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Three cheers for Reuters! In a September 7 report that I somehow missed, the news agency provided a valuable reminder about a protectionist trick that China has trotted out once again to offset the impact of new U.S. tariffs. In fact, this ploy can be so important that failing to address it could negate many of the benefits created either by the American levies or by any potential agreement by Beijing to curb or eliminate its predatory economic practices. Worse, this stratagem has created loopholes capable of undermining the impact of other recent Trump trade initiatives, like the effort to renegotiate the North American Free Trade Agreement (NAFTA).

The trick in question entails China increasing the value-added tax (VAT) rebates it provides for exports of literally hundreds of products. VATs, of course, are imposed by countries on any goods and services consumed within their borders (including imports), but rebates (refunds) are typically provided to companies for domestically produced goods that are exported. As a result, VATs act as a tariffs and as export subsidies.

China has long used this system for promoting exports, and according to Reuters has just decided to tweak the policy in order to offset the impact of new and impending American tariffs by increasing the rebates that will be received by exporters of 397 categories of goods. As a result, Chinese entities relying on sales of these products to the United States will be relieved of at least some of the new costs these products will ultimately carry. And the export flows could survive relatively intact.

At this point, you might be wondering why the World Trade Organization (WTO) hasn’t been used to combat this subterfuge. Two related reasons: First, nearly all its member states (along with those of its predecessor organization, the General Agreement on Tariffs and Trade) use it. And second, no doubt as a result, the contemporary global trading regime has always viewed VATs as purely domestic taxes that lie beyond its purview.

China, incidentally, has successfully employed VATs to keep prospering at other economies’ expense and escape any global opprobrium in one major instance two decades ago. When much of East Asia fell into financial crisis, and export-reliant economies throughout the region were devaluing their currencies in a frantic effort to stay afloat, fears emerged that financially healthier but just as export-dependent China would follow suit to preserve its global market share. After all, Beijing’s dramatic weakening of its yuan several years earlier played a big role in triggering the crisis to begin with.

In 1997 and 1998, however, the peak crisis years, China held the line – and actually received copious praise for good global citizenship. What almost no one noticed was that the Chinese maintained their newly grabbed export competitiveness by boosting VAT rebates.

Today, this move could not only benefit Chinese trade flows, but enable Beijing to realize many of the gains of further currency devaluation without incurring any of the costs – e.g., triggering major new capital flight; increasing the costs of imported inputs still needed by the Chinese manufacturing base to turn out finished goods; and risking a defeat in the global propaganda wars.

Failure to deal adequately with VATs moreover, could endanger President Trump’s objective of improving NAFTA from a U.S. standpoint. For both Mexico and Canada use this system, too, and there’s no public record of American negotiators even raising the subject.

Fool me once, shame on you, fool me twice, shame on me, goes an old adage. It will apply in spades to the Trump administration if it allows its needed efforts to overhaul U.S. trade policy to be weakened by a continued failure to face up to foreign VATs.