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Home / Washington Business - November/December 2007 / Points of View: Keep state’s ports and industries competitive |
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Points of View: Keep state’s ports and industries competitive |
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Written On: November/December 2007 |
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Written By: by Sen. Janéa Holmquist, R-Moses Lake |
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Early in the 2007 legislative session, a bill was introduced imposing a $100 fee on all 40-foot containers shipped in or out of Washington. Not surprisingly, the idea met strong bipartisan opposition. But like many ideas that surface in Washington, D.C., or Olympia, don't be surprised if the container tax idea resurfaces next year.
I will continue to oppose this proposal during the next legislative session for the same reasons it was rejected initially.
First and foremost, a container tax of this nature is likely to make Washington ports non-competitive with other regional ports. Approximately 70 percent of the containerized freight moving through Washington's ports is discretionary. That means shippers go through our ports, because they feel we provide a competitive advantage.
If our competitive advantage is weakened by new taxes, shippers will make other choices. The port at Prince Rupert in British Columbia is undergoing a major expansion to improve its ability to handle large cargo vessels. It will further intensify an already competitive market including Vancouver, B.C., Portland, Ore., and ports throughout California.
Losing vital shipping business to these other ports not only hurts Washington's import and export business in general, but it also damages businesses relying on their ability to export goods at a reasonable rate to remain competitive.
What would a container tax do a trade-dependent industry like agriculture? Washington exports more than 85 percent of its wheat, 60 percent of its hops, and 30 percent of its apples. It comes as no surprise that our state ranks in the top 10 for exports of agricultural commodities. According to the U.S. Department of Agriculture, Washington ranks second in fruit and vegetable exports. In addition, our agricultural products are usually subject to tariffs averaging 62 percent among World Trade Organization-participating counties. President John F. Kennedy recognized the plight of farmers when he said, "The farmer is the only man in our economy who buys everything at retail, sells everything he sells at wholesale, and pays the freight both ways."
Due to the impacts on the export hay industry and other agricultural products, farmers will not be able to recover the costs of the container tax. They will have to let the higher costs eat away at their bottom line. If farmers attempt to raise prices to cover the added costs, purchasers will simply buy the product elsewhere at a cheaper price. Wholesale commodities do not enjoy the benefits of value-added retail profits—the margin matters. When we subject agriculture and other wholesale industries to a container tax, the impact as a percentage of the margin is much greater. After considering the cost of production, the cost of shipping and the tariffs levied on our goods, why would we cut even deeper into farmers' (and other industries') sensitive margins when they are already struggling to make a good return?
Washington's families are the ones who would really be hurt by a container tax. At least one in three jobs in our state is dependent on international trade. Why endanger our families? We need a level-headed approach to solving our transportation needs.
In addition to its negative economic impact, the way in which the container tax has been proposed is troubling. The "congestion relief fund" in the 2007-2009 transportation budget was originally set to be funded by the container tax. While the container tax was vehemently opposed and rejected, it was dropped in favor of a study looking at the creation of container or other port-related taxes. The congestion relief fund remained, and a number of projects are still slated to be financed through the fund even though there is no revenue stream to support them.
Is it appropriate for legislators to make appropriations from an account that will never have any money in it unless the Legislature agrees to create a new tax?
This ghost-funding of projects establishes a dangerous precedent. Legislators should not make hollow promises by tying worthy projects to empty accounts without first finding a way to fund those projects. This alarming precedent allows future legislatures to promise citizens a laundry list of transportation projects with no way of paying for them. Washington citizens deserve better.
Since Washington is the most trade-dependent state in the nation, we must convince key Democrats to change course to protect Washington’s economy and its families.
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