Elizabeth Warren tries to out-Trump Trump on trade
August 13, 2019
This article originally appeared in the OC Register on August 7, 2019.
For consumers looking for a reprieve from the ongoing trade war and corresponding cascade of high prices, presidential hopeful Sen. Elizabeth Warren, D-Massachusetts, has a plan or two.
Under the lawmaker’s recently-released trade proposal, the U.S. would trade with…basically no one at all. Warren compiles a lofty list that any potential trading partner would have to meet, including eliminating all fossil fuel subsidies and complying with OECD high-tax “projects.” Sen. Warren’s move to “out-Trump” President Trump would be a recipe for Great Depression-style protectionism and create an environment cruel to workers and consumers alike. Voters deserve free-trade candidates that understand the perils posed by closed ports and trade taxes.
Consumers rummaging through credit card offers or sweepstakes promotions are bound to find the infamous phrase “restrictions apply” near the bottom of the letter, which is usually followed by a laundry list of complicated qualifiers in a minuscule font. Sen. Warren’s trade gambit is no different, with seemingly innocuous “trade conditions” creating insurmountable difficulties for nearly anyone trying to trade with an American business. Even if the presidential hopeful’s only trade requirement was that countries end fossil fuel subsidies, our very “greenest” allies would be excluded from the running.
Sweden is an excellent example. According to statistics from the European Commission, Sweden derives more than half of its energy from “renewable” sources such as solar and wind. The Nordic nation pads its green portfolio by punitively taxing carbon emissions and conventional power sources. But even Sweden sees the need to extend certain tax breaks for certain kinds of fossil fuel consumption. For instance, Sweden extends tax breaks for diesel-powered trains and company cars fueled by diesel. This would count, because according to Warren, tax breaks qualify as “subsidies.”
Meanwhile, Swedish owned energy giant Vattenfall still has plenty of hard coal-fired assets outside of Sweden. But strangely, this doesn’t count because, according to Warren, America should only care about “domestic” subsidies. Not to worry, because Sen. Warren also has a plan – within her trade plan – to make sure that companies keep all their resources at home instead of (heavens forbid) invest in other countries.
“President” Warren would require America’s trading partners to “participate in the OECD’s Base Erosion and Profit Shifting [BEPS] project to combat tax evasion and avoidance.” Warren is clearly a fan of BEPS, a project born out of OECD bureaucrats’ disgust with alleged tax-shifting schemes amongst multinational companies. The OECD alleges that global companies sell intermediate goods (i.e. car parts) to foreign subsidiaries in low-tax companies in order to get their taxes as low as possible.
This sounds scary until one realizes that, over the past 50 years, corporate tax revenue as a percent of the economy across the OECD has increased despite the widespread implementation of alleged “tax games.” The OECD, and presumably Warren, want to remedy this largely imaginary problem by implementing an international tax system based on “apportionment,” which would mean that companies could face higher taxes if they have some property holdings in a high-tax country.
Whether it’s Sweden building factories across Europe or U.S. companies setting up shop across Asia, everybody wins when countries trade with few strings attached. New host countries for business opportunities may have checkered pasts, but trade helps poorer nations overcome environmental and civil liberties issues by making its citizenries richer and exposing populations to new products and ideas.
Warren, Trump, and other trade protectionists try in vain to punish countries for perceived slights against the U.S. and policy deficiencies without realizing that policies and relationships improve when people and companies cooperate across borders. Instead of punishing countries such as Sweden for not taxing their citizens even more than they already are, American leaders should keep ports open and strive to learn from the best products and practices of other countries.
Americans clearly want a break from the broken status-quo of trade wars and rising trade taxes. Presidential hopefuls should offer a meaningful contrast, not an echo.