Small Business Committee Democratic Site

STATEMENT
of the
Honorable Nydia M. Velázquez, Ranking Democratic Member
House Committee on Small Business
Hearing on "The Rebate of Value Added Taxes at the Border and the Competitive Disadvantage for U.S. Small Businesses"
July 7, 2004

Thank you, Mr. Chairman.

In today's fast-paced global market, we need to focus on improving the environment for our nation's small businesses. As proven job creators, Congress needs to ensure that small companies are given every advantage in producing their goods and services.

The globalization of the world economy means U.S. companies face stiff competition from foreign firms. Today's hearing will examine one aspect of how American businesses continue to face obstacles in their ability to sell products abroad, as well as maintain their marketshare within our borders.

Unfortunately, this problem is of one of the many growing concerns of American companies. This administration has created an economic environment that has encouraged our firms to either move their productions overseas or shut their doors altogether.

The administration's lack of sound economic policy has led to gas prices reaching record levels, skyrocketing healthcare costs, and increased federal regulations. The rising cost of doing business in the United States has made it virtually impossible for small firms to compete against their foreign competitors.

The focus of the hearing is to examine the effect of the EU's VAT rebate. This comes on the heels of another important trade debate - the FSC/ETI legislation that was passed out of the House. Unfortunately, this legislation did nothing to help America's firms, particularly its small businesses.

Instead, Republican leaders continued on the reckless path of providing tax breaks for Corporate America at the expense of small business. Rather than moving forward with a bipartisan solution to provide a quick resolution to the FSC/ETI issue, Republicans produced a bill laden with special interest tax breaks. The result is an unworkable bill that means small businesses will continue to be hit with tariffs over the coming months.

This is something that could have easily been avoided, but Corporate interests won out. As a result, EU tariffs on American products will continue to climb - potentially costing American exporters over $4 billion.

I wish I could sit here and tell you there is a possibility that the issue of the European Union VAT rebate will be addressed by the administration. Unfortunately, President Bush's record on trade leaves much to be desired.

Rather than work with our trade partners, the United States has continued to alienate our allies. Despite representing the economic superpower of the world, the United States Trade Representative has consistently failed to negotiate and enforce favorable trade agreements that will aid U.S. small companies.

The failing of both our trade and domestic policies have made it difficult for U.S. companies to keep clients who are attracted to foreign companies. With the EU VAT rebate, it is even more difficult. Our foreign competitors are effectively having their goods subsidized by their governments. The U.S. equivalent was ruled in violation of the WTO and there is little hope that this problem will be fixed in the near future.

While I agree that we need to make sure foreign tax systems are not unfairly harming American businesses, I believe that Congress should first be concerned about taking care of the issues we have immediate control of. For the United States to see sustained job growth, we must provide our firms with the tools to compete.

We need to create an economic atmosphere where U.S. companies can purchase affordable health care, where they can spend more of the resources investing in their firms rather than complying with complicated paperwork burdens, and where reliable energy sources are available at stable prices.

Addressing these issues will go a long ways towards ensuring that the America continues to maintain its status as the world's economic superpower. Not only does our nation's small businesses depend on it, but the livelihood of the U.S. economy does too.

Thank you.