax that foreign countries rebate when their manufacturers export to the United States. The United States does not have a VAT or any other border tax system. The United States does not apply any similar federal taxes on goods shipped to the U.S. market from a foreign competitor, …

"The end result is that the United States has no mechanism to offset foreign border tax subsidies that tilt the playing field," Tantillo said. "Consequently, foreign competitors enjoy a substantial annual tax advantage when selling to the U.S. market and when competing against U.S. exports in foreign markets. Senator Graham's legislation would stop the charade by requiring USTR to negotiate an end to these distortions."

S. 1043 has been referred to the Senate Finance Committee.