Maybe, Hillary could learn a few things and counter this. She does not seem to want to do that and politically I get it, but the stupidity Trump/Sanders has spread on trade needs to be answered.
http://www.forbes.com/sites/timwors...mply-wrong-about-vat-and-mexico/#4fbcfd4638ef
Just one point about last night’s debate (no, sorry, my stomach is not strong enough to wage through more of that much politics). Donald Trump made a claim about Mexico and taxes. He claimed that the VAT there acts like a 16% barrier to American exports to Mexico. And that given the US doesn’t have a VAT then Mexican exports to the US did not face the same problem.
Apologies but this is simply flat out wrong. It’s nonsense, arglebargle if you want to use the technical term. Here’s Trump:
Let me give you the example of Mexico. They have a VAT tax. We’re on a different system. When we sell into Mexico, there’s a tax. When they sell in — automatic, 16 percent, approximately. When they sell into us, there’s no tax. It’s a defective agreement. It’s been defective for a long time, many years, but the politicians haven’t done anything about it.
Just rubbish, as Paul Krugman points out:
Gah. A VAT is basically a sales tax. It is levied on both domestic and imported goods, so that it doesn’t protect against imports — which is why it’s allowed under international trade rules, and not considered a protectionist trade policy. I get that Trump is not an economist — hoo boy, is he not an economist — but this is one of his signature issues, so you might have expected him to learn a few facts.
And as I pointed out yesterday:
Then we come to the interaction with trade. Under the US sales tax system an American corporation does not pay sales tax on the things it buys–it only applies to those final sales to the final consumer. So, American production pays no sales tax/VAT. But production elsewhere pays that VAT in those stages. And VAT is not payable on goods exported. Which is where that rebate comes in. If I, as a UK company, make something for sale in the UK then I collect VAT from the buyer, and I’ve paid out VAT to my suppliers. But if I export what I’ve made then I do not, and cannot, collect VAT from the buyer. And yet I’ve still paid out VAT to my suppliers. The system then says, well, OK, you can reclaim the VAT you paid out even though you didn’t collect any.
Note what this does–this puts me in exactly the same situation as a US company. When I make goods for export I have paid no sales tax/VAT on my supplies. Just like the American company.
The same is true of imports by that American producer. To the consumer it all looks the same. They have to pay the full VAT whether something is an import or domestically produced. And the producer has to turn over to the government 100% of the VAT collected minus any VAT that has been paid out. The American, imported, goods are treated exactly the same as the domestically produced ones.
There simply is no subsidy or trade barrier here at all. They’re flat out wrong.
Still, at least we know where the idea comes from now, Peter Navarro. Which is worse actually, because he actually is an economist and we should expect him to know this. Worse, he’s actually a rather good economist in certain areas of the subject. But he does seem to have some very odd ideas on trade and that’s probably where we should ignore him therefore. If only Donald Trump was doing that too….
http://www.forbes.com/sites/timwors...mply-wrong-about-vat-and-mexico/#4fbcfd4638ef
Just one point about last night’s debate (no, sorry, my stomach is not strong enough to wage through more of that much politics). Donald Trump made a claim about Mexico and taxes. He claimed that the VAT there acts like a 16% barrier to American exports to Mexico. And that given the US doesn’t have a VAT then Mexican exports to the US did not face the same problem.
Apologies but this is simply flat out wrong. It’s nonsense, arglebargle if you want to use the technical term. Here’s Trump:
Let me give you the example of Mexico. They have a VAT tax. We’re on a different system. When we sell into Mexico, there’s a tax. When they sell in — automatic, 16 percent, approximately. When they sell into us, there’s no tax. It’s a defective agreement. It’s been defective for a long time, many years, but the politicians haven’t done anything about it.
Just rubbish, as Paul Krugman points out:
Gah. A VAT is basically a sales tax. It is levied on both domestic and imported goods, so that it doesn’t protect against imports — which is why it’s allowed under international trade rules, and not considered a protectionist trade policy. I get that Trump is not an economist — hoo boy, is he not an economist — but this is one of his signature issues, so you might have expected him to learn a few facts.
And as I pointed out yesterday:
Then we come to the interaction with trade. Under the US sales tax system an American corporation does not pay sales tax on the things it buys–it only applies to those final sales to the final consumer. So, American production pays no sales tax/VAT. But production elsewhere pays that VAT in those stages. And VAT is not payable on goods exported. Which is where that rebate comes in. If I, as a UK company, make something for sale in the UK then I collect VAT from the buyer, and I’ve paid out VAT to my suppliers. But if I export what I’ve made then I do not, and cannot, collect VAT from the buyer. And yet I’ve still paid out VAT to my suppliers. The system then says, well, OK, you can reclaim the VAT you paid out even though you didn’t collect any.
Note what this does–this puts me in exactly the same situation as a US company. When I make goods for export I have paid no sales tax/VAT on my supplies. Just like the American company.
The same is true of imports by that American producer. To the consumer it all looks the same. They have to pay the full VAT whether something is an import or domestically produced. And the producer has to turn over to the government 100% of the VAT collected minus any VAT that has been paid out. The American, imported, goods are treated exactly the same as the domestically produced ones.
There simply is no subsidy or trade barrier here at all. They’re flat out wrong.
Still, at least we know where the idea comes from now, Peter Navarro. Which is worse actually, because he actually is an economist and we should expect him to know this. Worse, he’s actually a rather good economist in certain areas of the subject. But he does seem to have some very odd ideas on trade and that’s probably where we should ignore him therefore. If only Donald Trump was doing that too….
