U.S. LAW & GLOBAL TRADE RELATIONS.

     Due to rapid advances in trade spurred on by globalization, the information technology revolution, and by pressures unleashed by the 2008 global financial crisis,  discussions on reforming global trade taxation and traditional trade statistics are now significantly increasing, rapidly.

…..  There is growing pressure worldwide (in the U.S., the EU, and emerging markets) to more effectively and fairly tax multinational corporations and put a stop to aggressively shifting of profits to offshore tax havens via complex inter-company transfers, intellectual property licensing, and cross-licensing. The issues of “worldwide taxation” and “unitary taxation” are now being debated more earnestly.

“Unsafe Offshore.” Financial Times (Jan. 14, 2013).

…..There is an ongoing effort by the WTO and the OECD and others (such as the USITC) to update traditional trade statistics. With the advances in technology and business practices there has been a statistical gap in accurately measuring trade flows, a failure to accurately depict them, and  to formulate effective trade policies.  Newer methodologies bring into question hundreds-year-old assumptions about the actual nature of trade and trade theories. Three specific observations are often made by critics:

(i) high value-added services are not  accounted for accurately;

(ii) importance of intermediate goods  are overlooked;

(iii) there is a need to re-define bilateral trade balances in light of revised concepts, newer statistics, and datasets. 

      In light of this newer statistical approach (“value-added”) the U.S. trade deficit would not be reduced but would be redistributed to other countries such as Japan and Korea. For example,  if measured by the value of national content added to exports the U.S. trade deficit with China would be reduced by 25% – 30%.

     This value-added statistical / data approach raises a new set of geopolitical issues and questions.  Most importantly, it highlights important questions concerning the efficacy of existing  foreign policies of the United States especially concerning U.S. – China trade relations; raises questions over the usefulness of trade restrictions generally; further highlights the depth of trade interdependence by focusing on the importance of intermediate goods and services.

               Lamy, “Better Statistics and Better Policy.” WTO News (January 16, 2013).

                ” ‘Made in the World’  Initiative of the WTO.”  WTO website (January 16, 2013).

      To be effective the need to reform taxation of global trade should be done on both a national and international level. Multilateral efforts and bilateral cooperation are essential.

      There is a similar need to revise the statistical  measures of global trade and trade theories. Traditional trade theories often do not accurately take into account developments in globalization, the information technology revolution, or the global supply chain.

     (Revising and harmonizing international accounting, auditing and reporting standards need to go forward. But that is another story.)

      Both of these reform efforts  (trade taxation and trade statistics) are necessary to help ensure better public policies (and corporate strategies) in order to promote, hopefully, greater global trade in this decade.