Another article outlining some of the difficulties in getting to the truth about the TPP this election year. As I have said before, I don’t believe that the TPP is the problem, just a symptom, and that the real problem that we face by these massive trade deals, which are always done with an eye towards helping American businesses, is that the tax law is what ultimately defines whether companies can outsource their work to low wage countries. If the tax laws make it unfavorable to move factories overseas, then they won’t. An unintended consequence of that is that they may just choose to open new factories overseas and slowly shut down antiquated ones, by not investing in them, but again, tax law dictates such issues as depreciation schedules of equipment. One reason Japan outcompeted us in the 198os was due to a very favorable depreciation schedule of 1 year to our 5 (or more) years. A company could write off the depreciation of a large manufacturing machine in 1 year, and then buy the latest state of the art one the next, making them more and more competitive. By the time our companies would have depreciated the equipment, the Japanese were 5 or more times efficient against our companies.
Part of our complicated tax law in the US gives different industries different depreciation schedules. For example, replacing computers at companies like Microsoft can be done more rapidly than standard companies, due to the ability to classify them as Research and Development (R&D) tools, rather than just standard business equipment. That Microsoft tests new Operating systems and programs like Word on their internal computer users first, allows them to take advantage of this tax law issue.
Another thing to think about, is that we currently dominate the world in software, a business that generates not only great middle class and upper class jobs, and has an enormous effect on follow on jobs for low income workers, that often supply goods and services to these businesses, and to the universe of partner companies that establish offices in the area of the business, such as we see with partners to Microsoft,Boeing and Amazon. These businesses all generate enormous tax revenues for our country. Working towards a beneficial trade agreement that forces other countries, like China or India, to get better at supporting our intellectual property, such as software, music and film rights, is a good thing for American workers. Fighting trade deals and making it more punitive or operating outside of trade deals leads to piecemeal implementation (or no implementation) of protection of these laws.
There is always an inbalance between competition between nations and even states. Most people have heard that Delaware has a special tax law that allows corporations to form easily there and shelter themselves from taxes. Nevada, likewise is a haven for companies in other states, to use as a tax haven for their revenues to be gathered. A large global company, headquartered in the Bay area, can open a subsidiary in Nevada, and have all their revenues go there first, to avoid California tax rates. You likely have heard of our massive tax breaks to Boeing and other companies. These are our states’ TPP deals with internal US companies, and external foreign companies that can bring jobs. This is the way states compete. It is legal. Allowing corporations to have signification input on trade deals is the way to get US subject matter expertise to the table so that our negotiators can best understand what we need from other countries. It’s our governments fault if they allow corporations to bury tax advantages into these but it is not the fault of the agreeement. And it is a political football to pretend that the deal is the problem.
To be clear, there are many other isssues that are concerning in TPP, and again our Congressional delegation should support taking it out from behind it’s secrecy and opening the process up for feedback. I support the documented TPP problems and the solutions to them that were laid out in a 20 page detailed over veiw by a consortium of the Sierra Club, Friends of the Earth, Public Citizen, Institute for Policy Studies and Earth Justice in 2012. If you like detail on these issues go and read the document.
But the following article is a good generic article, useful for much more discussion, I present it with an eye on helping us better understand why our representatives in Congress in the Pacific NW are not flocking to damn TPP, while the outsiders, who have nothing to lose, are. Ultimately we need trade deals, but they need to protect our environment, our hard won intellectual property. We must make sure they don’t give hidden benefits to countries and companies that are working against these issues.
Politics Of Trade: The Northwest’s Complicated Relationship To The TPP
Filed under: Around the Sound, Government Legislation, legislation, Puget Sound | Tagged: TPP | 1 Comment »