Free exchange is not a zero-sum game.

States are in a certain amount of competition with each other. It is true that trade is not a zero-sum game and that trade wars, tariffs and other restrictions are therefore counterproductive. Nevertheless, it cannot be denied that different regulatory options lead to better or worse results. For example, a state that taxes its citizens and businesses less tends to be more competitive than a state with high taxation. A state that makes it easier to open a business will usually have more self-employed people than a state that imposes a high bureaucratic barrier. Only in an entirely free global market economy would these regulatory differences disappear.

But we do not have that starting position. The Beatles have disbanded. Sebastian Vettel will not become world champion with Ferrari, and parents sometimes do not love all their children equally. 

In this imperfect world, states are definitely in competition with each other. This leads to such pathological phenomena as protectionism.

Another kind of competition could be observed not too long ago in two Baltic states. In Estonia, for example, it was noticed that due to the higher alcohol taxes, many citizens decided not to buy alcohol in their own country but from their neighbour in Latvia. This led to lively trade, especially in the border areas, and businesses grew like mushrooms after a shower. The losses suffered by the Estonian state budget had an effect, as is often the case, and the government decided to reduce alcohol taxes by 25% in 2019.

This initially triggered a small diplomatic crisis. The Latvians were initially dismayed. The two countries had actually agreed years before that Latvia would increase alcohol taxes, which also happened gradually. The Prime Minister of Latvia initially affirmed that he did not want to enter into an alcohol war against Estonia. The Estonians’ bold action effectively forced Latvia to lower its alcohol taxes in return. The result was a 15% reduction in alcohol taxes. 

Such a tax cut does not necessarily mean that less revenue is collected.  

Poland decided in 2002 to radically reduce alcohol taxes by 30% in order to fight the “grey zones” where alcohol was produced illegally and uncontrolled. Because of the tax cut, the Polish state budget recorded significant revenues and was able to reverse a trend that had been going on for years. In 2002, taxes brought in 3.87 Mld PLN (881 Mln €), in 2003 it was already 4.09 Mld PLN (931 Mln €) and in 2004 the Polish state enjoyed 4.56 Mld PLN (1 Mld €). Likewise, it was possible to combat the grey areas where alcohol was produced in an uncontrolled manner.

The examples show two lessons. On the one hand, a tax cut does not always mean a loss of financial resources for the state. On the other hand, it is a suitable tool for international competition, with economic benefits for the consumer.

For such competition to emerge, certain framework conditions are needed. In the case of taxes levied on certain goods, this framework condition is the free market and freedom of movement. Both states are members of the European Union. The situation described above could only arise because it is possible for Estonians to travel to Latvia and buy goods there without significant bureaucratic and financial effort.

However, the principle is applicable to many types of taxes. Thus, states and regions can also compete against each other by cutting wage and income taxes, capital market taxes, property taxes and other levies. This principle can be seen on the European continent in the example of Swiss federalism. There, cantons compete against each other with, among other things, the tax burden. For instance, in Zug’s canton, which is located in the centre of the country, one tends to pay less tax than in the western areas close to France.

A larger country with a federal structure that favours tax competition is the USA. Nine states in the USA (Wyoming, Washington, Texas, Tennessee, South Dakota, New Hampshire, Nevada, Florida, Alaska) do not levy their own income taxes. This is a not inconsiderable difference from the state of California, which levies a tax of 13.3%. Differences also arise in details such as progression. States like Illinois, North Carolina or Minnesota do levy income taxes, but in the form of a “flat tax”, a line tax.

There are also significant differences in sales taxes and other levies.

In both the USA and Switzerland, citizens thus choose between different taxation models and can vote with their income and their own feet by selecting another place of residence.

This mechanism can also be observed in the EU. Such an advantage of European federalism must be preserved and strengthened. Instead of introducing minimum tax rates (which already apply to VAT, for example), the European Union should instead endorse competition. Benefits would accrue not only to individual taxpayers in the EU but to the free trade area as a whole. 

Lower taxation, which could be achieved through competition, would make European companies more competitive in the international market. So the EU should talk less about solidarity and more about federalism and decentralisation in the context of taxation. 

Originally published here.

Early this morning, in the final hours of the Donald Trump presidency, the outgoing president granted pardons and commutations for federal charges to several political and cultural figures, as is his right under Article II of the Constitution.

Among the most notable were former Trump aide Steven Bannon, former Detroit mayor Kwame Kilpatrick, and rappers Lil Wayne and Kodak Black. In total, pardons were issued to 73 individuals and 70 more had their sentences commuted.

Also on the list of pardons was a prominent North Carolina political figure: former area Congressman and NC GOP chairman Robin Hayes. He served 11 terms as congressman of NC’s 8th district, stretching from Cabarrus to Hope counties, encompassing Fayetteville, Albemarle, and my hometown of Concord.

In 2020, Hayes pled guilty to a reduced charge of lying to the FBI, after initially being charged with corruption, bribery, and making false statements in the infamous scandal to pressure then-Insurance Commissioner Mike Causey.

Hayes was alleged to have funneled more than $2 million from billionaire Greg Lindberg to the NC GOP, intending to illegally donate to Causey’s campaign in exchange for removing an assistant who was overseeing Lindberg’s insurance business.

The alleged bribery scheme was a total and utter breach of the public trust, facilitated by our state’s Republican Party chairman. Separating the fact that Hayes was able to escape the most serious charges, he should not have been granted a pardon.

There are currently more than 3,000 people imprisoned for nonviolent drug offenses in North Carolina, according to the Department of Public Safety, and 450,000 nationwide. Mostly of those cases involve marijuana possession, and were disproportionately brought against Black and brown people. Hayes’ ability to plead to a lesser charge and skate by with probation, in contrast to how those folks are treated, should have left us appalled and outraged.

This is not an argument for increasing criminalization and punishment, but rather for making our system more just and fairer. There are people far more deserving of a pardon.

Apart from the thousands of our fellow citizens in prison for nonviolent offenses, Trump could have easily pardoned Wikileaks founder Julian Assange, currently awaiting extradition to the U.S. in the United Kingdom, alleged Silk Road founder and Internet entrepreneur Ross Ulbricht, and government whistleblower Edward Snowden, living in exile in Moscow.

According to Trump’s executive action, Robin Hayes’ pardon was sought by U.S. Sen. Thom Tillis and several members of our state’s congressional delegation. One can assume they were looking out for their fellow Republican because of his long-standing reputation.

As the great-grandson of Concord-native industrialist James Cannon, founder of the Cannon Mills Corporation, once the largest textile manufacturer in the world (and new namesake to the Kannapolis Class A minor league baseball team), Hayes is the closest thing we have to Charlotte-area royalty.

During his time in office, there is no doubt that he lobbied hard for local interests.

As a young college student interested in politics, I wrote to Hayes’ office in 2008 to ask how he would vote on the TARP program, proposed to stem the coming economic crisis in the waning days of the Bush Administration. He wrote back explaining his intention to vote against the $700 billion bailout bill but lauded an amendment he helped introduce to extend tax breaks for NASCAR tracks.

My opposition to the unfairness of corporate welfare aside, there is no doubt that Hayes has been a towering figure in North Carolina politics, love him or hate him. But owing to his alleged crimes and breach of the public trust, his presidential pardon would have been better used for someone else.

Originally published here.

Trust innovation to improve the airline industry.

Through the European Green Deal, the European Union wants to create a carbon-neutral Europe in the near future. To achieve this goal, the European Commission reverts to many punitive measures, including taxation — used to find subsidisation in other areas. This old-school redistributive thinking is unlikely to yield the results that Berlaymont would like to see. However, this does not mean that we should do nothing about environmental challenges.

In the transport sector, we witness that traditional modes of travel are under increasing scrutiny. Through mechanisms such as the Emissions Trading System (ETS), or the more recent discussion over carbon border adjustments, the European Union seeks to institutionalise the principle of the paying polluter. In this context, we would like to express our concern that these mechanisms are effectively taxes on consumption, known to be regressive. 

Low-income households spend a larger part of their total income on these services. The adage of “if you tax something, you get less of it” is correct, yet does it serve the purpose of making the travel sector sustainable? COVID-19 has significantly reduced global air travel for a couple of weeks, and as a result, governments feel that they need to bail out the airline industry. In this sense, it seems understandable that a reduction in any mode of transport cannot be radical, and that there needs to be a gradual shift to sustainable transport. 

Reducing fuel consumption is as important to airlines as it is to each and every one of us. The aviation industry has been making consistent efforts to use less fuel. Giving innovative technologies such as new materials and fuel-saving engines a chance doesn’t usually come to mind as a possible solution, while its potential to help us cut the emissions would actually have a significant impact. 

For example, Airbus’ new A321XLR has 30% less kerosene consumption per passenger, while adding 30% more range than the currently used A321neo. These innovations are possible due to the current rate of use of airline services. Private industry needs capital flow in order to invest in future technological innovation. Cutting low-income households out of the equation with regressive taxation would paralyse the goals of sustainable agendas.

We should not underestimate human ingenuity when it comes to overcoming the challenges of the future, and that includes the field of aviation. The COVID-19 pandemic has shown some staggering inconsistencies in the way in which we treat airlines. 

On one hand, European taxpayers are subsidising big players on the airline market due to travel bans, while simultaneously taxing airlines through existing environmental measures. Needless to say, airlines have received financial support not just during the terrible business year of 2020, but also during previous years, mostly following considerable mismanagement. The Italian company Alitalia comes to mind, which instead of a simple bankruptcy procedure gets dragged out into a market it cannot sustain, through expensive government loans. Instead, EU member states should allow new airlines to prosper through eased administrative and tax burdens. 

Why not endorse new and small airlines that are willing to invest, as opposed to supporting old airlines that cannot focus on using new technology because they are too focused to make the next repayment, or sustaining cash-flow?

Europe has the technology and the ingenuity to make air travel even more sustainable. Through the existing ETS system. Sustainable fuels and new aircraft are the way forward to a Europe that allows for continued mobility, while aiding those who have made grandiose promises to reach the carbon-neutrality goal. Europe should not be about “either/or” policies, but pave the way for an innovative future.

Originally published here.

Estesa al 2 febbraio la consultazione pubblica del governo. Oltre il 98% delle risposte contro la misura restrittiva. In campo associazioni, medici e scienziati.

Di Barbara Mennitti| SIGMAGAZINE

È stata posticipata al 2 febbraio la chiusura della consultazione pubblica sulla proposta del Ministro della salute olandese Paul Blockhuis di vietare la vendita di liquidi per sigarette elettroniche con gusti diversi dal tabacco. La data per cessare la raccolta delle opinioni era fissata per ieri, ma è stato necessario concedere una proroga “a causa della richiesta popolare”, si legge sul sito del Governo. Mai, infatti, in Olanda un quesito in materia sanitaria aveva raccolto un numero così grande di partecipanti.

Read the full article here.

The EU’s stimulus package isn’t the right way to go.

On July 21, 2020, the twenty-seven member states of the European Union agreed on a “historic” stimulus plan. In total, 750 billion euros will be injected into the European economy. For the first time in the history of the European Union, member states have agreed to collectively take on debt to the tune of €390 billion. Borrowed on the bond markets, this sum will be paid to the States most affected by the crisis, unconditionally.

While Angela Merkel said in June 2012 that she would not agree to Eurobonds, the Covid-19 has acted as an accelerator to the political will to implement them.

European Commissioner for the Internal Market Thierry Breton welcomed with a tweet that the European recovery plan will in no way result in the creation of new taxes to be paid by European citizens before specifying that “it is only at the borders of our internal market that we will impose taxes”! As if it were not European consumers who were going to see their purchasing power cut by the amount of these taxes.

The only tax officially enacted so far is the one on non-recycled plastic. Applicable from January 1, 2021, this tax will take the form of national contributions. While it is the Member States that will be responsible for making these contributions to Europe, they could come from several sources, including a contribution from market players. In such a case, the cost will likely be passed on to consumers. The risk is also to reduce the capacity for investment and innovation of the industries concerned.

The other funding avenues considered are those of the GAFA tax – still under discussion – and the European carbon tax – which would come into force no later than January 2023. President Emmanuel Macron announced on French television that these new taxes, in addition to financing the recovery plan, will penalise “large companies and international players who do not play our policy game”. This is a very naive view of how the market economy works. In reality, it does not matter whether the tax is imposed on the consumer or the producer, the financial result remains the same: the cost is higher for the consumers and the profits lower for the producer.

While stimulus packages are prevalent, their return on investment is never guaranteed. Historically, the performance of stimulus packages has often turned out to be disappointing.

Harvard economist Alberto Alesina has spent the end of his career analysing thousands of budget adjustments in hundreds of countries. In 2010, when the debate was in full swing following the turmoil of the subprime crisis, the expert on budgetary policies explained in an opinion piece to the Wall Street Journal that the stimulus based on increased public spending was turning out to be positive. Indeed, while market players react positively to a lasting and credible drop in the level of taxation, the increase in public spending sends the opposite signal.

Another advantage attributed to the liberalisation shock is that this method allows power to be distributed to consumers instead of concentrating it in a few administrations which will make choices for others.

It is, therefore, possible to revive the economy without placing an additional tax burden on consumers. It would even be an opportunity for the “bad students” of the euro area to consolidate their public finances — the crisis has shown that countries which are already heavily indebted are the most vulnerable to an exogenous shock.

Unfortunately, it is in the opposite direction that the European Union seems to be heading: towards the increasing disempowerment of the laxest economies. How long can such an arrangement last?

Originally published here.

L’Union européenne souhaite lancer une révolution agricole sur le continent européen. Admirable intention… si elle avait des chances de fonctionner, et surtout si elle n’était pas si dangereuse.

La Commission européenne a élaboré un plan ambitieux avec sa nouvelle stratégie nommée « Farm to Fork », « de la ferme à la fourchette ». L’objectif n’est pas moins que d’imposer une révolution de l’agriculture en Europe.

Visiblement, pour l’Union européenne (UE), l’agriculture est en grande partie responsable de la dégradation environnementale, ce qui oblige les agriculteurs à assumer une grande partie du fardeau de la lutte contre le changement climatique. L’UE a donc fixé deux objectifs principaux : 25% d’agriculture bio d’ici 2030, et une réduction de 50% des pesticides dans le même laps de temps.

Plusieurs auteurs ont souligné les effets négatifs de l’augmentation de la production d’aliments bio. En effet, l’agriculture biologique a également besoin de pesticides, et certaines études montrent qu’ils émettent plus de dioxyde de carbone que l’agriculture conventionnelle.

Sur la question des pesticides, il y a également des éléments qui sont occultés : la quantité de pesticides utilisée aujourd’hui n’est pas comparable au niveau des années 60. Les substances chimiques existantes sont actuellement approuvées par les agences de l’UE et par d’innombrables normes régulatrices produites par les Etats membres.

Les oubliés du débat

Ce que l’on oublie souvent dans le débat, c’est l’actuelle importation d’aliments « non durables ».

D’une part, l’augmentation des normes alimentaires en Europe a aggravé les effets du commerce illicite. Prenons l’exemple des importations frauduleuses d’aliments bio. Dans son rapport de 2019 intitulé « Le système de contrôle des produits biologiques s’est amélioré, mais certains défis demeurent », la Cour des comptes européenne a constaté des problèmes structurels dans le système de contrôle du commerce des aliments bio, malgré les contrôles mis en œuvre en 1991.

Dans une section sur la communication relative à la non-conformité, la Cour des comptes européenne écrit ceci :

« En Bulgarie, nous avons constaté que certains organismes de contrôle ne communiquaient à l’autorité compétente certains types de non-conformité que par le biais de leur rapport annuel.

L’autorité compétente ne l’a pas remarquée au cours de ses activités de contrôle. En République tchèque, nous avons constaté qu’en moyenne, les organismes de contrôle mettaient 33 jours en 2016 et 55 jours en 2017 pour signaler à l’autorité compétente un cas de non-conformité affectant le statut biologique d’un produit. »

Le rapport note également que les délais de communication des cas de non-conformité sont de 38 jours en moyenne dans l’Union européenne, alors que la réglementation en vigueur stipule que les rapports doivent être présentés sans délai.

Cela signifie que les produits biologiques non conformes, c’est-à-dire le commerce biologique frauduleux, continuent un mois en moyenne dans la circulation légale du marché unique européen avant d’être signalés aux consommateurs.

Si l’Union européenne et ses Etats membres sont sérieux en matière de contrôle de la qualité et d’information et de protection des consommateurs, ils ont besoin de mécanismes de détection et de signalement qui surpassent la vitesse de distribution des colis postaux.

Des mois de retard

La Cour des comptes européenne note également que les Etats membres ont pris en moyenne quatre mois de retard dans leurs rapports à la Commission européenne et que 50% de tous les rapports analysés ne contenaient pas d’informations.

La Chine est le plus grand exportateur d’aliments biologiques vers l’Union européenne (sur la base du poids, chiffres de 2018, du rapport de la CCE). Compte tenu des difficultés importantes concernant le contrôle de la qualité d’un large éventail de produits originaires de Chine, il devrait être clair que les institutions de l’UE doivent donner la priorité à l’authenticité de ces importations de denrées alimentaires.

En outre, les importations légales finiront également par entrer dans la catégorie des produits « non durables » selon les réglementations de l’Union européenne. Cela pose déjà un problème considérable avec l’adoption de l’accord de libre-échange entre le Mercosur et l’UE, et a empêché par le passé la conclusion d’accords tels que le TTIP.

L’Europe sera confrontée à un choix difficile : insister sur les normes prévues, et risquer ainsi de dresser des barrières protectionnistes, voire de créer une insécurité alimentaire, ou réévaluer la nécessité de certains objectifs environnementaux.

Certaines voix s’élèvent en faveur de la première option, qui consiste à empêcher les importations non durables par le biais de taxes sur le carbone aux frontières. Elles oublient de se demander si le retrait des importations sera vraiment la solution qui permettra de maintenir l’agriculture européenne à flot.

Les objectifs fixés dans le cadre de la stratégie « Farm to Fork » pourraient avoir des conséquences désastreuses sur l’économie dans son ensemble.

Selon une étude d’impact réalisée par l’USDA – l’agence américaine dédiée à l’agriculture [dont il faut se rappeler qu’elle n’est pas neutre en matière de politique agricole…] –, cette stratégie, si elle est adoptée par l’UE uniquement, y entraînerait une baisse de la production agricole de 7% à 12%. Cela entraînerait alors une baisse du PIB de l’UE, laquelle représenterait jusqu’à 76% de la baisse du PIB mondial. En d’autres termes, dans un tel cas de figure, les trois quarts de la baisse de productivité mondiale seraient à attribuer à l’Europe.

En outre, dans un scénario d’adoption mondiale de ces normes, la situation des prix des denrées alimentaires se détériorera considérablement, comme l’ont constaté les chercheurs de l’USDA.

L’Union européenne fait une grave erreur avec son initiative « Farm to Fork ». En plus de ne pas assurer les institutions nécessaires à la surveillance de ces mesures, une telle décision d’imposer une agriculture biologique et sans pesticide pourrait entraîner une baisse du niveau de vie des consommateurs et des agriculteurs.

Je suis d’avis que la stratégie « Farm to Fork » doit être repensée sérieusement ou faire l’objet d’un moratoire à long terme.

Originally published here.