Foreign Countries Have Taken U.S. Jobs, But Tariffs will not Bring Them Back
By Joel D. Joseph, Founder,
Made in the USA Foundation
President Trump has proposed tariffs to bring films back to Hollywood. Tariffs are not the right tool for the job. I represented the Screen Actors Guild and other film unions challenging Canada's illegal film subsidies in 2002. At that time, we needed the George W. Bush administration's approval to back our complaint via a NAFTA provision against subsidies. President Bush wouldn't do it. Film subsidies have driven films away from Hollywood and tariffs won't bring them back. Further, there are now many states, including Louisiana and Georgia who provide illegal film subsidies to attract movies to be made there. Under GATT (the General Agreement on Tariffs and Trade), subsidies are considered illegal, primarily those that distort international trade.
The reasons that the United States has lost different industries are complex. We lost film production because of illegal subsidies. We lost jobs to Mexico and Canada because NAFTA failed to create a unifying currency. We lost pharmaceutical jobs to Ireland because Ireland imposed a low corporate income tax rate of 12.5%. Each of these causes must be addressed individually. Tariffs are not the answer to any of them.
Films should be made where it makes sense to make them because of storyline, scenery, weather or other location uniqueness. Hollywood was originally chosen because of its favorable weather. However, this advantage can be overcome by foreign subsidies. For example, the film American Beauty was filmed in Canada to take advantage of illegal Canadian tax credits. To combat the loss of the film industry, we can either enact our own tax credits, or file a complaint with NAFTA or with the World Trade Organization. Tariffs will not get the job done. Foreign films will be difficult to define and enforce because one movie is often shot in several locations, written in another and edited elsewhere.
The North American Free Trade Agreement and
the U.S. Mexican Canadian Agreement (NAFTA 2.0)
President Trump had his chance to reform NAFTA with the USMCA during his first term, but he failed to make significant changes. For example, one major reason that the United States has trade deficits with its to neighbors is that their currencies have weakened compared to the dollar. The Mexican peso was three to the dollar when NAFTA went into effect. Now there are 20 pesos to the dollar. Canada's currency has declined from $0.83 to $0.73 since NAFTA went into effect. We should, and still can, create a North American dollar that would eliminate the weak currency problem. Europe created the Euro and it has been very effective in stabilizing currency throughout the European Union.
Another reason that we lost the car industry to Canada is because Canada has national health insurance paid for by each province. This gives Canada a $1,500 per car advantage as General Motors and Ford must pay for health insurance out of its corporate pockets in the United States, but not for workers in Canada. That is why GM makes the Camaro in Canada and Ford makes many cars there.
Ireland
Ireland, a small nation of four million souls now controls most of American drug companies' production. In 2003, Ireland adopted a 12.5% corporate income tax rate. Seven of the top pharmaceutical companies have left the United States for the greener shores of Ireland.
Pfizer, the largest drug company in the world, now manufactures best-selling Lipitor and Viagra pills in Ireland. Pfizer has eight factories in Ireland employing
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