I Do Not Think That Word Means What You Think It Means

The EU has an odd definition of the term "free trade."  Apparently, low taxes, in the EU's world, are irreconcilable with free trade.

In a move that is both remarkable and disturbing, the European
Commission plans to file a complaint - and threaten protectionist trade
barriers - because attractive Swiss tax policies are supposedly a
violation of a free-trade accord. The bureaucrats in Brussels are not
arguing that Switzerland is imposing barriers against EU products.
Instead, the Commission actually is taking the position that low taxes
are attracting businesses that might otherwise operate in high-tax
nations. The implications of this radical assertion are
breathtaking. It certainly is true that a nation with more
laissez-faire policy will attract economic activity from neighbors with
more burdensome levels of government. But if this migration of jobs and
investment is a "distortion" or trade, then the only "solution" is
complete and total harmonization of all taxes (and regulations,
spending, etc). If the Euro-crats succeed with this argument at the
European level, it will be just a matter of time before similar cases
are filed at the World Trade Organization.

  • Bob Smith

    This isn't new. The OECD has whined for years about "harmful tax competition" regarding capital flight to low-tax Carribean states, and numerous US states want to form a sales tax (and possibly and income tax) coalition in order to harmonize tax rules and stamp out "harmful tax competition".

  • What are the odds that the WTO would be sympathetic to such arguments? They have typically struck me as a free-trade friendly bunch for the most part.

  • Kevin

    Using the EU's arguments...

    McDonald's should be punished, because they are "unfairly" consistent...

    Florida should be punished, because they are "unfairly" warmer...

    Microsoft should be punished, because their software is "unfairly" popular
    (oh wait, that one already happened)...

    and ice cream should be banned, because it "unfairly" tastes better than spinach...

    My point is that it is just wrong to punish those who compete successfully to help those who refuse to compete.