In the European Union, a similar strategy applies. The EU uses subsidies and encourages inter-member corporate collaborations to expand exports. Now, EU corporations are forming subsidized conglomerate with Asian and U.S. multinationals to further control selected industries.

Most of our major EU competitors, Germany and France for example , give rebates of the Federal VAT taxes on goods which their corporations export. The rules of the WTO sanction these rebates, which are equivalent to government subsidies, but do not allow any rebates of U.S. income taxes to our corporations. Thus U.S. goods must compete at a disadvantage. Foreign companies are also able to get much lower tax rates on their U.S. operations than domestic companies. The EU has also announced that the Unitary Tax System used by 14 U.S. states to equalize the tax differences on U.S. operations is a violation of the GATT rules. In Germany, the Central Bank holds major equity positions in over 100 corporations whose financing the Bank exclusively controls. This is reminiscent of the infamous "Money Trust" of the Morgan Banks which used interlocking financing and directorates to provide an American version of super cartels a century ago. In many EU countries the economy remains highly socialized with State ownership and subsidies for large segments of industry. When an American corporation obtains a major contract from an EU country, its government negotiates "Give back" terms which require the U.S. company to sell an amount of product from the purchasing country of a value that may be from 25- 50% of the contract. The U.S. imposes no such terms at all on foreign vendors.

The United States has adopted a "Free Trade" model which serves our own multi-national corporations well but does not protect our domestic industries or workers. It is based on the very naive assumption that if we buy the goods of other nations they will then have the money to buy our goods. In reality, given the European and Asian models, this policy has been disastrous, leading to a cumulative merchandise trade deficit of almost $ 2 Trillion since 1982. The foreign-owed trade debt can only be funded by massive borrowing from abroad. While in 1980 the United States was the world's greatest creditor nation, we are now the world's greatest debtor nation. This debt has been increased by the action of our own multinational corporations who move production to foreign countries to take advantage of low labor costs. That is because the bulk of products of these plants are reimported to the United States for sale. This not only displaces the multinationalsÕ own U.S. workers, it drives domestic competitors who cannot compete with the cheap labor costs out of business. In spite of a growing economy, the number of manufacturing workers and their average real wages continue to decline while corporate profits and executive compensation soar. It is not surprising that in spite of record economic growth, the U.S. multinationals have been down-sizing their U.S. work force and have not, on balance, increased their U.S. employment in decades.

Our "free trade agreements" have contributed to our loss of manufacturing capability through the inclusion of "Investor Securitization" features which protect manufacturers who move production to countries with low labor costs. In both NAFTA and WTO agreements, international judicial bodies were created with the ability to compel compliance with these features under threat of sanctions. These bodies provide fundamental protection for the multinational corporations from legislation passed by the democratic legislatures of their own countries to relieve the effects of the loss of our manufacturing capability and tax base. The great advantage of the U.S. in international trade negotiations is our control of access to the world's greatest consumer market. The WTO and NAFTA pacts have surrendered these advantages while leaving intact the state-organized mercantilism of our competitors.

The root of the problem is not in the existence of our multinationals, whose industrial and export capabilities are assets. Rather, the problem is bad trade agreements which incentives these companies to make profits in ways which are detrimental to our domestic economy. A corporation which does not take advantage of the profits which globalization of the labor market offers may lose market share to its domestic and foreign competitors who do use these advantages. The needed solution requires changing the trade system to one that promotes domestic manufacturing and export while leading to a trade balance. This requires action by democratic legislatures to reverse the losses of the current system.

Senators Pete Domenici and Sam Nunn included a first step in this direction in their 1995 draft tax proposal. The key provision provided for additional income taxes for U.S. companies that manufactured abroad and reimported those products for sale in the U.S. This proposal attempts to correct some of the worst features of globalization (without violating GATT) by using income tax instead of tariffs. However, this would not prevent foreign corporations from using cheap labor production to undercut our companies in the U.S. market. The WTO has indicated that it would regard attempts to impose additional taxes on foreign companies as a violation of GATT. In order to achieve balanced, ÒFair TradeÓ, the U.S. will need to use tariffs or their equivalent to even the playing field. These were used successfully by the United States for over one hundred years when the United States rose from an economically weak former colony to the world's dominant economy.