MSU Debate Alum Comments on Arguments Read at Indiana Tournament

from:      Carly Watson <carlyjanewatson@gmail.com>

to:           Jack Caporal <jcap1219@gmail.com>

date:       Sat, Jan 28, 2017 at 7:03 PM

subject:  You're famous!

Trump is using his capital with GOP congress to block border adjustment provision that will violate WTO and trigger trade retaliation

Caporal & Leonard, 1/20/17 (Jack & Jenny, Inside U.S. Trade, “SOURCES: HOUSE GOP TO QUICKLY PUSH BORDER TAX; SOME DOUBT ITS CHANCES,” Factiva, JMP)

House Republicans are expected to push ahead with a "very ambitious" time line for tax reform legislation that will include a border adjustment provision to tax imports and exempt exports, but according to sources on both sides of the aisle the GOP will face difficulty shoring up enough votes to pass the bill.

Complicating the political landscape for such legislation is the fact that President-elect Trump this week criticized the GOP tax plan as "too complicated," highlighting an apparent disagreement between House Republicans and the incoming president on how to tackle tax reform.

But incoming White House press secretary Sean Spicer sought to downplay Trump's comments on Jan. 17, stopping short of endorsing or denouncing the GOP's blueprint for a border-adjustable tax when asked if Trump was completely against the plan.

"I'm not going to get ahead of this," he told reporters. "I think we are having some serious discussions back and forth with key members of Congress and House and Senate leadership and when we have something announced we will."

"But as you know there is always a back-and-forth between the executives and Congress as to how to get this right and that is something the President-elect is committed to getting done," Spicer added.

Apart from the potential for friction between congressional Republicans and Trump, some sources pointed to a more fundamental problem that House Ways & Means Committee Chairman Kevin Brady (R-TX) and House Speaker Paul Ryan (R-WI) could have to grapple with: Whether enough support can be secured within the Republican party to pass the legislation.

One source closely following tax policy developments expressed doubt that 51 Republicans could be found in the Senate to vote in favor of a tax plan that contained border adjustability provisions. That sentiment was echoed by other sources.

The source speculated that about 10 GOP senators are "on the fence" about their support for border adjustments. Another source questioned if enough Republican votes could be found in the House Ways & Means Committee to move a bill forward.

Multiple sources said Brady and his caucus are looking to finalize language on the bill by March and move the legislation by August, which many have described as "very ambitious" -- charging it may not be realistic given the complexity of the issue and other legislative priorities for this year.

Opposition to the concept of taxing imports while providing tax breaks for exports has been expressed by some U.S. industries that rely heavily on imports.

Sources told Inside U.S. Trade that retail industry groups are putting together a coalition to oppose the GOP blueprint. Retailers and trade associations in December began their push against it, asking House Ways & Means Chairman Kevin Brady (R-TX) and his new ranking member, Richard Neal (D-MA), to scrap the border-adjustability provisions.

Neal on Jan. 12 cautioned the GOP not to "touch off a trade war" by pushing tax legislation that included a provision on border adjustments, and added that in conversations with the Republican caucus he sensed that "there is anything but certainty about it."

Brady, however, has not given any indication that he will back down from his commitment to the provision, which he strongly endorsed when speaking to Inside U.S. Trade on Dec. 13 -- calling it a "critical" part of ensuring U.S. competitiveness.

"No one in America wants to continue this tax code that subsidizes foreign products over made in America products. No one," Brady said.

"We are committed to ending the made-in-America tax, leveling that playing field, making sure all the businesses can compete anywhere in the world. That provision is critical to our growth," he added.

Another powerful group that could oppose the tax plan is the oil refiners industry, a source said. A number of U.S. refiners rely on the import of crude oil that is then turned into a range of commercially viable fuels, from standard gasoline for cars to aviation fuel. Some of those same refiners are also involved in the production of other ubiquitous products, like plastics.

One way to ease at least some industry opposition to the border adjustability provision would be to allow carveouts for certain sectors, sources have said.

Those sources, however, have warned that carveouts would likely further endanger the plan's chances for favorable treatment at the World Trade Organization on national treatment grounds. One source said a viable argument could be made for the legitimacy of an exemption for imports of crude oil by invoking the national security exception under Article XX of the General Agreement on Tariffs and Trade.

At the same time, sources said, an exemption granted to one industry could lead to an outcry from other importers that would not be deemed eligible for an exemption.

Sources said the tax plan -- as it stands -- is likely to face immediate scrutiny at the WTO. Those sources question the GOP blueprint's consistency with U.S. trade obligations and cite as precedent the Foreign Sales Corporations WTO dispute (DS108) with the European Union from 1997.

The EU, they suspect, would immediately bring a trade case against the U.S. over tax legislation based on border adjustments, and DS108 could be informative for how that dispute would proceed.

Senate Finance Committee ranking member Ron Wyden's (D-OR) staff late last year criticized the House GOP's blueprint in an internal memo, warning that it could not only violate certain WTO rules but would also likely result in retaliation.

Sources who have analyzed it said the GOP plan -- dependent on how the tax is designed and how it would be applied -- could violate aspects of the WTO Agreement on Subsidies and Countervailing Measures as well as the General Agreement on Tariffs and Trade Article III:2.

Some sources, on the other hand, speculated that the tax proposal's potential inconsistency with WTO rules is being discussed in closed-door meetings but the GOP wants to move forward regardless -- even if that means risking a challenge in Geneva.

Brady's chief tax counsel, Barbara Angus, is the driving force behind the proposal, sources told Inside U.S. Trade, while trade counsel Angela Ellard's role has been described as "more on the sidelines."

Industry sources said Angus "is in listening mode," and in stakeholder meetings takes into consideration concerns about the proposed tax plan.

The U.S. in the early 2000s ultimately lost DS108 case against the EU and was pressured into reforming its tax policy in question after the EU steadily ramped up tariffs on certain politically sensitive U.S. products, but the dispute itself took more than eight years to wind its way through the dispute settlement process.

Some sources have noted that the length of time it would take to sort out a WTO dispute could mitigate the downsides that some GOP lawmakers see in its potential WTO inconsistency.

Another outcome, some say, could be that congressional Democrats, especially those in the Senate, would only back the tax proposal if it was based on a value-added tax system, which is common in many WTO countries -- basically forcing the GOP to adopt a tax that has to date seemed politically unviable for Republicans.

But Brady on Dec. 13 refuted that idea when asked if he would back such a system if pressured to do so, saying, "it won't be a VAT." -- Jack Caporal and Jenny Leonard

from:      Jack Caporal <jcap1219@gmail.com>

to:           Carly Watson <carlyjanewatson@gmail.com>

date:       Sat, Jan 28, 2017 at 7:17 PM

subject:  Re: You're famous!

New cards first, response later, I think some of their highlighting got messed up in the body of the email, can you send a doc version?

 

Battle lines take shape, fight heats up over border adjustable tax proposal

January 26, 2017

Proponents and opponents of a border adjustable tax are clashing over multiple aspects of the policy as both sides rev up opposing industry coalitions and prepare for a fierce battle on Capitol Hill over a core component of a broader tax reform plan championed by House Speaker Paul Ryan (R-WI) and House Ways & Means Committee Chairman Kevin Brady (R-TX).

Looming over the back-and-forth on the immediate economic implications of the plan is the near certainty that the U.S. will be dragged into dispute settlement proceedings at the World Trade Organization if the Brady-Ryan border adjustable tax becomes law. The WTO-consistency of the tax plan could influence its fate in the Congress, John Veroneau, a partner at Covington & Burling and former USTR general counsel during the nearly decade long FSC/ETI tax dispute resolved in 2006, said at a Jan. 26 event on the tax proposal and trade hosted by the Washington International Trade Association.

Taking a hard line at the event against a border adjustable tax -- a consumption-based tax which would essentially exempt revenue from exports from taxation but generally prevent deductions for imports -- was the National Retail Federation, which was represented by Rachelle Bernstein, the group's vice president and tax counsel.

She was joined in her opposition by Rick Woldenberg, chairman of Learning Resources, a toy company that manufactures its products outside of the U.S. and subsequently imports them to sell.

The American Apparel and Footwear Association (AAFA) -- while waiting on more details regarding the border-adjustable tax -- also stated its opposition to the initial outline of the proposal in a statement to Inside U.S. Trade.

The common economic thread among those opposed to the border adjustable tax is that it would skyrocket the costs of imports, which would force industries reliant on imports to pass increased costs on to consumers. Depending on the elasticity of a product, that cost bump, which opponents claim would be significant, could lead to a large downturn in sales causing layoffs and some businesses to close. Opponents say the economic downside would not be made up for by other parts of the House GOP tax blueprint, such as the elimination of the estate tax and other measures that are argued to be pro-growth.

National Retail Federation vice president of supply chain and customs policy, Jon Gold, told Inside U.S. Trade after the event that his group has already begun making the case against the tax to the Ways & Means Committee. He noted that the tax reform package's political fate is not sealed in the House or the Senate. Some sources have questioned whether enough support exists for the package to clear the Senate if it includes the border adjustable tax provision.

AAFA also indicated that it was taking its message to Brady's committee. “We are actively sharing our concerns and working to get more information from the House Ways and Means Committee regarding their proposal,” it said.

Taking the opposite view is a still-forming coalition of companies that support the overall Brady-Ryan tax reform package and see the border-adjustable tax plan as a necessary component of it, largely because it would shift the tax base from income to a territorial, consumption-based system. That coalition was represented at the WITA event by Brian Reardon of Venn Strategies. Dow Chemical, which is part of that coalition, was also represented at the event by its director of government relations Janet Boyd.

 Reardon told Inside U.S. Trade after the event that GE, Oracle, Dow and Eli Lilly were signed on to the coalition, and more companies would be joining soon. He stressed that the coalition supports the entire House GOP tax plan, not just the border adjustable portion of it.

But at the same time Reardon noted that the border adjustable tax is the “glue” that holds the entire plan together due to the shift in tax base and is also the main driver of revenue under the plan, which makes up for other tax cuts that all members of the event agreed were pro-growth. The net effect of the overall tax package would be a sizable GDP boost, Reardon and Boyd argued, which should create more employment and have other positive economic effects.

Proponents also argue that a border adjustable tax is the only way for the U.S. to resolve a competitive disadvantage it faces when exporting and importing goods to and from the roughly 160 countries that use a value-added tax. The border adjustable tax would end double taxation of U.S. exports while leveling the exemption exports are awarded from countries that use a VAT, the argue.

But Bernstein fired back, charging that the retail industry, which is heavily reliant on imports, is presently stuck in a downturn likely to last seven years and the House GOP tax plan would only make that worse. She noted that most retailers are already hit with a relatively high tax rate of 37 percent of their revenue, and some specialty apparel members of NRF have told her that the effective rate under the Brady-Ryan plan would result in tax expenditures three to five times higher than their profits.

 “There will be no choice for retailers but to pass this cost forward to their consumers. The only other choice is for them to go out of business.” Bernstein said. “I believe what consumers are going to feel at least for several years until this is truly transitioned in is that their standard of living will decline compared to where they are today.”

Reardon and other proponents of the plan meanwhile argue that the net effect of the border adjustable tax will result in the dollar appreciating, which in turn lowers the costs of imported inputs and neutralizes the effect of a tax hike on after-tax income.

But Gordon Gray, director of fiscal policy at the American Action Forum, noted at the event that there is no empirical study to prove that the dollar would appreciate between 20 and 25 percent following the implementation of the House GOP tax plan. Further, he pointed out that other external variables can sway currency values as well. Woldenberg noted that dollar appreciation of that level could negatively impact other economies, such as China's and the United Kingdom, and that his decisions related to the pricing of his goods are based on supply, demand, and capacity for production, not the relative strength of the U.S. dollar.

But in the backdrop is an all but promised WTO challenge to the tax plan if it becomes a law. Veroneau and others at the event noted that it is unclear how the U.S. would fare in a dispute centered around a border adjustable tax largely because the details of the plan are not public.

A loss at the WTO, Veroneau argued, would cut into any of the plan's potential gains while the near certainty of a challenge alone raises the political stakes of the plan's compatibility.

“Even companies that are favorably inclined to this tax proposal are going to quite likely say we don't want to rewire our business only to find ourselves in three or five years having to rewire it again to comply with a WTO ruling,” he said. Furthermore, a loss in a such a dispute would likely invite retaliation on a massive scale, Veroneau added.

The Ways & Means Committee will “need to give people confidence that this can survive a WTO challenge,” he charged. Sources have said that the committee plans on pushing legislation out in the next few months and move to pass it by August. That timeline has been described by some as “ambitious.” Brady has indicated that he plans for a vote on the tax reform package in 2017.

“I suspect at some point in the process they will need to be more forthcoming as to why this is WTO consistent,” he continued. A reluctance exists on the part of the White House and Ways & Means Committee to “talk too much publicly about how you justify things, how you justify WTO consistency because those words are read back to if you're in a litigation mode,” he said.

“So we have this tension here that I think the committee and the administration will have to work through,” Veroneau said. “[The Ways & Means Committee is] trying to come up with something that is neither fish nor fowl and I think we don't know where it will settle out.”

Brady, on the other hand, is confident that his vision for a border adjustable tax is WTO compliant. Earlier this week he charged that it will comply with “three key tests” the WTO uses to judge consistency. A Ways & Means aide clarified that those tests are: whether the measure in question is a subsidy, a prohibited export subsidy, and consistent with the WTO's national treatment principle.

“The WTO has not examined a destination-based cash flow system,” the aide added.

 But Veroneau warned that, based on his read of the Trump administration, WTO compatibility may not be its first concern when examining policies.

“It's clear to me that unlike ten years ago, where the administration -- I'd say this is true for Republican or Democrat -- if the president were seriously considering a tax measure or any measure and you said, 'you know what this would be great policy but it is clearly inconsistent with our WTO rules,' that would have, I would say, a pretty profound effect, and probably determinative effect on the outcome of that policy discussion. It is quite clear that that is not the case in this administration.” -- Jack Caporal (jcaporal@iwpnews.com)

 

Trump says border adjustment tax will create revenue from Mexico to build border wall

January 26, 2017

PHILADELPHIA -- President Trump, addressing congressional Republicans, applauded the House GOP plan to tax imports while exempting exports as a means to create revenue from Mexico to pay for a border wall.

“We're working on a tax reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the wall if we decide to go that route,” Trump told the Republican caucus on Jan. 26 at a joint House and Senate retreat here.

Trump, speaking about the legislative agenda, echoed House Speaker Paul Ryan (R-WI) and Ways & Means Committee Chairman Kevin Brady's (R-TX) description of a “bold” tax reform plan, which he said is “at the center” of the GOP's agenda. Trump added that the tax reform legislation is aimed at reducing U.S. trade deficits.

Trump's spokesman, Sean Spicer, told the White House press pool en route to Washington after Trump's speech that the administration has “been in close contact with both houses in moving forward and creating a plan.”

He did not give significant details about how the tax would work, and, according to White House pool reports, described it as the beginning of a process toward overall tax reform.

“When you look at the plan that’s taking shape now, using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit from, like Mexico. If you tax that $50 billion at 20 percent of imports -- which is by the way a practice that 160 other countries do -- right now our country’s policy is to tax exports and let imports flow freely in, which is ridiculous,” Spicer said.

“By doing it that we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding,” he added, stressing that Trump's plan for funding the border wall would “wholly” respect the American taxpayer.

Spicer echoed another argument advanced by the plan's champions -- that the U.S. is at a competitive disadvantage compared to those countries that apply a value-added tax.

“We are probably the only major country that doesn’t treat imports this way,” he said. “This gets us in line frankly with the policies that the other countries around the world treat our products.”

Trump, in Philadelphia, bashed the North American Free Trade Agreement, which he said “has been a total disaster for the United States from its inception, costing us as much as $60 billion a year with Mexico alone in trade deficits.”

“I will not allow the taxpayers, the citizens of the United States to pay the cost of this defective transaction -- NAFTA, one that should have been renegotiated many years ago, except that the politicians were too preoccupied to do so,” Trump added.

According to the Office of the U.S. Trade Representative, the U.S. trade in goods deficit with Mexico was $58 billion in 2015, which is a 8.4 percent increase -- or $4.5 billion -- over 2014, the USTR website states.

At the same time, the United States has a “services trade surplus of an estimated $9.2 billion with Mexico in 2015, down 12.7% from 2014,” USTR said.

Trump was slated to meet with Mexican President Enrique Pena Nieto on Jan. 31, but he told GOP lawmakers in Philadelphia that the two presidents had “agreed to cancel our planned meeting scheduled for next week.”

“Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be fruitless and I wanna go a different route. We have no choice,” Trump said.

The president also pledged to move away from multilateral trade deals like the Trans-Pacific Partnership to “one-on-one” agreements that will include provisions allowing 30-day notices to terminate -- measures Trump said will be applied if a trading partner does not treat the U.S. fairly.

“We've withdrawn from the Trans-Pacific Partnership, paving the way for new one-on-one trade deals that protect and defend the American worker. And believe me, we're gonna have a lot of trade deals -- Mitch, don't worry about it -- but they will be one-on-one. It won't be a whole big mash pile,” Trump said, turning to Senate Majority Leader Mitch McConnell (R-KY).

“There will be one-on-one deals and if that particular country doesn't treat us fairly, we'll send them a 30-day notice of termination and then they'll come and say 'please don't do that' and we'll negotiate a better deal during that 30-day period,” Trump said. “The other way you can't get out of it, it's like quicksand.” -- Jenny Leonard (jleonard@iwpnews.com)

 

Navarro: 'No question' the U.S. needs some type of border-adjustable tax

January 27, 2017

White House Director of Trade and Industrial Policy Peter Navarro said Friday there is “no question” the U.S. needs “a border-adjustable tax of some kind.”

Navarro, in an interview with CNBC, faulted what he called the “unequal treatment” of the U.S. income tax system by the World Trade Organization, as well as value-added taxes used by other countries, in asserting “that's why a border adjustable tax is front and center on the Hill for discussion. Somehow that needs to be dealt with.”

Asked point-blank if the president agrees that a border-adjustable tax is needed, Navarro said Trump “is on board with the idea that the WTO and that VAT problem is a huge problem.”

As to how the administration views the House GOP tax reform plan, which relies heavily on border adjustability, Navarro said “we're having a lot of discussions about the best way to go forward” – and adding that the GOP blueprint is an approach “we might very well be able to work with well.”

“There's no question that we need a border-adjustable tax of some kind, one that has to be flexible,” Navarro said. “But we need one that's flexible.”

By “flexible, Navarro said, he means “you can't treat Germany the same as Japan with respect to that specific issue.”

“We as an economy cannot succeed putting our people back to work in Ohio and Pennsylvania, Michigan and Indiana if those countries keep treating us unfairly with respect to that VAT tax system,” Navarro said. “The only way to do that is by coming up with some system of border adjustable tax which is flexible.”

Navarro labeled Germany “one of the worst actors” in its use of a VAT, saying the country “strategically raised that to 20 percent,” unlike Japan, and is “sticking it to us. When they send a BMW or a Porsche into our markets, they basically rebate the VAT to those manufacturers. It's like a subsidy. And then if we try to sell them a Ford or a Chevy, they slap on the VAT.

“That's not going to happen under a Trump administration,” Navarro said. “So we're going to deal with that in some fashion. There's been a lot of discussion about how to do it.”

 

Ways & Means Chair Brady defends border adjustability as WTO-compliant

January 26, 2017

House Ways & Means Committee Chairman Kevin Brady (R-TX) defended the House GOP's tax blueprint -- particularly its border adjustability provision -- by saying he is "very confident" the bill would withstand World Trade Organization challenges if it became law, though he expects other countries to criticize the move nonetheless.

"I'm convinced that this is WTO-consistent," Brady on Jan. 24 told a crowd of business leaders at the U.S. Chamber of Commerce, citing "three key tests that the WTO uses in making these determinations."

He did not elaborate on those tests. But a Ways & Means aide provided an explanation: "The WTO has not examined a destination-based cash flow system. In general, in analyzing a provision, the WTO will examine whether it constitutes a subsidy, whether it is otherwise a prohibited export subsidy, and whether it is consistent with the WTO national treatment principle."

"So looking at the three key tests I'm very confident that we meet all three," Brady said in his Chamber speech. "In our proposal we are moving away from that income tax based on where the products are produced or where profits are booked to a very simple cash flow system based on where it's consumed. It is economically equivalent and trade equivalent to the value-added tax."

More than 100 countries have a value-added tax system, Brady noted, and Republican leaders in the House argue that reforming the U.S. tax system according to the GOP blueprint would eliminate the competitive disadvantage that U.S. businesses face and disincentivize moving operations abroad.

Brady acknowledged that "there will be a thousand different opinions on whether it will be WTO-compliant," but said "we have the advantage of designing this tax system to be so."

"I do expect China and Europe and Mexico and Canada to yell about this," he said. "They have tax advantages built in. That unbalanced approach will not continue; we're dead serious about leveling the playing field."

Brady's panel, which has jurisdiction over tax and trade policy, is working on a "fairly short timetable" in developing its tax bill, Brady said, adding that Donald Trump's victory made it possible for his caucus to follow through on a "bold" agenda in 2017.

Brady has remained committed to the border adjustability provision despite criticism from some industries as well as Democratic staff on the Senate Finance Committee.

President Trump initially dubbed the GOP tax plan and the border-adjustment provision "too complicated" but shortly after softened his stance, signaling that the provision is under consideration.

The blueprint has received mixed reactions, with retailers and businesses that rely on imports being the most skeptical. Brady, acknowledging those concerns, said he is confident Republicans on Capitol Hill, together with the new administration, can find "some really smart positive ways to address this."

The chairman told business leaders that "in developing our blueprint, we made a purposeful decision to consider and incorporate some of the boldest, most pro-growth policies available," but he acknowledged there are opponents of the plan.

"Understandably, some companies that import a lot of foreign products have concerns," Brady said. "Taxing both foreign and 'Made in America' products at the same rate is a big change. We are listening to their concerns and we welcome their feedback."

Asked by a member of the audience whether imported oil would be subject to a border-adjustable tax, Brady said "it would," but tried to ease worries by saying the GOP is looking "to design this provision to use a transition to accommodate concerns like that."

"We know we are throwing bold changes at the business community; we don't expect these models to change on a dime," Brady said. "We want to accommodate these concerns. I'm confident that the economy and the currency adjust in a very efficient way."

Sources have speculated that oil refiners could ultimately be exempted from the border adjustment provision on national security grounds, saying such a move likely would not be challenged in Geneva.

But Brady warned of "severe consequences" if industry opposition to the provision ultimately eliminates it from the bill.

"Make no mistake, there are severe consequences for America if special interests succeed in blocking this provision," he said, adding that "foreign products would continue their tax advantage over 'Made in America' products -- undercutting President Trump's focus on American jobs and growth."

"But perhaps most importantly," Brady continued, "Congress and the White House would have voluntarily left in place the damaging incentives for U.S. companies to move their jobs, research and headquarters overseas. We cannot let that happen and we won't."

At the same time, he said his committee appreciates input from the business community as well as Democrats on how to make the plan work.

"We absolutely welcome our colleagues on the other side of the aisle in this process," he said. "We continue to invite CEOs to engage constructively on the design and transition of this critically important provision so that imports and exports continue to contribute to our local economies."

Club for Growth President David McIntosh, in a statement issued after Brady's remarks at the Chamber, decried the GOP's tax plan, saying "pro-growth tax reform is not creating a new middle-class consumer tax to take the place of high corporate tax rates."

"There is no budget rule that requires Congress to raise one tax when it cuts another," McIntosh said. "House Republicans are already threatening to sacrifice pro-growth tax reform on the canard of revenue neutrality. Instead of trading one tax for another, the GOP needs to focus on cutting rates, and cutting spending and the size of government to match."

Chamber president Thomas Donohue, introducing Brady, emphasized the chairman's powerful position in Congress.

"I want you to know that he's a man who when he says he's going to do something he's going to try real hard, and I want you to know that this is a man in the House who is going to be inundated and has the opportunity to make something happen," Donohue said of Brady.

"And we have to look at this thing in a broader sense, we have to look at it without thinking immediately 'what do we get out of it?' We're not going to get anything out of it if we can't work together to make it happen," he added.

Asked about his stance on comments by White House Press Secretary Sean Spicer that the Trump administration will pursue bilateral trade agreements instead of multilateral deals, Brady said that while regional agreements have proven to be good approaches to access certain markets quickly, congressional Republicans will work with the new administration to open up those markets in a bilateral way.

"The good news is that Mr. Trump and his team understand we need more customers," he said.

Brady pledged to advocate that Trump and his team review trade deals on the basis of "what works for America" and "what can be improved," and urged the new administration to ensure the U.S. competes in markets like the Asia-Pacific and North America.

When asked whether he expects Congress to have oversight of a renegotiation of NAFTA -- which President Trump has pledged to do in his first 100 days in office -- under procedures laid out in the Trade Promotion Authority law, Brady said "I think that's a step ahead."

"Right now I support Mr. Trump's careful analysis of the impact that NAFTA has had on our economy, on our supply chains, on our workers," Brady said. "And by the way, ending the tax on made in America products can help us compete very well in those regions as well," he added. -- Jenny Leonard

 

Key senators studying trade implications of House GOP's tax reform plan

January 26, 2017

As Senate and House Republicans headed to a joint retreat in Philadelphia this week, members of the Senate Finance Committee said they were looking into the House GOP blueprint for tax reform and its consistency with U.S. trade obligations, as well as President Trump's proposal for "border taxes," but indicated that the Senate is a long way from considering legislation.

Sen. Rob Portman (R-OH), who sits on the finance panel and was U.S. Trade Representative under President George W. Bush, said an education effort is needed before a border adjustment or other tax plan with trade implications can advance in Congress.

"The House has a plan but in the Senate we haven't even taken that step," Portman said. "We have a lot of educating to do. We need to look at the pros and cons of a cash-flow tax. A lot of thinking needs to go into this, in the Senate but in the House also."

The House GOP tax plan, championed by Ways & Means Committee Chairman Kevin Brady (R-TX) and House Speaker Paul Ryan (R-WI), includes a provision on "border adjustments," which would tax imports while exempting exports.

Trump and his team to date have not put forward a detailed tax reform plan, but Trump has repeatedly warned U.S. companies that offshoring operations will result in a "big border tax" that would be applied to their products when imported back to the United States.

Portman said "we'll know more" about next steps on tax issues after the joint House-Senate GOP retreat Jan. 25-27 in Philadelphia, which Trump attended. Portman suggested that tax legislation addressing trade policy could be on the Senate floor by "early summer" after Congress acts on a budget resolution and a reconciliation package.

On the timing of tax legislation, Senate Republican Conference Chairman John Thune (R-SD) said health care legislation will have first priority, "but we can multitask.... Tax reform is long overdue. We'll have things going on at the same time," he added.

Thune also noted "interest" in legislation to allow "repatriation" of U.S. corporate profits made overseas, which could be used for domestic infrastructure investment.

Asked about Trump's proposal for tax reform and its compatibility with Senate Republicans' ideas, Thune said, "We are obviously interested in seeing whatever he puts forward. We haven't seen anything that's got any detail to it yet."

On the House GOP blueprint's border adjustment provision, Thune said there is "at least an economic argument that you'd see an increase in the value of the dollar, which helps offset or counterbalance that, and you know there's a pretty compelling logic behind that."

Thune added, however, that the House plan is "hard to quantify."

"But we're going to look at all those issues in the context of tax reform, and there are going to be people I'm sure who weigh in, and we've heard from people who don't like border adjustability and we've heard from people who do. So we'll sort it all out," Thune said.

Another GOP senator active on trade policy said "I see benefits but also have questions" about the House GOP border adjustment provision. "We want to be careful about not dislocating our economy," the senator warned, while noting that there is very little familiarity among lawmakers about how a border adjustment tax might work.

Sen. Richard Burr (R-NC), also a Finance Committee member, said of a border adjustment tax: "We'll see if that grows a life or is just talk."

Staffers for Senate Finance Committee ranking member Ron Wyden (D-OR) have suggested the House GOP plan could run afoul of World Trade Organization rules. But Portman, pressed on whether taxing imports while giving tax breaks to exports constitutes picking winners and losers, sidestepped the question and instead noted the WTO consistency of a value-added tax that other countries apply to U.S. exports.

"Other countries have a VAT tax that they apply to our exports to them, but not to their exports to us, and that's a tax issue that is legal under the World Trade Organization," he said.

"But that's a different issue than tariffs," Portman added, referring to Trump's threat. "On the tariff issue I have concerns over what the World Trade Organization would say, and what could result in other countries raising their tariffs as well."

On the Democratic side, Finance Committee member Ben Cardin of Maryland called the emerging House approach "high-risk," suggesting it could be found out of compliance with WTO rules. "The rest of the world looks to the U.S. to set the standard for WTO compliance," Cardin said. "This could be determined not to be a border adjustment, it's not up to us to decide it is."

Cardin has been pitching a consumption tax approach as an alternative he said could meet the same objective of making U.S. exporters more competitive.

Finance committee member Pat Roberts (R-KS), who also chairs the Senate Agriculture Committee, said he spoke to Trump after the inauguration and was asked by the president "how can I help you?" Roberts said he responded by saying "trade."

In response, Roberts said, Trump told him "We'll get back to you."

"So we're looking forward to that," Roberts added.

As to whether Trump's tariff threats could encourage other countries to retaliate against the U.S. -- specifically in the agriculture sector -- Roberts said, "well there's always that possibility. The president likes solid trade agreements and our best interests, and everybody's for that. We'll just have to see how this plays out."

Roberts said he has held more conversations on trade with Vice President Mike Pence, who Roberts said is "very much aware" of the needs of the U.S. agriculture industry.

"He's from Indiana, he knows farmers, he knows agriculture, he knows that we have to sell our product," he said.

Roberts said he has met with Trump's nominee for U.S. trade representative, Robert Lighthizer, and pushed him to defend U.S. agriculture interests while warning that there could be "too many cooks in the kitchen" who have a say in setting a trade agenda in the new administration.

"I had what I think is a very good conversation with Bob," Roberts said. "I'm very well acquainted with him."

"We brought up the fact that in his position I hope he takes the lead," he added, noting the two have discussed "some concern about too many cooks in the kitchen" -- referring to Peter Navarro and Jason Greenblatt, who Trump has said will influence trade policy in White House positions, along with the USTR and the new commerce secretary.

"We don't need different recipes or some things coming to a boil," Roberts added.

Asked whether he is confident that Lighthizer, who has years of experience defending the U.S. steel industry as an attorney, will be able to represent U.S. agriculture interests, Roberts said Lighthizer pledged to "step up" anytime he "would feel that agriculture could be hurt."

"And I said 'flip it: get ahead of the problem first and be a champion for agriculture,''' Roberts said, "and I think he will. He knows you can't eat steel." -- Jenny Leonard and Charlie Mitchell

from:      Jack Caporal <jcap1219@gmail.com>

to:           Carly Watson <carlyjanewatson@gmail.com>

date:       Sat, Jan 28, 2017 at 7:30 PM

subject:  Re: You're famous!

Thanks for sending. Feel free to use this in a debate. Everything below is based off of newer articles I or Jenny have written (see previous email) or issues that I have with the way Michigan is portraying what I've written. Rehighlighting the card is probably sufficient to beat the Trump PC part of the DA...

Also, can you please send me more snaps of Ham. He looks super cute and I want more dogs in my life. Thanks!

Trump -- not clear where he is on this, has made recent statements indicating he may be in favor of the House GOP border adjustable tax plan, but it's really unclear if when he talks about a "border tax" he's talking about the Brady-Ryan plan or a tariff on Mexican goods, a tariff on goods from U.S. companies that have offshored, etc. We have not heard that Trump is actively lobbying members against the border adjustable tax provision.

The Spicer quote -- backs up what I said below and Michigan in my opinion has highlighted that part of the card in a manner that distorts Spicer's message....

WTO question -- there is no (publicly available) legislative text on the border adjustable portion of the Brady-Ryan tax reform package, so no one really knows what will happen at the WTO. WTO dispute settlement proceedings are extremely legalistic and detail oriented. It is too early to say for sure the U.S. would lose a dispute. The tax proposal being discussed has also not been challenged ever at the WTO. The speculation about a WTO dispute is all based on five paragraphs of the House "Better Way" blueprint on tax reform where the border adjustment vision is laid out.