2020 Trade Policy Agenda
Finance/WM, June 17, 2020
Senate Finance, USMCA, July 30, 2019
House W&M, Trade, Mexican Labor Reform June 25, 2019
Senate Finance, President's 2019 Trade Policy Agenda and the United States-Mexico-Canada Agreement, June 18, 2019
House Ways & Means, 2019 Trade Policy Agenda: Negotiations with China, Japan, the EU, and UK; new NAFTA/USMCA, U.S. Participation in the WTO and other matters, June 19, 2019
2020:
The comments on the incompetence of this President are more obvious this year, when trade was put in front of a pandemic, leading to domestic disaster. He then reversed his comments and is inciting more retaliation from this authoritarian opposite in China. Sadly, in the impeachment trial earlier this year, the House did not cite this incompetence nor did the Senate consider it, so here we are again. More’s the pity.
Trade Policy only 2019, 2020 attachment:
Trade negotiations with China, Japan, the EU, and the UK threatening tariffs have taken on the character of economic gunboat diplomacy, but without the Navy. These occur because the President is ill equipped by his background as a businessman to work cooperatively, which is the essence of governance in a free society. He has a freer hand in trade negotiations. Sadly, his experience as a CEO has not served the nation well. The modus operandi of most executives is to break things in order to be seen fixing them. This must stop. The public is not amused, including the Chamber of Commerce, farmers and the stock and commodity markets.
The solution to these problems lies not with oversight of trade policy but through using criminal contempt proceedings against the leadership if the Internal Revenue Service, the Secretary of the Treasury and anyone in the White House, possibly, if not probably, including the President for not releasing the tax information requested by the Chairman. The penalties for refusing to do so are quite clear and the opinion that a sitting President cannot be indicted can no way apply to this matter.
Today's witness is not likely to say his boss is a vainglorious idiot, so allow me to. It is well known that in this Administration, professional diplomatic expertise is not valued. Mr. Trump prefers to shoot from the lip. The incompetence of this president is tragic for our ongoing trade policy, which relies on a high degree of professionalism and careful work over a period of several administrations. NAFTA negotiations and it's successor, as well as similar free trade agreements are an example of this. The Trans-Pacific Partnership was one such effort, but it was derailed by presidential politics on both sides. In trade, what is good politics is often not good economic policy.
Trade Policy, 2019 only:
This is not to say that there are not fundamental issues that need to be addressed in current and future agreements. We have reservations in matters having to do with the U.S.-Mexico-Canada Agreement. Material stating our reservations (which should be yours as well, but more formally) on both Enforcement and who is allowed to migrate are brought forward from our testimony on May 22nd of this year and July 2017 on the modernization of NAFTA. There are two other issues we would like to address as it relates to NAFTA and to all subsequent trade agreement.
All 2019:
The first is Chapter 19 Tribunals. These tribunals put national and state sovereignty at the mercy of the interests of multinational enterprise. If such enterprise were employee-owned, we would see no problem. That, however, is not the case. Local workers and the environment are put at the mercy of the wealthy few.
The second is visas. Canadian (including refugees from Hong Kong) and American citizens can immigrate for one year (renewable) on a NAFTA visa. Mexican workers cannot. This is purely racism. If the Congress believes there are too many Mexican workers in American fields and factories, repeal right to work laws and immigration restrictions. Most employers will prefer American workers if they have to pay a union wage and operate under safety standards set in collective bargaining. Until then, make visa rules uniform and apply them to workers already here. If this does not happen, someone may yet raise an equal protection case in our courts, which will also give us a test of the constitutionality of the Chapter 19 tribunals.
Mexican Labor and USMCA 2019:
Labor reform will take the pressure off of migration, although that is now the case already. Mexican workers who can join a Union in Mexico and not in so called right-to-work states will face an easier choice to stay home. We hope that this will lead manufacturers in such states to rethink their positions on organized labor and American labor unions to seek expansion into these states and to link with Mexican unions in solidarity. This may increase prices for some goods, particularly food, but it will increase wages even more, particularly among lower wage workers. We have suffered under a two-tier economy for too long, with undocumented workers suffering the most of all. As a more union-based economy progresses on both sides of the border, the desire for more workplace democracy through employee ownership. Tax reform can certainly facilitate expanding ownership when actual worker control, rather than simply a change in management at the top, evolves.
Trade Policy only 2019:
WTO participation, like NAFTA/USMCA, have issues regarding extra-territorial regulation of American business interest. The interesting question is who is regulating who? We explored this in comments to the Senate Finance Committee on March 22nd of this year. You can find these comments in Attachment One. The interaction of tax and trade is worthy of mention. Attachment Two contains our revised tax reform proposals. Two elements of these proposals are discussed below.
Trade Policy and USMCA 2019:
Consumption taxes could have a big impact on workers, industry and consumers. Canada as a Goods and Services or Value Added Tax (VAT), as does Mexico. In our tax reform proposal, we refer to such taxes as an Invoice or I-VAT. Such taxes are zero rated at the border, so American consumers benefit while our lack of these taxes means that Canadian and Mexican consumers pay our taxes indirectly while getting none of the associated benefits. This essentially means they often shop elsewhere, which is not good for our workers or industry.
Trade Policy 2019, 2020 attachment:
Enacting an I-VAT is far superior to a tariff. The more government costs are loaded onto an I-VAT the better. Indeed, if the employer potion of Old Age and Survivor’s Insurance, as well as all of disability and hospital insurance are decoupled from income and credited equally and personal retirement accounts are not used, Then there is no reason not to load them onto an I-VAT. This tax is zero rated at export and fully burdens imports. Seen another way, to not put as much taxation into VAT as possible is to enact an unconstitutional export tax. Adopting an I-VAT is superior to it’s week sister, the Destination Based Cash Flow Tax that was contemplated for inclusion in the TCJA. It would have run afoul of WTO rules on taxing corporate income. I-VAT, which taxes both labor and profit, does not.
The second tax applicable to trade is a Subtraction VAT or S-VAT. This tax is designed to benefit the families of workers through direct subsidies, such as an enlarged child tax credit, or indirect subsidies used by employers to provide health insurance or tuition reimbursement, even including direct medical care and elementary school tuition. As such, S-VAT cannot be border adjustable. Doing so would take away needed family benefits. As such, it is really part of compensation. While we could run all compensation through the public sector.
The S-VAT could have a huge impact on long term trade policy, probably much more than trade treaties, if one of the deductions from the tax is purchase of employer voting stock (in equal dollar amounts for each worker). Over a fairly short period of time, much of American industry, if not employee-owned outright (and there are other policies to accelerate this, like ESOP conversion) will give workers enough of a share to greatly impact wages, management hiring and compensation and dealing with overseas subsidiaries and the supply chain – as well as impacting certain legal provisions that limit the fiduciary impact of management decision to improving short-term profitability (at least that is the excuse managers give for not privileging job retention).
Employee-owners will find it in their own interest to give their overseas subsidiaries and their supply chain’s employees the same deal that they get as far as employee-ownership plus an equivalent standard of living. The same pay is not necessary, currency markets will adjust once worker standards of living rise. Attachment Three further discusses employee ownership.
Over time, ownership will change the economies of the nations we trade with, as working in employee-owned companies will become the market preference and force other firms to adopt similar policies (in much the same way that, even without a tax benefit for purchasing stock, employee-owned companies that become more democratic or even more socialistic, will force all other employers to adopt similar measures to compete for the best workers and professionals).
In the long run, trade will no longer be an issue. Internal company dynamics will replace the need for trade agreements as capitalists lose the ability to pit the interest of one nation’s workers against the other’s. This approach is also the most effective way to deal with the advance of robotics. If the workers own the robots, wages are swapped for profits with the profits going where they will enhance consumption without such devices as a guaranteed income.
Attachment: Tax Reform, February 21, 2020
Attachment: Employee Ownership from Improving Retirement Security for America’s Workers, June 6, 2018
Senate Finance, USMCA, July 30, 2019
House W&M, Trade, Mexican Labor Reform June 25, 2019
Senate Finance, President's 2019 Trade Policy Agenda and the United States-Mexico-Canada Agreement, June 18, 2019
House Ways & Means, 2019 Trade Policy Agenda: Negotiations with China, Japan, the EU, and UK; new NAFTA/USMCA, U.S. Participation in the WTO and other matters, June 19, 2019
2020:
The comments on the incompetence of this President are more obvious this year, when trade was put in front of a pandemic, leading to domestic disaster. He then reversed his comments and is inciting more retaliation from this authoritarian opposite in China. Sadly, in the impeachment trial earlier this year, the House did not cite this incompetence nor did the Senate consider it, so here we are again. More’s the pity.
Trade Policy only 2019, 2020 attachment:
Trade negotiations with China, Japan, the EU, and the UK threatening tariffs have taken on the character of economic gunboat diplomacy, but without the Navy. These occur because the President is ill equipped by his background as a businessman to work cooperatively, which is the essence of governance in a free society. He has a freer hand in trade negotiations. Sadly, his experience as a CEO has not served the nation well. The modus operandi of most executives is to break things in order to be seen fixing them. This must stop. The public is not amused, including the Chamber of Commerce, farmers and the stock and commodity markets.
The solution to these problems lies not with oversight of trade policy but through using criminal contempt proceedings against the leadership if the Internal Revenue Service, the Secretary of the Treasury and anyone in the White House, possibly, if not probably, including the President for not releasing the tax information requested by the Chairman. The penalties for refusing to do so are quite clear and the opinion that a sitting President cannot be indicted can no way apply to this matter.
Today's witness is not likely to say his boss is a vainglorious idiot, so allow me to. It is well known that in this Administration, professional diplomatic expertise is not valued. Mr. Trump prefers to shoot from the lip. The incompetence of this president is tragic for our ongoing trade policy, which relies on a high degree of professionalism and careful work over a period of several administrations. NAFTA negotiations and it's successor, as well as similar free trade agreements are an example of this. The Trans-Pacific Partnership was one such effort, but it was derailed by presidential politics on both sides. In trade, what is good politics is often not good economic policy.
Trade Policy, 2019 only:
This is not to say that there are not fundamental issues that need to be addressed in current and future agreements. We have reservations in matters having to do with the U.S.-Mexico-Canada Agreement. Material stating our reservations (which should be yours as well, but more formally) on both Enforcement and who is allowed to migrate are brought forward from our testimony on May 22nd of this year and July 2017 on the modernization of NAFTA. There are two other issues we would like to address as it relates to NAFTA and to all subsequent trade agreement.
All 2019:
The first is Chapter 19 Tribunals. These tribunals put national and state sovereignty at the mercy of the interests of multinational enterprise. If such enterprise were employee-owned, we would see no problem. That, however, is not the case. Local workers and the environment are put at the mercy of the wealthy few.
The second is visas. Canadian (including refugees from Hong Kong) and American citizens can immigrate for one year (renewable) on a NAFTA visa. Mexican workers cannot. This is purely racism. If the Congress believes there are too many Mexican workers in American fields and factories, repeal right to work laws and immigration restrictions. Most employers will prefer American workers if they have to pay a union wage and operate under safety standards set in collective bargaining. Until then, make visa rules uniform and apply them to workers already here. If this does not happen, someone may yet raise an equal protection case in our courts, which will also give us a test of the constitutionality of the Chapter 19 tribunals.
Mexican Labor and USMCA 2019:
Labor reform will take the pressure off of migration, although that is now the case already. Mexican workers who can join a Union in Mexico and not in so called right-to-work states will face an easier choice to stay home. We hope that this will lead manufacturers in such states to rethink their positions on organized labor and American labor unions to seek expansion into these states and to link with Mexican unions in solidarity. This may increase prices for some goods, particularly food, but it will increase wages even more, particularly among lower wage workers. We have suffered under a two-tier economy for too long, with undocumented workers suffering the most of all. As a more union-based economy progresses on both sides of the border, the desire for more workplace democracy through employee ownership. Tax reform can certainly facilitate expanding ownership when actual worker control, rather than simply a change in management at the top, evolves.
Trade Policy only 2019:
WTO participation, like NAFTA/USMCA, have issues regarding extra-territorial regulation of American business interest. The interesting question is who is regulating who? We explored this in comments to the Senate Finance Committee on March 22nd of this year. You can find these comments in Attachment One. The interaction of tax and trade is worthy of mention. Attachment Two contains our revised tax reform proposals. Two elements of these proposals are discussed below.
Trade Policy and USMCA 2019:
Consumption taxes could have a big impact on workers, industry and consumers. Canada as a Goods and Services or Value Added Tax (VAT), as does Mexico. In our tax reform proposal, we refer to such taxes as an Invoice or I-VAT. Such taxes are zero rated at the border, so American consumers benefit while our lack of these taxes means that Canadian and Mexican consumers pay our taxes indirectly while getting none of the associated benefits. This essentially means they often shop elsewhere, which is not good for our workers or industry.
Trade Policy 2019, 2020 attachment:
Enacting an I-VAT is far superior to a tariff. The more government costs are loaded onto an I-VAT the better. Indeed, if the employer potion of Old Age and Survivor’s Insurance, as well as all of disability and hospital insurance are decoupled from income and credited equally and personal retirement accounts are not used, Then there is no reason not to load them onto an I-VAT. This tax is zero rated at export and fully burdens imports. Seen another way, to not put as much taxation into VAT as possible is to enact an unconstitutional export tax. Adopting an I-VAT is superior to it’s week sister, the Destination Based Cash Flow Tax that was contemplated for inclusion in the TCJA. It would have run afoul of WTO rules on taxing corporate income. I-VAT, which taxes both labor and profit, does not.
The second tax applicable to trade is a Subtraction VAT or S-VAT. This tax is designed to benefit the families of workers through direct subsidies, such as an enlarged child tax credit, or indirect subsidies used by employers to provide health insurance or tuition reimbursement, even including direct medical care and elementary school tuition. As such, S-VAT cannot be border adjustable. Doing so would take away needed family benefits. As such, it is really part of compensation. While we could run all compensation through the public sector.
The S-VAT could have a huge impact on long term trade policy, probably much more than trade treaties, if one of the deductions from the tax is purchase of employer voting stock (in equal dollar amounts for each worker). Over a fairly short period of time, much of American industry, if not employee-owned outright (and there are other policies to accelerate this, like ESOP conversion) will give workers enough of a share to greatly impact wages, management hiring and compensation and dealing with overseas subsidiaries and the supply chain – as well as impacting certain legal provisions that limit the fiduciary impact of management decision to improving short-term profitability (at least that is the excuse managers give for not privileging job retention).
Employee-owners will find it in their own interest to give their overseas subsidiaries and their supply chain’s employees the same deal that they get as far as employee-ownership plus an equivalent standard of living. The same pay is not necessary, currency markets will adjust once worker standards of living rise. Attachment Three further discusses employee ownership.
Over time, ownership will change the economies of the nations we trade with, as working in employee-owned companies will become the market preference and force other firms to adopt similar policies (in much the same way that, even without a tax benefit for purchasing stock, employee-owned companies that become more democratic or even more socialistic, will force all other employers to adopt similar measures to compete for the best workers and professionals).
In the long run, trade will no longer be an issue. Internal company dynamics will replace the need for trade agreements as capitalists lose the ability to pit the interest of one nation’s workers against the other’s. This approach is also the most effective way to deal with the advance of robotics. If the workers own the robots, wages are swapped for profits with the profits going where they will enhance consumption without such devices as a guaranteed income.
Attachment: Tax Reform, February 21, 2020
Attachment: Employee Ownership from Improving Retirement Security for America’s Workers, June 6, 2018
posted by Michael Bindner at 10:00 AM
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