Walmart Sign
The other day, an Arizona woman was digging through a purse she picked up at the local Wal-Mart, one of the biggest retailer of Chinese-made goods in the United States. What she found inside horrified her: a note that a Chinese laborer apparently quietly slipped into the bag with a description of the beatings, 14-hour work days and other appalling conditions that workers in China have been said to endure.
The episode underscores an ugly reality about corporate America, as it seeks cheap goods to unload in the American market in the drive for greater and greater profits. The story is also a grim reminder of the decline of our nation’s manufacturing sector, once the envy of the world and the source of jobs that paid enough to sustain the aspirations of America’s working families.
As American corporations have fled overseas to find cheap labor in countries like China, their executives have offered a number of explanations that, on the surface, seem reasonable. Perhaps the most compelling is that manufacturing abroad has resulted in a bounty of inexpensive consumer goods for America, from electronic goods to clothing. But the toll has been high – and not just for hapless workers in countries with little regard for workplace safety or even human rights.
The cost has also been shouldered by Americans, who are among the most productive workers in the world but who simply cannot compete with labor forces in other countries that in some cases resemble slave labor.
It is against this backdrop that some members of Congress are pushing for a policy that would encourage American companies to begin manufacturing here in America once again.
The provision known as border adjustment is one of many being formulated on Capitol Hill as Congress and the Administration consider revamping the American tax code to make it more competitive. It would help transition to a completely new tax system, one that focuses on where a product is sold rather than where it’s made, as a result leveling the playing field for companies that want to make products here in America.
But there are powerful adversaries, including Wal-Mart and other retail operations, who are spending millions to keep the status quo. These large retailers, who have profited handsomely selling foreign-made products at a steep discount, argue that making comprehensive changes to the tax code would force them to drive up prices on consumers. In reality, however, border adjustment is something that hundreds of countries around the world currently do making the United States an outlier, along with the likes of Iraq and North Korea.
The arguments made by opponents are based on the notion that a border adjusted tax would be levied in addition to corporate taxes. But, in fact, no one in Congress or the Administration has proposed that. What is being proposed is similar to what’s in place throughout the world, including European markets, where Wal-Mart and other retailers operate and make a profit.
While opponents of reform have focused on the cost to U.S. consumer, maybe it’s time the discussion looked at the other costs – specifically why those purses and other foreign-made goods are so cheap in the first place. Maybe part of the debate should be about the value of producing goods here in America, with our strict labor laws and regulations, which prevent the sweatshop conditions known to exist in many other countries.
This is the best chance, in 30 years, to reform tax code and level the playing field for American manufacturers. Doing so would grow our economy and help create new jobs here at home. And while it will not raise prices on every day goods and services, it may raise the standards and conditions in which those products are made.
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