Japan concocted a devious tax system - Free Trade

[kach22i]

Japan concocted a devious tax system..........3rd point, see below

Frist posted here:
http://www.blueovalforums.com/forums/index.php?showtopic=8113

How U.S. trade policies (including NAFTA) are affecting ALL U.S. jobs



from The California Statesman's Foreign Policy Review
November, 2005
WILLIAM K. SHEARER, Publisher
8158 PALM ST., LEMON GROVE, CALIFORNIA 91945



America's automotive industry, once a towering example of the country's industrial strength, is in deep trouble. Last month, Ford Motor Co. announced that it will reorganize its operations to achieve "significant plant closings" and job cuts. This announcement came in the wake of the company's third quarter 2005 loss of $1.49 billion, before taxes, in its North American automotive operations.

General Motors, the only other domestically owned auto manufacturer, lost $1.6 billion in the third quarter of 2005, its largest quarterly revenue loss in more than a decade. GM's losses in the first nine months of 2005 total almost $4 billion. And, during October, Delphi, GM's former parts subsidiary, went into bankruptcy.

The sad fact is that these catastrophes are the direct consequence of the United States' so-called "free trade" policy, under which foreign manufactured products are favored in both the American domestic market and foreign markets abroad. Gus R. Stelzer, who retired in 1976 as a senior executive of General Motors, graphically detailed the story in his 2005 article, "A Great American Tragedy: How Our Own Country Raped General Motors and Itself." Stelzer is a nationally recognized authority on trade policy, and is the author of the book "The Nightmare of Camelot: An Expose of the Free Trade Trojan Horse."

In his defense of General Motors, Stelzer begins by pointing out that the seeds of a disastrous free trade policy were planted in 1913, when the U.S. Government began to replace tariffs on imported goods as a revenue source with an income tax on Americans. "For 123 years after the founding of our republic in 1789," Stelzer says, "tariffs on imports provided up to 85 percent of all revenue needed by our federal government." He views the income tax, which replaced duties on imports as the principal source of federal revenue, as "a tariff on our own goods."

Stelzer describes the events in which "our own government sabotaged General Motors in favor of Japanese car companies, and which led to the problems now confronting GM."

First, was the acquisition by GM dealerships of Japanese auto franchises. In 1966 as a GM executive, Stelzer opposed this policy. In a confrontation with a GM dealer, Burt Chevrolet, which wanted to take on a Toyota franchise, Stelzer reminded the dealer that in 1937, "GM had put up 75 percent of the capital to start his dealership, with a generous contract that allowed him to assume full ownership out of profits." Stelzer told Burt: "...[l]f you want to take on Toyota that is your prerogative, but not in Chevrolet facilities, nor utilization of any personnel in this dealership who had been trained by General Motors. If you take on Toyota it will be at another location with no ties to Chevy facilities or personnel."

The result of the confrontation is related by Stelzer:

"Three days later I received a call from a GM Vice-President who applauded me for my stand, but who said that Toyota had complained to the U.S. State Department, and that a high government official had ordered GM, and me, to allow Burt Chevrolet to take on Toyota after only a small investment in signs and an initial parts order, thereby relieving Toyota of the millions of man hours and billions of dollars to develop its own dealer organization, as GM did, and in which I played a significant role for 30 years.

"To put it bluntly, our own government gave Japan squatters rights to GM dealerships and blatantly violated traditional concepts of property rights. While not listed on GM financial statements as an asset, its dealer network was its biggest asset...built over a period of more than 45 years at a cost of billions of dollars. Yet our own government forced GM to surrender it to the same country that bombed Pearl Harbor less than 25 years earlier, without one dime of compensation! Subsequently, nearly all of the first 2,000 Japanese car outlets in the U.S. road 'piggy-back' on GM dealer facilities...an absolute outrage."

Consequently, Stelzer notes, GM dealerships were soon selling fewer GM cars and more Japanese cars because they were cheaper and dealer profits were greater.

Second, Stelzer notes, as a result of U.S. labor laws, "factory labor costs at GM in 1978 were five times greater than in Japan...and our tax burdens were three times higher....At the same time, U. S. trade representatives were in Japan giving them carte blanche access to U.S. car markets, after paying a tariff duty of only 2 percent, in one of the biggest double-crosses in American history."

Third, Stelzer describes how "Japan concocted a devious tax system that enabled their manufacturers to dump cars in the U. S. at prices lower than in their own country, thereby undercutting U.S. companies in our markets, while shutting U.S. companies out of Japanese markets." Stelzer found that Japan imposed consumption taxes on all manufactured goods, including a 22 1/2 percent commodity tax on cars and light trucks. This tax was rebated if the vehicle was exported. He says:

"Here is an example of how it worked: If Toyota produced a car with a basic dealer price of $8,160 it would pay a commodity tax, $1,840, to the Japanese government causing the dealer price to rise to $10,000. That tax was then paid by Japanese consumers as a hidden part of the total price, along with other taxes....

"However, the fine print in Japan's tax manual revealed that if that car was exported to the U.S., Japan would rebate (kick back) the commodity tax."

Toyota could sell the car in America for $8,160...$1,840 less than its price in Japan.

"On the other hand, if a U.S. car carrying a similar dealer price of $10,000 was exported to Japan the U.S. government would not rebate even one dime from $4,000 of taxes that had been imbedded in that price through income, PICA, property, and many other taxes. When the $10,000 U.S. car entered Japan it would not be released from customs bond until the manufacturer paid the 22-1/2 commodity tax, thereby causing the price of the U.S. car in Japan to rise to $12,250, plus other charges...."

As a result of these assaults on American auto manufacturers, Stelzer says, "GM has closed at least 70 plants and offices in the U.S. while reducing its domestic work force from over 600,000 to barely 300,000 today, and opening plants in many other countries. At the same time, GM's role as the largest private generator of federal, state, and local tax revenue shrunk by at least 50 percent." He points out that federal, state, and local governments have enacted millions of tax and regulatory laws that have been responsible for over 80 percent of the cost of the average American product. That being a ratio of 4- to-1, it constitutes a tariff of 400 percent on our products. Yet we assess a tariff of only 2 percent on imported cars and parts which are assembled in Japanese plants in the U.S.?

Stelzer emphasizes that:

"Hundreds of communities, like Detroit and Flint, Michigan, have been decimated as has nearly every producing industry not subsidized by government, such as: VCRs, television, radios, DVD and record players, motion picture projectors, cameras, sewing machines, toys, textiles, apparel, shoes, steel, motorcycles, fishing, shipping, sporting equipment, dental and medical instruments, factory and farm machinery, garden tools, computers, printers, appliances, musical instruments, telephones...the list is almost endless. Even our flags are made in China."

Each of these cases is "a tragedy in itself," Stelzer says, "caused by trade policies that are inherently immoral, unconstitutional, contrary to basic laws of socio-economics, and The Rule of Law.'" He concludes:

"To put it bluntly, Free trade across our borders is a rigged system designed...for the benefit of those who evade our laws, and to the detriment of those who abide by our laws. No other competitive activity would tolerate such double-dealing."



MORE TRADE TRUTHS FROM GUS STELZER

"After his inauguration in 2001, [President] Bush pressured Congress to grant permanent favored trade status to China and entry into the World Trade Organization against the opposition of many, including this writer. In 1989, the year of the Tiananmen Square massacre, our trade deficit with China was $6 billion. It soared to $83 billion by 2000. Instead of granting permanent favored status to china, Bush should have taken strong action, via stiff tariffs on imports from China, to stop the bleeding of our economy.

"But he opted to make it worse. In 2004 that deficit reached $162 billion almost double the year before Bush took office, and the federal debt went up another $580 billion. Current trends indicate that trade deficit will exceed $180 billion this year .''

"It is now well established that NAFTA, which became effective in January, 1994, has been a failure far beyond the most dire warnings....NAFTA has failed to live up to any claim of its proponents. Instead of heralding trade surpluses, NAFTA has caused America to suffer $700 billion in additional trade deficits since its inception, reaching a record $111 billion in 2004. Over 4,000 U.S. factories closed due to NAFTA and over 3,000,000 law-abiding Americans lost (or were deprived of) jobs to foreigners who do not abide by our laws. Contrary to statements that NAFTA would reduce illegal immigration it is now much worse....

"In consideration of these facts, we must reject...any...new multi-nation trade pact, such as the Free Trade Area of the Americas (FTAA)."

[kach22i]

In 1989, the year of the Tiananmen Square massacre, our trade deficit with China was $6 billion. It soared to $83 billion by 2000.........................."But he (Bush) opted to make it worse. In 2004 that deficit reached $162 billion almost double the year before Bush took office, and the federal debt went up another $580 billion. Current trends indicate that trade deficit will exceed $180 billion this year .''


Question; does Canada have the same trade imbalances with Asia that the USA has?

Just wondering.

[svandamme]

we've read in the news that Ford is actually considering importing the European Ford Mondeo to the US, as the Mercury Mondeo,
it supposedly seems more in tune with what customers in the US want

[sammyg2]

I find it amazing that these guys can blame the government when tye real problem is they can't make a decent car.

If their product was as good as the japanese we wouldn't be talking about this.

TRY MAKING A GOOD CAR, GET RID OF THE DARN UNIONS, AND TAKE CARE OF BUSINESS AND STOP WHINING!

[nota]

Originally posted by sammyg2
I find it amazing that these guys can blame the government when tye real problem is they can't make a decent car.

If their product was as good as the japanese we wouldn't be talking about this.

TRY MAKING A GOOD CAR, GET RID OF THE DARN UNIONS, AND TAKE CARE OF BUSINESS AND STOP WHINING!

AGREE ON THE CARS NEED IMPROVEMENT
BUT THATS THE OVER PAID MANAGEMENTS FAULT
NOT ANY FAULT OF THE UNIONS

kill the unions and the illegals will pour in to those jobs
they are glad to work for 1/3 of union rates or less
just look at the meat packers and the building contracters
to see what happens when unions go out

btw why do the newly conned hate the workers so much
that they all want to distroy the unions

[Christien]

Originally posted by kach22i
In 1989, the year of the Tiananmen Square massacre, our trade deficit with China was $6 billion. It soared to $83 billion by 2000.........................."But he (Bush) opted to make it worse. In 2004 that deficit reached $162 billion almost double the year before Bush took office, and the federal debt went up another $580 billion. Current trends indicate that trade deficit will exceed $180 billion this year .''


Question; does Canada have the same trade imbalances with Asia that the USA has?

Just wondering.

Looks like it: 22.9 billion for 2005, 18 billion for 2004

Remember, 1/10 population, 1/10 economy size, so multiply our #s by 10 to get a proportionate value: 04 180 billion Canada (proportionate) vs. 162 billion US.

source: http://www.asiapacificbusiness.ca/data/trade/t2_withasia.cfm

[kach22i]

Originally posted by Christien
Looks like it: 22.9 billion for 2005, 18 billion for 2004

Remember, 1/10 population, 1/10 economy size, so multiply our #s by 10 to get a proportionate value: 04 180 billion Canada (proportionate) vs. 162 billion US.

source: http://www.asiapacificbusiness.ca/data/trade/t2_withasia.cfm

Canada generally runs large merchandise trade deficits with Asia Pacific. A regional trade deficit is not necessarily problematic, however, as we continue to run healthy bilateral surpluses with other trading partners and our current account remains positive.

healthy bilateral surpluses with other trading partners

Canada exports oil to the USA, why don't they just come out and say it?

[red-beard]

Kach, this is why I prefer a consumption based tax instead of an Income tax. Goods produced cheaply overseas will produce the same amount of Tax revenue as good produced in the US, if they are the same price. You will not have "hidden" taxes in the price of products.

And as far as Unions are concerned, they should reshape themselves in labor supply houses. They should sell labor to companies at a specific $/hr rate, and then pay the Union member and provide the health insurance, etc. This way, if a company goes under, it will not destroy the pension funds of the workers. And the pension funds will not be a source of money for companies to raid. It would also equalize the union workers, since they will get paid the same if they work for GM, Ford or whoever,even if the worker changes jobs.

[rammstein]

I got halfway through the article. It could very well all be valid and true. But as others already stated, GM and Ford make crappy cars for the most part.

I really had been diggin on the new Mustangs. I actually got a free upgrade from Hertz one day and got a new Mustang Convertible, with leather and pretty much everything (except a v8, dammit). My hand and eyes went to the Automatic shifter to put it in drive, and there is a big honkin plastic molding line on the TOP of the shifter, along the cruddy silver plastic part. They lost me right there. And it wasn't a defect, they are all like that.

Drove a Ford Five-Hundred. I think my 86 Crown Vic provided a more stable drive.

My wife got a 4 cylinder Auto Accord this year. This is not an exhilarating drive. Its not a performance car. But everything works nicely. Nothing rattles. There aren't junky seam lines everywhere on it. The interior is cheap, no leather or metal trim. But the plastics are cushy, the doors close nicely, the controls and buttons all move smoothly. Seriously, what the hell keeps Ford/GM guys from driving an Accord for a few months, and then copying it? How can they drive an Accord, and then drive a Five-Hundred and feel anything other than embarrassed?

From what I can tell, the saving grace of both is their large trucks. But man, everyone knows that with gas prices going up, and the Japs slowly nibbling at that market that its just a matter of time.

Has anyone driven an entry-level sedan from Ford or GM thats good?

[stevepaa]

My dad worked for GM, and so we got the family discount. My first new car was a 1973 Vega. The last GM car I bought was in 1987. A brand new Buick station wagon. In five years I had to have it repainted, GM paid for it, had the mass air flow sensor stop the car three times, fortunately on a two lane higway rarely traveled, and the fabric on the back of the rear seat was worn through.

Went looking at new Buick wagon in 1992, and there was no improvement at all in five years. We bought a 1992 Volvo wagon which is still going strong and looking good at over 290kmiles.



Hum, anyone want to relate the rise and fall of GM with the popularity of US in ME. Something along the lines of how shortsighted, self serving decisions end up losing the populace who find a better alternative.

[svandamme]

Originally posted by rammstein


Has anyone driven an entry-level sedan from Ford or GM thats good?

i have , Ford Mondeo's , Galaxy's (people van based on VW chassis)or Escorts in Europe are not bad at all
we had em as company car in company i used to work, and we abused those cars and they never broke down...

the new Focus is nice car too , it's no VW you do notice they are built cheaper,, but the purchase price is cheaper then a equivalent VW too... all in all, good bang for the buck..

as far as i'm concerned, i wouldn't ever buy a Ford, i buy German (VW,AUDI,BMW,PORSCHE) , but i don't find em particulary bad cars or uglier or lower standard then what else is out on the european market, i'de never buy Japanese cars over a euro Ford

but when i see the Fords you guys have on your market, Fugly , overweight , guzzlers with tacky interiors ...

[Christien]

The old slogan "have you driven a Ford lately?" was retired for a good reason. I've driven 4 Fords lately, and I would never buy any. We have an Explorer in the family (dealership car we're long-term "borrowing"), fully loaded, pretty much every option, and it's a POS. The suspension is bouncy as hell, it handles like a shopping cart, and sucks gas like there's no tomorrow. Why would you ever want a V8 in a SUV? My father in law has an Explorer Sport Trac which I also dislike. They both have the same transmission which is miserable. Believe it or not, I've peeled the tires accidentally several times - IN REVERSE! The gas pedal is completely unpredictable in its sensitivity. I also had the misfortune of driving an 01 or 02 Mustang V6 auto recently. I can't believe they have the nerve to put the Mustang logo on that car. It's uncomfortable, slow, heavy, drives like a pig, and has none of the fun of a sports car whatsoever.

We put some 100km on a used 93 Lexus ES300 - probably the best all-around appliance car I've ever driven. Superbly comfortable, great sound system, good gas mileage, extremely low maintenance. Man, do I miss that car!

[MichiganMat]

Originally posted by svandamme
we've read in the news that Ford is actually considering importing the European Ford Mondeo to the US, as the Mercury Mondeo,
it supposedly seems more in tune with what customers in the US want

Wow, its not half bad looking:

[rammstein]

I really have to wonder why it is that Ford and GM seem to screw us on their own soil.

Look at some of the stupid a$$ $hit they have tried:

Chevrolet SSR:


Pontiac Aztec:


Chevrolet Malibu:


Ford Fusion:


Wahhhh... its not fair- the Japs have a tax advantage.

Check out the European Fords!!

Focus ST (220HP)
[img]
http://forums.pelicanparts.com/uploads9/focus1165525350.jpg[/img]

Opal Vectra Wagon- 280hp turbo V6 in a wagon


Opal Astra- 240 HP Hatch


And then you have Ford Australia, whose Ford Performance Vehicles Division should just take over the whole US operation:

f6 Typhoon (yeah, dumb name but Turbo 4 liter V6)


FPV BF MkII GT (dude, 290kW v8)


I would actually go to a showroom and look at these. And if they kept them at the same price (same besides exchange rates) some of us might be able to buy them.

[rammstein]

But then again, I really think a Malibu Maxx fits my active lifestyle. Can I get it in Red?