By Capo, Jim
The New American , Vol. 23, No. 10
Congressional Representatives--Political Activity
Political Parties--Political Aspects
International Trade--Political Aspects
Textile Industry--Political Aspects
Textile Industry--Political Activity
Trade Policy--Political Aspects
Interview of Congressman Duncan Hunter
Congressman Duncan Hunter of California is one of the few Republican members of Congress with the distinction of having voted against both the NAFTA and CAFTA trade agreements. His congressional district in the San Diego area shares a border with Mexico. He is currently campaigning for the GOP presidential nomination. We caught up with him on Patriot's Day at Washington's Capitol Hill Club in between weekend trips to South Carolina to campaign for the upcoming presidential election. The early primary state, which has seen its textile industry devastated by trade-deal-greased off-shoring, will host the first televised GOP presidential candidate debate on May 15.
Congressman Hunter was interviewed by Jim Capo, national spokesman for the John Birch Society on trade policy.
THE NEW AMERICAN: Congressman Hunter, a key issue that sets you apart in the GOP presidential race is your position on U.S. trade policy. Why have you opposed trade agreements like NAFTA and CAFTA ?
Rep. Duncan Hunter: I see these agreements as business deals. NAFTA was a bad business deal. We gave up something of value, the American market, and got essentially nothing in return. We were promised that NAFTA would develop a Mexican middle class that would buy Kenmore washers and Cadillacs. The promise was also made that NAFTA would stem the tide of illegal immigration. Instead, NAFTA destroyed many small businesses and farms in Mexico that were incubators of a potential middle class in Mexico, and we have seen illegal immigration surge. Similar unrealistic promises were made for CAFTA.
Let me say here one more thing about how these trade deals are bad business deals. The 1946 General Agreement on Tariffs and Trade [GATT] was upgraded to the World Trade Organization a year after NAFTA. When the GATT was created, the United States allowed a loophole for something called the VAT--the Value Added Tax. Almost all of our trading partners use a VAT to put U.S.-based manufacturers at a significant disadvantage in all these so-called free-trade deals we are signing. Right now it has been calculated that the VAT system creates up to a $327 billion annual disadvantage for the United States just in manufacturing goods, not including services. This is almost half our ballooning yearly trade deficit.
TNA: Since you bring it up, can you give us the nickel version of how the VAT works?
Rep. Hunter: In simplest terms the VAT is a tariff-and-subsidy scheme masquerading as a GATT/WTO compliant tax. Here is an example of how it works. China has a VAT of about 17 percent. Under the VAT system, a manufacturer produces a table that costs $100. If that manufacturer ships that table out of the country to the United States, that manufacturer is rebated $17 of taxes that were collected along the manufacturing supply chain in China under the VAT system. The manufacturer can then deliver that table to the United States for $83. When a U.S. manufacturer wants to ship a similar table into China he gets a bill for $17 at the Chinese border, so the cost of his good now becomes $117. This means that before the opening kickoff in this international competition we call world trade, the other side has 34 points on the scoreboard before the game even begins! That is a built-in disadvantage we have signed up to.
TNA: On Capitol Hill there seems to be a movement to address the situation. Are you aware of a bill called the Border Tax Equity Act that is soon to be introduced? This bill calls for countervailing taxes to be assessed to VAT countries in an effort to level the playing field for U.S. manufacturers.
Rep. Hunter: I am very much aware of that bill, and I will proudly be adding my name to it as one of the initiating co-sponsors. We are not going to continue to play the global trade game at a built-in disadvantage. I know there will be many U.S. companies that will resist this effort because they have already moved their production outside our country to take advantage of this designed-in disadvantage for U. …