Fighting for American Industrial Renewal; Industry and Manufacturing Advocacy Group for public Education

Compare the price in Europe

For a great illustration of how US manufacturing is impacted by foreign government trade barriers, and "double taxation", take a look at the examples below. All prices and images are taken from the manufacturer's respective websites, and all currency conversions are based on 1€ = $1.49 US, the closing rate on 11/06/09.

Both vehicles used as examples offer gasoline and diesel powertrain options.

 


Below we see two compact SUVs, a VW built in Wolfsburg, Germany and a Jeep® built in Toledo, Ohio.  At any auto dealer in the United States, they are priced within a few hundred dollars of each other.  Yet when the Jeep arrives on the Volkswagen's home turf, the base price increases 3315€ (roughly $5000 US).  By the time you add some options, the VW Tiguan (which tops the Jeep's price by $4700 in the US) is now $14,625 cheaper than the top-range Jeep! 

 

 

Of course, this double-standard of trade isn't limited to SUVs, or even vehicles with a final assembly point in the US. (The Chrysler 300 is assembled in Canada, one of the small number of nations that doesn't penalize US imports.)  The Volkswagen Passat CC is built in Emden, Germany.  Once again, when on US soil the cars are priced within two-hundred dollars of each other, this time at both ends of the price range.  Now the base-price difference widens to almost $14,000 US and grows to $20,413 at the top of the line!

 

 
Rather upsetting that such information, easily available in the public domain has been absent from any debate involving the US auto industry.  Perhaps instead of criticism of Chrysler for failing to effectively penetrate the European market, they should be praised for the sales they've made while at such a price disadvantage!
 
Both Democrat and Republican congresspeople have gotten on board to correct this disparity, read more about it here:

Foreign value added tax systems should go the way of the Edsel

...When comparing a German and American car, each offered to the consumer in its home market for $20,000. When the German car is exported to the United States, the VAT taxes are rebated and it costs $17,885 here -- a price advantage of roughly 10 percent due only to the difference in tax systems, not corporate competitiveness.

The VAT rebate gives the German automaker a tremendous advantage in our market. Please note that in the same example, the $20,000 American car exported to Germany is saddled with the VAT at the border -- which is imposed not just on the base price of the car, but the shipping and insurance costs as well -- and winds up costing $25,792 in Germany, while the German car remains at $20,000 in its home market. Small wonder that Detroit cannot export effectively from the United States but must set up foreign operations to counter the effects of the VAT (and currency manipulation and many other unfair foreign trade practices).

In sum, in competition with a foreign VAT country product, the American-made product winds up more uncompetitive in its home market, as well as in the foreign VAT country market. This disparity is reliably estimated to place an extra $290 billion burden on American manufactured goods and $85 billion on U.S. services -- or roughly half our yearly trade deficit...