Thought many on this list might be interested in a slight twist on
the globalization issue...
2220 Pleasant Valley Road
Aptos, CA 95003
First time print publication
rights in circulation area
Corporate Welfare Clashes with World Trade
By Don Monkerud
Despite vociferous protests by environmental and social justice
groups over what they see as the multinational corporate use of the
WTO for world economic dominance, American citizens accept
globalization as a path to prosperity. That may end.
Last week's World Trade Organization (WTO) challenge of U.S. trade
policy portends a trade war with the EU, one of America's largest
trading partners. The dispute may have unintended consequences both
for corporations and for the protesters, as it focuses on the tax
breaks Congress gives corporate America.
The WTO ruling is a result of a case brought by the EU against the
U.S. for allowing exporters to shield overseas earnings from taxes,
ruled an "illegal export subsidiary." The issue goes back to 1998
when the EU pointed out that 50 percent of all U.S. exports pass
through offshore tax shelters that allow U.S. corporations to escape
15 to 30 percent of their annual tax bills, estimated to be worth $4
to $6 billion a year.
Congress set up a Foreign Sales Corporation (FSC) program to provide
tax shelters for exporters to be more competitive in international
trade. The majority of these "safe harbors" operate in the Virgin
Islands, Barbados, Jamaica and Guam, but are little more than virtual
offices. With e-commerce, American corporations set up Web servers to
conduct sales operations that can easily be managed from offices in
the States with an Internet connection.
Major corporations, including Boeing, Microsoft and General Motors
receive substantial tax relief through these FSCs. The Seattle
Post-Intelligencer found that the FSCs cover over $250 billion worth
of U.S. exports a year and illegally benefit U.S. corporations to the
tune of $2.5 billion a year. The EU claims that Boeing escaped $79
million in taxes in 1997 and $130 million in 1998, and that Boeing,
Microsoft and General Motors will receive tax breaks worth $15
billion over the next five years.
Most trade disputes are settled with both sides sitting down and
working out a mutually acceptable solution, but this dispute is
proving particularly thorny because corporations don't want to give
up their tax breaks. Corporations are hoping to resolve the conflict
through negotiations between U.S. and EU trade representatives
because they are loathe for the American taxpayer to examine the
sweet deals Congress cut for these tax breaks.
The corporations and tax cut supporters claim the FSCs create a
"level playing field" because the EU allows companies a refund on
value added taxes (VAT) after goods are exported. While exempt from
raw material costs, U.S. corporations must pay taxes on supplies not
incorporated into the final product and equipment used in the
manufacturing process. Although they contend that this puts them at a
competitive disadvantage when exporting, it doesn't address the
criticism that these tax breaks are little more than corporate
We've heard little about corporate tax shelters, giveaways and
loopholes since presidential contender Bill Bradley promised to cut
such corporate favors by $125 billion over ten years if he were
elected president. Ralph Nader also brought up the issue, pointing
out that corporate tax subsidies will total more than $394 billion
from 2000 to 2004.
Ralph Nader points out the origins of one such tax break in 1997.
Then House Speaker Newt Gingrich and Senate Majority Leader Trent
Lott inserted a $19 million tax break over ten years into the tax
bill for Amway. Amway founder Richard De Vos had just given $500,000
to the Republican National Committee.
No matter how one looks at it, corporate tax breaks are huge. The
Office of Management and Budget estimates that special exclusions,
exemptions, deductions, credits and deferrals of taxes totaled $76
billion in 1999. Citizens for Tax Justice projected that tax breaks
for corporations and wealthy individuals from 1996 to 2002 would
total $3.7 trillion.
While the nominal corporate tax rate remains at 35 percent, corporate
tax revenues as a proportion of total corporate profits fell from
26.6 percent in 1994 to 21.3 percent in 1999. Some major corporations
don't pay any taxes at all. The Institute on Taxation and Economic
Policy, an independent research firm, finds that 41 major
corporations amassed $25.8 billion in profits between 1996 to 1999
and received $3.2 billion in tax rebates.
This isn't a partisan issue. President Clinton heavily supported the
FSCs and criticized the initial WTO ruling in April 2000. President
Bush is in a bind over the decision because he supports both free
trade and corporate tax giveaways. Additionally, Bush's huge tax cut
for the wealthy will put pressure on his budget in a year of
shrinking revenues, which could lead him to reevaluate corporate tax
While it's not clear to what extend the FSCs contribute to corporate
tax breaks, inadvertently, the WTO has handed the critics of
globalization a powerful weapon to take on U.S. multinational
corporations. When American citizens realize they are subsidizing
taxes so corporations can pay hefty dividends to the wealthy, they
could rebel. Add pressure from a vociferous minority in Congress to
abandon the WTO agreement to EU opposition to illegal export
subsidiaries, and the whole face of world trade could be in for a
>I agree very strongly with this last post from Jeremy Varon. It marks a
>beginning (not "the" beginning, for others have written somewhat
>similarly) toward the think-through we all need to figure out the steps
>to be taken to make anti-globalization and the positive consequences we
>believe that would bring a reality. They will differ from country to
>country, as well as in categories of countries (imperialist, formerly
>colonial, formerly socialist, industrial, agrarian). They will also have
>to be such as to eliminate or, more accurately, mitigate conflicts of
>interest among them.
> Bill Mandel
>> Dear Ron,
>> Thank-you for a very thoughtful and, more pertinently, gracious (!) reply.
>> With a millisecond's hindsight, I found my e-mail needlessly
>> and obnoxious in criticizing so zealously views composed with principle and
>> passion, and which are not all that far from my own. And yes, I noted the
>> irony: I decried what I detected was the "return of the repressed" --
>> 60s-esque denunciations of Capitalism with a Capital C and a kind of
>> "radder-than-thou-ness," while myself engaging in the kind of ad hominem
>> put-downs so characteristic of the sectarian tussles of the end of the 60s.
>> Deeper irony: at a NYC rally at the Italian Consulte shortly after Guliani's
>> murder, I brought a sign saying, among other things, "Capitalism Kills." It
>> seemed, in my own moment of urgent anger, a permissible reduction
>>that got at
>> the essence of things in that moment. And that was the slogan of yours that
>> I inveighed against. So once more, my very sincere apologies.
>> I suppose my rhetorical excesses in my response were born of a
>>kind of anger,
>> or fear, all its own -- that we, the left, the vestigal or reborn
>> anti-imperilists, might hold onto - and righteously so - a set of
>> and strategic assumptions that, later or sooner, may retard our
>> My fear is so great because the stakes are so high -- humanity may have one
>> small window, that of a few decades or more (or less!) to avert ecological
>> self-annihilation and the exponential increase of preventable human misery
>> that makes a mockery of millenia of human dreams of justice and
>> our worth and gifts as a species. So yes, I am intent on ascertaining the
>> deep causes of our past and current peril!
>> I don't dispute the ravages of colonialism and the horrible consequences of
>> its successor-systems or residues. I just wonder, again, what we mean today
>> when we say we are "anti-capitalist," especially when what it might mean
>> today to be "socialist" seems so elusive. Technical definitions (with all
>> respect to Mr. Mandel) stressing one's relationship to the means of
> > production, and not income or aggregate wealth, are triumphs of form, not
>> necessarily understanding. Mapping moral judgments onto such parsings of
>> social class are just plain difficult.
>> (At an extreme: baseball players are "workers" in a technical sense but earn
>> obscene amounts of money; the guy at the deli down the street,
>>whom I've seen
>> work, with heart and grit, to make a nice business for himself (with good
>> sandwhiches!) is a capitalist, with workers at his command, capital, plans
>> for expansion, "growing his business", all the rest. (ok, we
>>could place him
>> in the petit-bourgeoisie if you like). Whose life is wrong here, or right
>> here, and who am I to judge?)
>> More seriously, to be for people over profits is great (among our best
>> slogans) and to decry a system that puts profits over people makes is
>> necessary as well, but the contemporary reality is that the great
>> the world, including the world's poor, participate in markets (huge, big,
>> medium, small, micro) operating, in part, on the basis of personal
>> and the maximization of certain forms of highly local (even individual)
>> interest. Economies that strived to be rid of all market activity have
>> suffered greatly (if excelling in certain areas), and the world,
>>it seems, is
>> utterly leery of "going back" to anything like "actually existing
>> What to do, first with the past? To say that Stalinism was just "state
>> capitalism" seems to me bizarre, if Stalinism then becomes an indictment of
>> capitalism. Likewise, to blame the problems of the most abusive "socialist"
>> regimes on capitalism, because socialism was a response to capitalism, seems
>> sophistry (a few years ago a German historian got skewered, rightly so, for
>> blaming Nazism on communism, because Hitler was feuled by anti-Bolshevism).
>> More important, what to do with the future? As a marxist of sorts, I
>> nonetheless fear that something like a mixed economy, organized on humane,
>> pro-people lines, is a more viable and robust utopian goal that working
>> towards whatever we think is the absolute opposite of capitalism, conceived
>> itself as some kind of absolute, which it's not.
>> So yes, I do get squeamish at denunciations of "the capitalist" or
>> "capitalists," when I'm not quite sure who they are, what it means to smash
>> them, and what exactly they, as individuals, have done. Here I prefer
>> criticism of the -ism; Marx, at his best, denounced capitalism as a
>> structure; "capitalist," as an identity, is only a "character mask" (not an
>> existential category), often incurred thru the accident of one's birth place
>> within a social division of labor (many many more unhappy accidents in a
>> capitalist society).
>> The larger point: Sometimes, surveying radical history and just
>> in left wing movements, I sense that people feel they, in the last instance,
>> can be radical OR have a deeply complex view of the world; more challenging
>> is to be radical AND have a complex view of the world. (I think another of
>> the Weatherpeople said, quite eloquently, in the Helen Garvey movie,
>> something like "We looked for simple solutions to complex
>>problems.") By the
>> same token, the recognition of complexity is no excuse for inaction or
>> paralyzing equivocations. We have a world to save, right?
>> Please, keep the advice on how coming.
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