Bipartisan Coalition Introduces Border Tax Equity Act To Strengthen America's Domestic Production

Press Release

BIPARTISAN COALITION INTRODUCES BORDER TAX EQUITY ACT
TO STRENGTHEN AMERICA'S DOMESTIC PRODUCTION

U.S. Reps. Bill Pascrell, Jr. (D-NJ-08), Walter Jones (R-NC-03), Michael Michaud (D-ME-03) and Duncan Hunter (R-CA-52) today stood with the support of American manufacturers, business leaders, and labor groups to introduce the Border Tax Equity Act. The legislation would strengthen America's domestic production capability by negating an unfair tax burden that is being levied on American producers and service providers.

"I am proud to be supported a Democrats, Republicans, business leaders and organized labor in introducing the Border Tax Equity Act," stated Pascrell. "It is unconscionable that American producers are strapped with a $379 billion disadvantage caused by foreign border-adjusted tax schemes. Our hardworking American manufacturers aren't asking for a special deal-they're looking for a level playing field. Manufacturing has become a difficult venture in the U.S. It is about time we start to remove some the hurdles that domestic producers are forced to jump every time they do business in the global marketplace. The Border Tax Equity Act will push America's trade representative to rectify an untenable economic situation, and I am honored to stand here and fight for American manufacturers with my colleagues today."

"I strongly support fair trade, but it needs to be on a level playing field. Differential treatment of direct and indirect taxes under international trade rules puts U.S. producers at a profound disadvantage," Jones said. "Because the U.S. relies primarily on direct taxes rather than indirect taxes - like a VAT tax - U.S. exports are taxed twice, while exports of countries that use VAT taxes are traded free of certain taxes. Since the U.S. levies no similar taxes at the border on imports, foreign VAT taxes tilt the playing field against U.S. producers. The result of this tilted playing field has been a record U.S. trade deficit of $836 billion in 2006, and in the past six years, the loss of 3.2 million manufacturing jobs across the U.S. and 300,000 in my state of North Carolina alone. Our trade negotiators need to begin serving the best interest of this country by demanding a level playing field."

"This legislation would correct an inequity in the tax system that places domestic manufacturers at a great disadvantage with foreign manufacturers," Michaud said. "The loss of millions of jobs is a predictable outcome of a U.S. trade policy that gives significant advantages to foreign producers at the expense of domestic manufacturers. This legislation is a tremendous step forward in closing a loophole that has helped cripple our manufacturing industry. We will push for its passage in the days and weeks ahead."

"Today's workers are forced to compete on an uneven playing field that unfairly favors our global trading partners," said Congressman Hunter. "In order for our workers to stay competitive, we must level the playing field by eliminating the excessive tax burden and correcting the unfair trade practices responsible for driving American industry offshore. It is time for our nation's trade policies to begin reflecting the interests of American workers and manufacturers. This legislation, which ends the double taxation of American exports, takes a much needed step towards achieving a trading system that is fair and gives our workers and manufacturers a chance to succeed."

In 2005, countries accounting for 94 percent of all trade with the United States (137 nations) employed some type of national border-adjusted indirect taxes on services and manufactured goods. Countries levying national Value Added Taxes (VAT) impose them on imports and generally rebate them on exports. The average national VAT tax rate worldwide in 2005 was 15.7 percent. The United States, however, levies no similar taxes at the border on imports. Foreign manufacturers selling in the United States, pay neither U.S. income/payroll taxes nor their own consumption/VAT taxes as the VAT is rebated by their government on exports.

The Border Tax Equity Act would:

* Direct the United States Trade Representative (USTR) to negotiate a remedy which would level the $379 billion disadvantage to American domestic producers and service providers caused by foreign border-adjusted taxes by January 1, 2009.

If a solution was not negotiated by the given date, the legislation would:

· Charge an offsetting assessment at the U.S. border on imports of goods and services equal to the amount of the rebate that the exporting country would be subsidized by its home government.

* Issue rebates to equal to the amount of taxes paid by American exporters on goods that are taxed by an importing nation.

* Issue rebates to equal the amount of taxes paid by domestic exporters on services slapped with taxes when the reach the border of an importing country.

"AMTAC thanks the sponsors and supporters of this critically important bill. It represents a crucial attempt to rectify one of the largest inequities facing American manufacturers as they attempt to compete globally," said George Shuster, CEO of the Cranston Print Works of Cranston, RI and Co-Chair of the American Manufacturing Trade Action Coalition (AMTAC).

"We're grateful to Congressmen Pascrell, Michaud, Jones, and Hunter for tackling this important trade-related issue," said Kevin L. Kearns, president of USBIC. "One of the chief problems facing domestic American companies when they sell their goods or services abroad is the tax-induced markup they face when entering VAT-based markets. Additionally, they must compete in their home market with foreign-made goods that have received substantial export rebates and that enter the U.S. market without facing a corresponding VAT. "

"We would like to thank Representatives Pascrell, Hunter, Michaud, and Jones for introducing the Border Tax Equity Act today," stated Thea Lee, Policy Director of the AFL-CIO. "We are glad to join our voices to those of domestic businesses in calling on our government to take urgent action to address the problems caused by historical and inequitable differences in the trade rules at the World Trade Organization (WTO) governing tax policies."

"The introduction of this measure signals a bi-partisan willingness to rebuild America's global competitiveness, and I would like to thank Congressman Pascrell for once again taking action on behalf of the American manufacturer and the middle class," stated John Bello, the owner of Textile Trans-Print Corporation of Paterson, New Jersey. "I also would like to thank Representatives Jones, Michaud, and Hunter for the support they have given to this legislation."

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