Tyler Cowen recently created something uncharacteristic and mysterious.
But there’s another way to own the question, and it’s “indicate whether to assign EU resources to exports.” Additionally, exports are VAT-free, and sales within the EU are generally not VAT-free. So here is the discovery to export. You have sales tax, but the VAT rate is usually higher. Therefore, you can say that Europe is bored to find exporters than the US. Of course, the same can be said about many other European government interventions. Germany’s prominent Sunday closure laws also encourage more exports. Send it to the US and let it sell on Sunday, Bit! (Not Paramus, New Jersey.)
From an American perspective, I don’t think there’s anything wrong with this kind of “export subsidies” (and that’s not the way I explain it first, but we’re Steelman here).
Note that he did not call VAT an export subsidy, but suggested that “here is the discovery to export.” I don’t know how true that is. It is clear that there is no advantage if you have 20% VAT and export to other countries with 20% VAT. But what happens if you export to a country without VAT?
It is considered a $100 item sold in Europe for VAT. According to the PPP, it was sold for $100 in a country without VAT. So again, there are no obvious discoveries to export at 11. (The PPP may not be held for other reasons, but that doesn’t matter whether VATS exports or not.)
It does not suggest that Vats cannot construct an argument that finds exports. Therefore, sharing VAT with the situation with VAT with a larger fiscal deficit will result in lower actual exchange rates and increased exports. But that applies to any device for raising tax cuts, and I haven’t seen Tyler have that argument. The salt in the EU is the fact that VAT-free SEM is completely irrelevant unless I miss something.
Another point, this isn’t aiming for Tyler’s post. If it’s true that VAT is something like an export subsidy, then they would be the opposite of tariffs. European tariffs prevent US companies from exporting to Europe. European export subsidies discover that US companies will export to Europe as export subsidies are equivalent to import subsidies. So, if VAT is something like an export subsidy, they are also the opposite of import taxes.
