Offense or defense?
Published 9:13 am Thursday, October 18, 2012
Our success as a Nation and our success as human beings is complex. If you’re looking for simple solutions or approaches to our human existence that universally apply all the time, then you should have been Adam or Eve. That’s the last time that things were simple. If you want a simple analogy to life, think about a football game. There are times when you have to play offense and there are times when you have to play defense. The reality is that you have to play both if you are going to be successful. And no strategy is going to last all season long – you’ll have to continually adjust.
We are now and have been engaged in a growing, competitive “Global” economy since President Ronald Reagan declared that we were a “service economy” back in the early 1980s. As a nation our weakness has and continues to be the same weakness that last year’s “World Series” or “Super Bowl winner” has. We begin to believe we’re as great and invincible as the press releases and politicians declare. That doesn’t mean we aren’t resourceful and have great individual talent. It just means that we are not mentally ready to win the next game or championship.
While we have deluded ourselves in the last 30 or so years, the rest of the world has been playing both offense and defense to protect themselves from US economic power.They have worked to erect barriers such as value added taxes (VAT) systems and regulatory structures that make it difficult for US exports to flow into their countries. VAT structures make US products more expensive to the tune of 20 – 30 percent in places like China. And regulatory structures impede the flow of basic raw materials and chemicals into the EU (European Union Countries), China, S. Korea, Japan and many other countries. There are active laws that actually regulate the manufacturing processes of US plants. If we don’t manufacture within the criteria setup, then the products cannot be sold into these countries.
An example: If I were a small manufacturer of a household cleaning product and wanted to sell my product into the EU or China, I’d have to meet something called REACH – a set of chemical substance rules and regulations. Additionally, I’d have to pay VAT on the product. Simply put, I’d have to:
• register each individual substance or chemical in my product (count the number of substances in your household cleaner to get an idea),
• perform toxicological tests ($150,000 per substance),
• ensure that my customers don’t use my product in unapproved situations,
• provide my customers with reams of data on what the test data shows,
• ensure that my suppliers provide me registered and approved chemicals to make my products, and
• manufacture my products in compliance with “good manufacturing processes” that meet the host countries requirements.
And then after that, I’d have to pay VAT taxes equal to about 18 percent of the value of my product in addition to customs and tariff fees.
So what does a company that manufactures products in China have to do:
• Check the US lists to determine if the substances in their product are approved – lists built and maintained by our government (in the interest of Free Trade),
• Pay the customs and tariff fees and sell much cheaper products into the US marketplace for at least 30 percent less in taxes than US companies pay to export into my country.