Reply #115: All international trade is exempt from the fuel taxes and surcharges local businesses must pay [View All]

[jonathan_seer]

That is extremely important when trying to understand how the rapidly developed trade relationship between the USA and China developed to its current unhealthy state.

If you have you wondered from time to time just how can it be possible for it to be cheaper to bring over products that are already pretty cheap to make from China - things like gum, lotion, everyday products that can't have enough margin to justify importing this is a big part of the answer.

Importers and exporters are exempt from all fuel taxes.

This is a huge "tax break" especially for importers over exporters, considering that the smaller the overall price of the product you are selling the bigger factor a "tax break" tax break on all fuel taxes becomes in making a profit.

I understand that fuel is the biggest expense shippers face.

For those who might not know "shippers" are NOT part of the manufacturers or big name companies we know. They are little known multi-billion $ companies paid to transport goods across the globe.

They exist in a world few Americans are only dimly aware of. Their key role and vast impact rules and regulations governing international trade have on the local economy by way of creating unfair advantages for overseas industries vs a vs. local industry is even less widely known.

The average tax per gallon in the USA, 46 cents.

A typical loaded semi might get 3miles per gallon fully loaded driving the miles from LA to NYC.

Fuel Taxes alone would amount to $460 per load - that's a grossly rough estimate. the purpose is only to compare it to the taxes an international shipper would pay.

An international shipper transporting from Hong Kong to LA, CA would pay $0 in fuel taxes despite traveling many times further!!

Considering the total savings, this tax break can be the profit margin plus for many international shippers.


Can you imagine what would happen if they had to pay European level fuel taxes usually several dollars in the heavily taxed Euro nations.

Everyone locally all local businesses and industries have to pay this tax to ship their products to local consumers. When they do, they get the privilege of paying the local going tax rate.
When you factor that in to the cost of making something suddenly the strange proposition of it being cheaper to make candy in China and ship it to the USA starts to make sense.

International Shipping has all sorts of incentives to make it "affordable."

Free market advocates conveniently NEVER mention this.


In their eyes this is essential to make it possible to trade internationally.

Which is of course nonsense.

Cheap stuff like candy and other consumer products would not be cheaper to make overseas without such hidden subsidies.

World economic efficiency does not benefit when taxing policies create false paradigms that grant benefits to decisions that otherwise would make little economic sense.

Instead hidden subsidies like this one create fertile ground for the growth of parasitic trade whose margin would not exist were it not for the subsidies, and by no measure meet the principal behind the original decision which was to take advantage of differing costs of manufacturing in the world to locate and send the manufacturing most efficiently done there.

Theoretically there should be ample locations, many with their own "strength." This diversity is supposed to prevent a super concentration of manufacturing and industry in any one world location.

The "international fuel trade tax exemption" cripples this mechanism resulting in the development of parasitic trade relationships that only benefit one side in terms of long-term growth and development.

Paying the going tax rate for fuel would NOT kill international trade.

It would slow it down to its natural level and help it return to sensible reasonable levels of growth, WHILE SIMULTANEOUSLY encourage the businesses who shipped work overseas to come back home.

The products that truly do benefit from overseas production would stay there - going a long way to restoring the integrity that was behind the original act to exempt fuel used by international trade from all taxes

Removing the cutthroat advantages these subsidies create in trade benefits both sides.

China would be allowed to develop more sensibly and avoided much of the nightmare associated with becoming the world's factory floor and its people suffering from the effects of the massive pollution this has caused.

Americans would have been able to move away from those industries that are better done in China without the massive economic dislocation that is stripping this nation of its economic strength replacing it with fantasy wealth based on nothing more than financial rules and regulations that only exist because every player promises to respect them.