Border Taxes, Border Tax Adjustments, Comparative Advantage, and the Balance of Payments *

‘Border tax adjustments’, often referred to briefly and misleadingly as ‘border taxes’, have been the subject of international discussion recently in two contexts. On the one hand, U.S. public opinion has been very critical of the decision of certain Common Market and other European countries to move to a system of value-added taxes on the destination principle, which change has been seen as harmful to the U.S. balance-of-payments position. ¹ On the other hand, the German decision of November 1968 to compensate for Germany’s refusal to revalue the deutschmark by reducing her rates of tax remission on exports and tax imposition on imports was widely regarded as a constructive step towards the restoration of international monetary equilibrium, and official opinion has since occasionally favoured variation of border tax adjustments as a means of promoting international monetary equilibrium.