Page "Protectionism" Paragraph 22

Protectionists argue that this reverse protectionism is most clearly seen and most detrimental to those countries ( such as the US ) that do not participate in the Value Added Tax ( VAT ) system.

This is a system which generates revenues from taxation on the sale of goods and services, whether foreign or domestic.

Protectionists argue that a country that does not participate is at a distinct disadvantage when trading with a country that does.

That the final selling price of a product from a non-participating country sold in a country with a VAT tax must bear not only the tax burden of the country of origin, but also a portion of the tax burden of the country where it is being sold.

Conversely, the selling price of a product made in a participating country and sold in a country that does not participate, bears no part of the tax burden of the country in which it is sold ( as do the domestic products it is competing with ).

Moreover, the participating country rebates VAT taxes collected in the manufacture of a product if that product is sold in a non-participating country.

This allows exporters of goods from participating countries to reduce the price of products sold in non-participating countries.