Page 14 - Forbes - Asia (July - August 2018)

FACT & COMMENT

“With all thy getting, get understanding”

IMPORT SALES TAXES

DON’T MAKE U.S. RICHER

BY STEVE FORBES, EDITOR-IN-CHIEF

ONE THING TO always keep in mind In the meantime, even before the worst
about our trade battles is this: Tarif is an- of the tarifs may or may not be imposed, all
other word for “sales tax.” When you hear of this uncertainty will dampen investment.
of a 25% tarif on steel, translate that into a We have to ght Beijing’s trade abuses. But
25% sales tax on steel. hat clari es the issue. forging a united front with our allies rather
Hitting American businesses and consum- than acting unilaterally would have yielded
ers with a slew of new sales taxes on their more fruit more quickly.
products, materials and everyday items, such Another, more ominous factor should
as kids’ clothes, hurts them. To say export- be considered as well. hese U.S.-instigated
ing countries will feel more pain than we do trade ghts with everyone will, if they per-
doesn’t negate the truth: We will also be hurt. sist, seriously fray and perhaps undermine
If deals are not struck, our exporters—par- our carefully constructed post-WWII alli-
ticularly farmers—will feel the sting of retaliation. So will our ances, which have led to the longest-running period without
companies that have facilities overseas. How many Buicks or major wars and with growing global economic prosperity.
Apple products will be sold in China next year? Because of governmental economic errors, the U.S. and its
Another thing to keep in mind: Even if particular compa- allies have had nearly a generation of subpar economic growth.
nies or industries aren’t directly involved in international trade, hanks to President Trump’s push for deregulation and the
their prospects will be afected. hey aren’t isolated from buy- passage of a signi cant tax cut, the U.S. is nally starting to
ers, suppliers and nanciers who are more directly involved. break out of this rut. If we experience a Reagan-era-like expan-
Don’t underestimate the ripple efect. Look at the 1930s. Most sion, other countries will—as they did in the wake of Presi-
American enterprises weren’t exporters or importers, but dent Reagan’s successes—follow us and change some of their
almost all were hit hard when the Smoot-Hawley Tarif Act of growth-stunting economic policies.
1929–30 ended up crippling the global trade and nancial sys- Bad policies on taxes, money and regulation were the key
tem and triggered a devastating economic contraction. causes of our, as well as other nations’, stagnation.
Since the end of WWII, we and much of the rest of the A series of escalating trade wars will abort our recovery
world have been gradually reducing tarifs and other trade bar- and lead to the kind of everyone-for-himself environment that
riers, and we have all bene ted from this process. Again, look pockmarked the 1930s. An increasingly chaotic world will
at the 1930s to see the alternative. damage all of us and strengthen the hands of authoritarian
To sit down and negotiate, say, a free trade agreement with regimes, which are the enemies of democracy.
the EU, the U.K. or Japan would be terri c. Ditto updating
Nata. he reason we don’t instantly get a free-trade utopia, Baseball Strikes Out on Playofs
in which there are no tarifs or other barriers anywhere, is be-
cause every country has powerful political constituencies. Ask Here’s an important change Major League Baseball (MLB)
Canada about our unwillingness to let it freely export sotwood should immediately make to avoid a colossal postseason embar-
lumber and other forest products to the U.S. rassment: Increase the number of playof games between the
he U.S. has indeed been the best of the bunch when it wild-card teams. As things stand, the top teams in each of the
comes to freer trade. Perhaps unilaterally imposing sales leagues’ three divisions automatically qualify for the postseason
taxes at the border, instead of through the traditional way of play that leads to the World Series. he two wild-card slots go to
negotiating an agreement, will ultimately lead to better trade the nondivision-winning clubs that have the best win/loss records
pacts. But we shouldn’t rule out the possibility that at the least in their respective leagues.
some countries may conclude that, politically, honor comes he problem: he wild-card playof involves only one game.
before a deal. he winner then goes on to play one of the three division win-

12 | FORBES ASIA JULY / AUGUST 2018