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Brad Setser
@Brad_Setser
, 3 tweets, 1 min read Read on Twitter
The 2017 tax reform made it easier for U.S. firms to bring profits booked offshore home (no complex gymnastics required), but it did not - in my judgement - change the basic incentive to shift profits and in some cases jobs offshore.
The scale of the profit shifting that continues to take place speaks for itself.

What's the solution: Global tax with no deferral would (with credit for taxes actually paid abroad), as would apportioning the corporate tax base on the basic of sales (a Zucman proposal).
There are a number of options that would be substantially better than what we have now. Tis still too easy to move IP and the associated profits to a subsidiary in tax haven, and the low GILTI rate (& the way it is calculated) encourages tax gymnastics.

nytimes.com/2019/02/06/opi…
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Brad Setser
@Brad_Setser
Me, in the @nytimes (a first), with a simple message:

The offshoring of U.S. corporate profits is a real problem, and Trump's tax reform if anything made the problem worse.

nytimes.com/2019/02/06/opi…
The Times did some great graphics to accompany my argument --

like this one, showing the location of U.S. corporate profits relative to the underlying size of the economies that in theory are generating the profits.
The distortions associated with tax have long been treated as secondary, compared to say the distortions associated with tariffs. I think that's now backwards, as the distortions associated with firms efforts to move profits to low tax jurisdictions tax are now huge.
Read 5 tweets
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Brad Setser
@Brad_Setser
So I didn't see the big fall in the November trade deficit coming.

Exports were weak, so it was all imports -- about half oil and half consumer goods

bea.gov/news/2019/us-i…
The net deficit in petrol was under $1b in November, v say an average of $5b in Q3.

and non-petrol imports fell back from $197-198b in Sept/ October to $193-194b
Imports from China were up 8% y/y in October, but then fell 3% y/y in November -- which fits a front running the tariffs and the threat of tariffs story.

But there may also be more too it
Read 10 tweets
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Brad Setser
@Brad_Setser
Interesting piece.

But I really don't like taking China's GDP growth in dollar terms as a proxy for China's impact on the rest of the world. Not when China's imports are falling as a share of its GDP

(1/x)
China's GDP is way up by any measure.

Trade though is down as a share of China's GDP (non commodity trade that is).

Exports are only a bit over their pre-WTO level now; imports are well below their pre-WTO levels.
Net out processing trade, and imports of manufactures are are around 5% of China's GDP --

and exports aren't really out of line with China's economic size at around 11-12% of GDP (in line with the euro area)
Read 7 tweets

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