[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)."