Hollings, Ernest F., “Why America Slept on Globalization,” The Post and Courier, 01/17/12

“Globalization is nothing more than a trade war with production looking for a country cheaper to produce. And the war has expanded from trade to production, research, technology, techniques, jobs, payrolls — the economy. Every nation struggles in the economy war to maintain and build its economy — except the United States.

In the Jan. 7 debate in New Hampshire, Gov. Jon Huntsman exclaimed: “We don’t want to start a trade war.” Japan started the trade war after World War II by closing its market, subsidizing its manufacture, selling its exports at cost, making up the profit in its closed market — making Toyota No. 1 as General Motors went broke. In the same debate, Gov. Mitt Romney exclaimed: “We’ve got to stop China from stealing our jobs.”

China steals intellectual property — not jobs. President Obama and Congress do the “stealing” by continuing the tax benefit to offshore jobs.

Corporate America invests in China because there are no labor, safety or environmental concerns. If you make a profit, you pay no corporate tax unless profits are repatriated. Just reinvest for more profit. If not profitable, walk away with no legacy cost. Facing this kind of competition in globalization, the U.S. must develop an economy attractive to invest and protect the investment.

The president and Congress say they are developing an economy to create jobs in the United States. Tax cuts or federal aid for policemen, firemen and teachers is no way to build an economy. It takes private investment.

Ed Schultz, on MSNBC, continually exclaims: “You can’t increase the taxes on the job creators. Really? Where are the jobs?”

In China. To get Corporate America out of China and investing in the United States, we’ve got to lower the taxes “on the job creators.” All we have to do is to take the tax benefit to offshore jobs and give it to Corporate America to onshore jobs — replace the 35 percent corporate tax with a 6 percent value added tax. This tax cut reduces the cost of exports 29 percent, creating jobs. It releases $1.2 trillion in offshore profits for Corporate America to repatriate and create millions of jobs. In 2010, the corporate tax produced revenues of $194.1 billion. A 2010, a 6 percent VAT would have produced $700 billion. The VAT is a tax on consumption, not income. The more you spend, the more you pay. The poor have to spend most of their income on food, health and housing, so exemptions for the poor leaves billions to pay down the debt.

The VAT is self-enforcing: you either pay it or pass it on. Much of the IRS can be eliminated, cutting the size of government. The VAT has no loopholes, so it eliminates the tax lobbyists. We must get in step with the 141 countries that use a VAT to compete in globalization or keep losing our economy. Germany uses its 19 percent VAT, which is rebated on exports, to produce green jobs in the U.S. 13 percent cheaper than any domestic production. It produces the parts at high cost in Germany to avoid any tax; ships the parts at 3 percent cost, and assembles the parts in Charleston, at 3 percent cost, producing windmills.

www.postandcourier.com/news/2012/jan/17/17hollings/?print