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 Richmans' Trade and Taxes Blog

Are Trade Agreements Necessary?
Raymond Richman, 11/29/2016

Most economists are believers in free trade but there is nothing in economic theory that justifies a free trade policy. There is plenty of international trade theory that shows that balanced trade is beneficial to trading partners but there is no economic theory that justifies free trade and then only when special conditions apply. Chronic trade deficits are to be avoided because they usually involve loss of jobs and growth in the trade deficit country in favor or gains in jobs and growth in the trade surplus country. Free trade between countries is justified only when the countries have the same monetary unit, labor and capital are freely mobile between the countries, and none of the countries impose barriers to the free movement of goods. In effect, all the countries involved are in a common market. This is the case in the U.S. where the Constitution imposes these obligations on the States.

U.S. economists have always favored increased trade between nations. When the U.S. experienced     chronic trade surpluses, American economists opposed protective tariffs arguing for free trade. But they failed to distinguish between free trade and balanced trade. Prof. Milton Friedman is often quoted as favoring free trade but that was when the U.S. enjoyed chronic trade surpluses. Another great economist, Prof. John Maynard Keynes was an advocate of free trade but when the U.K. experienced chronic deficits, he stated that Britain should not tolerate being the victim of beggar-one’s neighbor policies pursued by countries to gain chronic trade surpluses at the U.K.’s expense.

The movement toward freer trade gained impetus with the inauguration of the series of General Agreements  on Tariffs and Trade in 1947 culminating in the conclusion of the Uruguay round in 1994, and the creation of  a new international agency, the World Trade Organization in 1995. What characterized these agreements is that they were all called “free trade” agreements even though countries continued to levy tariffs and impose non-tariff barriers on imports and to subsidize exports. As a result of the trade agreements, the U.S. in particular began to experience chronic trade deficits. In a paper written in 1995, I wrote:

The log-rolling negotiations that accompanied the revision of the GATT treaty gave substantial benefits to some American firms but sacrificed others. Owners of intellectual property and American companies that have established manufacturing facilities abroad are clearly the big winners. …The big losers are the employees of companies that do their manufacturing in the U.S. and the U.S. taxpayers who will have to make up the billions in lost tariff revenues and smaller taxes paid by displaced U.S. workers. Nor will these costs be compensated by benefits to the American consumers of imported goods. ...



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It's Morning in America 2.0 -- Peter Navarro in SF Chronicle
Howard Richman, 11/13/2016

Peter Navarro, Trump's chief economic advisor, had a commentary about Trump's election victory (It's Morning in America 2.0) in which he made the case that the Trump administration will lead to an economic resurgence. He states that the Trump program will create a stimulus to the economy in four ways:

President Trump will hit four points of the stimulus policy compass: tax cuts, streamlining regulation, reducing restrictions on fossil fuels production, and, above all, eliminating a chronic trade deficit that shaves at least a full point of GDP growth off the American economy each year.

Regarding Trump's trade policy he wrote:


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Joseph Wharton is smiling down on Donald Trump
Howard Richman, 11/10/2016

Joseph Wharton founded the Wharton School of Business at the University of Pennsylvania in order to insure that America would protect its industries from the economic attacks of other nations. Michael Lind pointed this out in a 2011 commentary:

In 1881, in order to promote protectionism, a Philadelphia industrialist named Joseph Wharton founded the first business school in the U.S. Wharton viewed free trade as a “fungus … which healthy political organisms can hardly afford to tolerate.” In his deed of gift to the Wharton School of Finance and Economy at the University of Pennsylvania, the industrialist specified that the school should teach “how by craft in commerce one nation may take the substance of a rival and maintain for itself virtual monopoly of the most profitable and civilizing industries; how by suitable tariff legislation a nation may thwart such designs.” He made his gift conditional: “The right and duty of national self-protection must be firmly asserted and demonstrated.”

Recent presidential candidates of the Democrat Party have promised, when running, to protect American industries from foreign attacks, but once elected, they have failed to do so. As Lind noted humorously:...


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How the Media Show Their Anti-Trump Bias and Why I Favor Trump  
Raymond Richman, 11/7/2016

You may believe that the media is anti-Trump because they believe he is unqualified to be President. Nothing is further than the truth. The real issue is his position on foreign trade. Free trade has become a Republican and Democratic ideology. There is nothing in economic trade theory that suggests free trade is an appropriate public policy unless the following conditions exist: the trading partners have a common currency, there is free movement of capital and labor, and no trading partner can impose artificial barriers to trade on imports from the other. The only place where these conditions hold is between the States of the USA because the U.S. constitution mandates them. Of course, multi-nationals are for free trade; it is the source of great profits.

And they favor globalization because it reduces the sovereign power of national governments. You did not hear a peep from any of them when the World Trade Organization ordered the U.S. government to rescind a law that the U.S. congress enacted requiring meat products to be labeled to show the country of origin. Can you believe that the U.S. Congress complied? And the U.S. media with the exception of Fox News, the Washington Times, and a few others fall in line with the desires of the multi-nationals as does the pre-Trump leadership of the Republican Party and the current leadership of the Democratic Party. Take as an example of media bias the following analysis of a single edition of a formerly conservative newspaper.

I read the Tribune Review, Pittsburgh edition, published on November 6, 2016, two days before the national presidential and Congressional elections, and what did I read? No news at all about the positions of either Donald Trump or Hillary Clinton. ...


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CERN Study Casts Doubt on Man-made Global Warming
Raymond Richman, 10/18/2016

The following article appeared in London's Sunday Express in May, 2016. I came across it while browsing on Google. I found no reference to the study referred to in any American news source. The study casts doubt on the validity of the belief that the use of man-made fossil fuel is the major contributor to global warming much of which occurred before man began using fossil fuels. The assertion that scientists are in agreement with the notion that man-made global warming is principally responsible for global warming appears to be utter nonsense. The study has not been publicized in any American journal or news source that I have been able to find. A leading study of the negative effects of global warming world-wide showed that the U.S. would be one of countries least affected by global warming in the next century.  Until more research is done and it is reasonably certain that man-made fossil fuel emissions are the major or a significant cause of global warming, it is foolish to spend hundreds of billions of dollars world-wide measures to reduce fossil fuel emissions. The U.S. and the States give subsidies and tax benefits to the wealthy producers of so-called "clean fuel" a number of whom are not even American-owned and forces utilities to pay high prices for the electricity they produce.  And it gives tax credits to the wealthy consumers of Tesla and other electric and hybrid motor vehicles.

CERN is the largest nuclear research institution in, the world. The leading CERN researcher on the cause of climate change is a British scientist Jasper Kirkby. The article follows:

Has climate change been disproved? Large Hadron boffins cast shock DOUBT on global warming

MANKIND'S burning of fossil fuels may not be the primary cause of global warming, according to the shock results of a new study by scientists behind the Large Hadron Collider (LCH).



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Real Income Tax Reform Is Taxing Corporate Earnings As Personal Income
Raymond Richman, 10/11/2016

Although tax reforms have been proposed by all candidates for President in the primaries, they all fall far short of what most economists would propose. It is not tax reform to impose a flat tax as Sen. Cruz and others have proposed or to eliminate the estate tax as a number of Republicans have recommended. The proposals would simply eliminate all progressivity from the tax system. The personal income tax and the estate tax are the only taxes that reduce income inequality and wealth inequality in a free market system. It is not tax reform to propose a value-added tax as Pres. Obama once briefly suggested and his rival Romney said he was considering it. The VA tax, widely used in the Euro community and promoted by the IMF for every country in the world is not appropriate for countries with a federal system of government. It is a sales tax and nearly every one of the States in the U.S. imposes a sales tax. Sales taxes should be left to the States.

Real reform must call for abolition of the corporate income tax and taxing corporate earnings as personal income under the personal income tax. None of the candidates for President have proposed doing so. Instead they propose reforms that are not real reforms at all. ...


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Trump is Correct: GDP Growth Lowest since 1929-1939 - my blog entry in American Thinker this morning
Howard Richman, 10/11/2016

Here's a selection:

During Sunday’s presidential debate, Republican candidate Donald J. Trump claimed that the U.S. GDP growth rate is the lowest since 1929....

The usually accurate Breitbart fact-checkers held that this claim was “hyperbole” and “mostly false.”  However, the average growth rate in real GDP during the period from 1929-1939 was 1.3% per year. The average growth rate from 2005-2015 was 1.4% per year. Every decade in between has had higher growth than 1.4%, as shown in the graph below:

To read it, go to:



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Comments on News You May Have Missed
Raymond Richman, 10/8/2016

From web site, "Everything You Hear About Aleppo Is Wrong" by Tyler Durden. "The United States, on the other hand, continues to play a dangerous game in pushing this war further than it needs to. The United States-led coalition has no legal basis to be operating militarily in Syria, whether through their own domestic legislative institutions or through the United Nations. Russian assistance was requested formally by the Assad regime, which currently holds the seat at the U.N. This gives the Russian campaign an air of legitimacy whether or not it is immoral.

Yet the United States continues to give itself a special privilege (which only Israel can rival) by insisting the U.S. military has the right to defend itself against Russian anti-missile defense systems within Syrian territory. Yet, they argue, the Syrian regime does not have the right to defend itself against multiple ground and air invasions within their own country. (Bold type is in the original article.)

From Pittsburgh Trib-Review. In an opinion piece entitled "Discrimination & Free Markets", Prof. Walter Williams of George Mason University writes that Government intervention in South Africa maintained economic and social discrimination against blacks until Apartheid was ended. But it was not merely the ending of Apartheid that improved the status of blacks but adoption of some free market reforms. He writes, “in  free market settings one is apt to observe less racial discrimination because it is costly to both the discriminated and the discriminator.” And he writes, “From the 1860s into the 1960s, the majority of American states enforced segregation through the Jim Crow laws.” With the end of Jim Crow laws, discrimination against blacks was maintained by mostly market interfering measures such as the Davis-Bacon Act, minimum wage laws and occupational and business licensing regulations. Note: The Davis-Bacon Act and the minimum wage laws were initiated by Democratic Pres. FD Roosevelt under pressure from the then lily-white unions.

From Wall Street Journal. An article in the Business News section entitled, “Tax Credit Powers Wind-Farm Upgrades" reports that wind-farms are highly subsidized by the Production Tax Credit Act recently renewed by a Republican-controlled Congress at the behest of Pres. Obama, who believes that global warming is man-caused despite the fact that scientific studies show it to contribute to a fraction of it, one study estimating it at 15 percent.  Texas and California are the biggest wind energy states. The article recites, “In a report last year, the U.S. Government Accountability Office said the Treasury has forfeited more than $8 billion in revenue as a result of the tax credit And faulted Congress for repeatedly renewing the credit without requiring any agency to study its impact on renewable-energy development.”The article does not say so but the same is true of the hundreds of billions of dollars spent on subsidies to solar energy, subsidies to builders of hybrid motor vehicles, and to homeowners and businesses in expenditures to reduce electricity consumption. The Republican Congressmen and Senators should the described as RINOs, Republicans in name only) ...


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Comments on some news items you may have missed
Raymond Richman, 10/6/2016

Today’s date, 10/6/2016. Some news you might have missed!...


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Trump won 1st debate trade fight
Jesse Richman, 10/5/2016

There were many things wrong with Trump's tactics in the first debate.  But he did accomplish one of his strategic goals.  He moved the polling needle on trade.  

The CNN / ORC poll asked several questions about which candidate would better handle a series of issues.  One of the issues was trade.  In both prior outings of this question, Clinton had a solid lead: 53:43 in late July for instance.  In the post-first-debate poll, Trump had taken the lead: 45 for Clinton, 49 for Trump.  Trump's position versus Clinton deteriorated marginally on most other issues.  But he won the trade segment. 


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Veep Debate -- A loss for Kaine and Civility
Jesse Richman, 10/5/2016

Civility took a back seat this debate.  Since 2012 at least, the presidential debates have headed to the gutter.  Interruption contests rather than contests of ideas.  I have proposed eliminating the moderator and letting the microphone do the business the moderators aren't of keeping time and preventing interruption.  But in the absence of that approach, perhaps we can consider the following.  Television networks can probably do this one all on their own.  If one of them advertises that they are taking this road next debate, I promise I will watch their feed. 

1. Announce that candidates who speak when it isn't their turn will have their microphone muted.  

2. Any candidate who speaks out of turn will have their image cut from the screen -- the camera will just show the opponent.

3. If candidates persist in violating the rules, change the angle and cut to the moderator when candidates interrupt.

Implementing this will merely require a few seconds of lag and an agile crew managing the video and audio feeds.  If done right, no one outside of the auditorium of the debate need ever know that one of the candidates lacked the basic self control and decency to wait until the opponent had delivered a sentence and exhausted the allotted time.   

As it is, the debates have become an embarrassment.  A display of bullying disrespect rather than an arena for the battle of ideas.  At best an audition for the weekend talk show circuit.   Perhaps the cross-talk makes for "good television" but it diminishes our democracy.  There should be ample provision of time to respond.  No quarter should be given, however, to the efforts candidates make to steal time and silence their opponents through snide remarks, repeated interruptions, and similar schoolyard tactics.  

The marching orders for Tim Kaine in the VP debate seem to have been to attack relentlessly.  But he was miscast for the role.  Kaine's basic temper and personality...


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Free Trade vs. Balanced Trade - we were published in American Thinker this morning
Howard Richman, 9/28/2016

Here's a selection:


As a result, the two alternatives in this year’s election are free trade vs. balanced trade. These are not necessarily mutually exclusive. Indeed, there have been periods of world history in which trade has grown more free without getting out of balance. Especially notable were the 1840-1870 and the 1950-1997 periods. Those were the two golden ages of globalization in which tariff reductions around the world greatly benefited and integrated the world economy.

But the 1840-1870 period was followed by a period, much like the present, in which world trade became more and more unbalanced. The European countries were experiencing worsening trade deficits and eventually had to choose between free trade and balanced trade. Those that chose to balance their trade through tariffs resumed their economic growth, while those that stuck with free trade continued to stagnate. The United States faces a similar choice today.

The U.S. economic growth rate has followed the U.S. trade balance downward, as shown in the following graph:


If you want to read it, go to:




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The Case for Free and Balanced Trade  
Raymond Richman, 9/26/2016

In the 2016 presidential campaign, trade has become a major economic and voting issue.  For decades both political parties have supported expansion of free trade through trade agreements.  So have most academic economists. But a few have urged a policy of balanced trade with the rest of the world.  Free trade and balanced trade are not necessary mutually exclusive.

When trade is balanced, all trading partners benefit. Countries can increase that benefit by reducing their barriers to imports, as long as trade remains balanced. Then they will exchange goods that are cheaper to produce in one country for goods that the other country can produce more cheaply. This is called the law of comparative advantage. Both countries benefit. David Ricardo pointed this out in the early 1800s. 

But what happens when trade is not balanced? Is free trade still a good thing? Unfortunately, U.S. policy makers in Washington have thought so and so have most economists. They are wrong. The U.S. economy has been suffering annual trade deficits for decades that resulted in economic stagnation, slower than normal economic growth, and the loss of millions of  manufacturing jobs. The Table below shows how the trade deficits for selected years during the period covered by the foregoing graph caused a reduction in Gross National Product and led to slow growth. The slow U.S. economic growth rate of the last 17 years is unprecedented. From 1999 through 2015, the average U.S. growth rate was just 2.1% per year, as compared with over 3% for almost every ten year period during the previous 5 decades.

The following table shows how negative net exports reduced Gross National Product during selected years from 1960 to 2015 ...


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Getting the moderators out of the presidential debates
Jesse Richman, 9/21/2016

I recently wrote a piece on presidential debate format for the Washington Post Monkey Cage blog.  Here's how it begins. 

Donald Trump recently picked up a suggestion that I made last year, a suggestion that was also made by a blue-ribbon, bipartisan group of campaign hands: Presidential debates be conducted without a moderator. It’s an idea worth thinking seriously about. Removing the moderator could well make debates faster, deeper, more informative, more interesting and more revealing...

To read the rest go to


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The Case Against Free Trade
Raymond Richman, 9/15/2016

There is a very good case for international trade between two countries. Both countries can increase their welfare by exchanging goods that are cheaper to produce for goods that the other country can produce more cheaply. Both countries benefit. Historically, economists called this the law of comparative advantage. But for a country to benefit from international trade, its trade must be in balance with the rest of the world unless the imbalance is temporary; for example when the imbalance permits the import of capital goods that will enable it to produce goods that will enable it to balance its trade in the future.

Few goods are directly exchanged for other goods. Goods are usually exchanged for money. In international trade, goods are paid for in any currency the seller with accept. Historically, this meant exchange of goods for gold or other precious metal. For many decades, most currencies were on the gold standard, meaning their currencies could be exchanged for gold. From 1880 to World War I, most countries were on the gold standard and it was a period marked by economic growth in most countries. A so-called gold-exchange standard succeeded it in which the U.S. was on the gold standard and other countries could convert their currencies into U.S. dollars or gold. But it broke down when the U.S. abandoned the gold standard in 1971. Since then, most imports have been paid for in U.S. dollars, internationally  accepted as a reserve currency. The U.S. dollar continues to be the preferred currency for paying for imports. But the U.S. dollar today has competition. Many international transactions are settled in other currencies, the Euro, or the currency of one of parties, the Chinese Yuan, for example, since China is a leading exporter and importer.

Most of the problems of international trade are related to the fact that a number of big countries have trade surpluses year-after-year, becoming international creditor nations. This has been described as a beggar-one’s-neighbor policy because it grows its own economy at the expense of lack of growth or slow growth in the economies of its trading partners. The U.S. has incurred annual trade deficits which became huge after conclusion of the GATT agreements and the creation of the World Trade Organization in 1995. The stagnation of the U.S. economy during the past two decades and the loss of millions of American manufacturing jobs can be attributed to the trade deficits. Today, China, Germany, and Japan are the leading creditor nations. And South Korea is becoming one.

Of course, countries do not need to balance their trade with every country but with the rest of the world. But this is not and has not been the U.S. recent experience. For two decades the U.S. has experienced rising trade deficits with the rest of the world. In 1980 the trade deficit was $13 billion or about 0.45 percent of GDP, less than one-half of one percent. As a result of the successive GATT trade agreements, the trade deficits grew enormously reaching $376 billion in the year 2000, diminishing GDP by 3.66 percent and contributing to the 2000-01 recession. The U.S. trade deficit grew to a record level reaching $723 billion in 2008 diminishing GDP by a record 4.91 percent and helping to precipitate the Great Recession of 2008-09. As a result of the Great Recession, international trade decreased and the trade deficit fell, recovering to $530 billion in 2015, reducing GDP in that year by  2.95 percent. ...


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Answer to Prof. D. J. Boudreaux’s Questions for Trump’s Supporters
Raymond Richman, 9/7/2016

As an economist and a Trump supporter, I hasten to answer Prof. Boudreaux’s “Some questions for Trump’s supporters” (Trib-Review, 9/7/2016). Prof. Boudreaux is Professor of Economics at George Mason University.

First, he sets up a straw man that Trump is against immigration. He asks: "Do you believe that America would be a better place today had your ancestors been kept from immigrating?" Trump and this supporter of Trump are against illegal immigration and the immigration of Muslims who may become terrorists. So what is the question to be answered? Prof. Boudreaux as a respected professor who in asking a question should avoid innuendos that Trump is against legal immigration. He should at least have hie facts straight.

Second question, “If Mr. Trump is correct that NAFTA was a boom to Mexicans but a bust for Americans, why do you worry that Mexicans, in the absence of a “big beautiful wall,” will continue to flock to America in search of work and prosperity.” Because the Mexican boom does not benefit all Mexicans, just as American “prosperity” has left millions of American workers, both black and white but disproportionately black, without jobs or the hope of securing a job. So, many Mexicans and Central Americans who come to the U.S. via Mexico will continue to seek to migrate illegally to the U.S.

Third, Boudreaux asserts that Americans benefit from Chinese low prices. Some do, but many don’t. Some Chinese goods are sold in America at low prices, but the price of an Apple cell-phone imported from China is as high as it would be if it were made here. Competition from other cell-phone manufacturers limits the price Apple can charge here.  Boudreaux does not mention the devastating effects that our trade deficits have had on our levels of manufacturing and employment. He seems to be unaware that the U. S. Department of Commerce statistics on national output show  that  our trade deficits with the rest of the world are a subtraction from Gross Domestic Product. The rate of economic growth would have been double during the past two decades had our trade with the rest of the world been in balance. The trade deficits have caused our economy to stagnate and caused the loss of jobs of millions of workers in manufacturing.

Fourth, Boudreaux writes, “Can you explain why – in a world with nearly 200 countries – we should expect with fair trade, that the Mexicans will each year buy from us exactly the same dollar amount amount of goods and services that we buy from them, and that the Chinese will do likewise?” Trump has not said that trade has to be balanced with every country and of course it does not need to be. We say that trade should be balanced with the 200 countries. Our trade deficits are huge with China, Japan, Germany, Korea, and Mexico. We need to start somewhere to balance trade. Should we start with the countries with whom we have a surplus? Of course not....



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Trump Gets It Right: Trade Was a Loser For All Except the Most Wealthy Americans
Raymond Richman, 8/24/2016

Robert B. Zoellick, wrote an opinion piece entitled “Trump Gets It Wrong: Trade Is a Winner for Americans” (WSJ, 8/8/2016).  Mr.Zoellick is a lawyer with a J.D. degree from Harvard. From 2001to 2005, he was the United States Trade Representative under President GW Bush. Prior to that, from 1993 through 1997, he served under Pres. Bill Clinton as an Executive Vice President at Fannie Mae for two years.  He served as the lead State Department official in the negotiations of the North American Free Trade Agreement and the Uruguay Round which created the World Trade Organization. He helped launch the Asia Pacific Economic Cooperation group.  From 1985 to 1988, under Pres. Reagan, he served in the Department of the Treasury in various positions, including Counselor to the Secretary, Executive Secretary and Deputy Assistant Secretary for Financial Institutions Policy. He served as the Chairman of International Advisors at The Goldman Sachs Group, Inc., from June 2006 to 2007  He actively supported Romney in 2012. He was rewarded by Pres. G. W. Bush with a five year stint as the head of the World Bank at about $800,000 per year. He is clearly a guy who knows how to ingratiate himself with politicians of both parties.

He writes that “55% of registered voters think free trade is good for America because it opens up markets for U.S. goods”. Citing other polls, the writes that “Republicans would be prudent not to assume voters will join Mr. Trump’s retreat on trade.”  Unfortunately, he may be right on that; we shall see. He declares that American manufacturers have benefitted from the free trade deals through lower costs and so have American consumers through lower prices, averaging savings according to one study of about $10,000 per household. U.S. multinationals make about “57 % of U.S. capital investment, and are the source of 83% of private R&D.” “Americans are not losers. But some Americans lose out because economic forces and misfortunes can overwhelm them. Whoever becomes the next President should help people adjust to change, not pretend that change can be prevented.” ...


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Two interesting articles
Jesse Richman, 8/16/2016

Puts together many of the pieces of the current crisis without recognizing the critical role of Asian mercantilism. 

Outlines some key challenges of the present.  Including this: "The era when globalisation seemed like a process that could create only common interests between China and the west is over. It is now giving way to...


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Why Multinational Corporations Favor Hillary -- we're published in the American Thinker
Howard Richman, 8/10/2016

Here's a selection:

Prominent economists are divided on trade. The lead-author’s dissertation advisor, University of Chicago economist Milton Friedman, favored free trade, but he was mostly writing when the U.S. had a trade surplus.

In contrast, British economist John Maynard Keynes supported tariffs when Britain was experiencing trade deficits. In 1931 he proposed (in what was called the addendum to the Macmillan Report) a system of tariffs upon British imports to be used to subsidize British exports in order to balance British trade.

During World War II, Keynes tried to set up a postwar system that would keep trade in balance by letting trade-deficit countries, but not trade surplus countries, impose tariffs and/or reduce their exchange rates. But he was overruled at Bretton Woods, where the postwar international agreements were negotiated, by America’s chief negotiator Harry Dexter White, a Soviet agent.

Economic history shows that the effect of tariffs depends upon trade balances. When trade is balanced, all trading partners benefit, but benefit could increase even more in the absence of tariffs. When trade is not in balance, countries sometimes use tariffs and other barriers to imports and/or subsidies to exports to gain a trade surplus, what 18th Century Scottish economist Adam Smith called a policy of “beggaring all their neighbours.” Their economies grow at the expense of their trading partners.

Countries with trade surpluses grow in relative power, while those with trade deficits shrink. For example, Bill Clinton’s trade agreement with China led to steadily worsening trade deficits, with concomitant transfer of U.S. economic growth and political power to China.

To read it, go to:


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Time for Balanced Trade Not Free Trade
Raymond Richman, 8/7/2016

Most economists oppose protective tariffs by the U.S. but few of them criticize the mercantilist practices of others who impose artificial import duties and other barriers to trade.  Few economists oppose the imposition of protective tariffs by developing nations, designed to promote “infant” industries -- and they all proclaim that is what they are doing. Most economists favor expanding international trade in order to gain the efficiencies of specialization among nations. The basic economic criterion to determine what to specialize in is the economic theory of comparative advantage. A country should specialize in the things its resources enable it to produce relatively more efficiently.

While that still holds true for industries based on the accessibility of natural resources,  traditional theory was given a death blow recently by the publication of a seminal book by  Ralph Gomory and William Baumol, Global Trade and Conflicting National Interests (MIT Press,  2001). In their book they point out that trade today is dominated by manufactured goods, very different from the largely agricultural trade  which was the basis for traditional economic theory of comparative advantage. Any country, they showed,  could invest in the production of a manufactured good and gain economies of scale that would enable it to produce the good at a lower cost than rivals. No one visualized that leading American corporations would move their factories overseas secure in the knowledge that free trade meant that they could export those goods to the U.S. free of duty....


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TPP Resembles Past US Trade Agreements
Jesse Richman, 8/1/2016

In a recent Washington Post (Monkey Cage) essay available at ( Todd Allee and Andrew Lugg report on their text analysis of past trade agreements of TPP members and their resemblances to the TPP text.  They find that TPP most closely resembles past US trade agreements.  They tout this as a sign that the US did well at the negotiating table.  But this may not indicate success for US workers -- the US trade deficit with the signatories of past trade agreements hardly bodes well for this one.


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Snow in July in Austria and Switzerland
Howard Richman, 7/25/2016

As we suffer through a warmer than usual summer, the alps are having a colder than usual cold snap. Here's an excerpt from a European posting from, as translated by

Wiesbaden ( 14 July 2016 – have you ever thought of camping in the snow and in the middle of July? As warned already on Monday by, this forecast came true in the Alp countries of Switzerland and Austria!

The snowfall elevation really dropped over night. In some places early this morning snowflakes were falling at 1500 meters.

For mid July such a low elevation snowfall is extremely rare. Clearly snow is not real unusual in June or late August at these elevations, but in July it is truly an unusual event to witness. This summer is not only behaving like fall, but even like winter...

Jung writes that the cool weather has also gripped parts of Germany and is accompanied by heavy rains in the regions near Poland. The cause of the cold spell is a low situated over Poland.



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Why US Multinationals Oppose Trump and Favor Clinton
Raymond Richman, 7/3/2016

Apple’s CEO, Tim Cook, announced that Apple would not contribute to the costs of the Republican convention in Cleveland this year as it has done in past conventions.  Apple is a corporation incorporated in the.US but almost all of its products are produced in China. It is a Chinese company much more than it is an American company. And so are many other “U.S.” multinationals, including a number of high-tech companies like Hewlett-Packard. Hundreds of major American corporations have shipped millions of jobs overseas, according to an analysis of Trade Adjustment Assistance (TAA) filings made to the U.S. Department of Labor's Employment and Training Administration on behalf of the displaced workers. According to a report on CNN, over 900 US corporations are producing products abroad, a "who’s who" of American manufacturing firms. 

Given that the presumptive Republican candidate for President, Donald Trump has announced his intention to balance trade with China and re-negotiate all USA trade treaties to assure that trade becomes more balanced, Trump has incurred the opposition of companies that produce all or some of their products abroad and their spokesman, the US Chamber of Commerce.  The latter in its propaganda lauds the advantages of  U.S. exports and does not mention the disadvantages of U.S. imports which exceed the former by several hundred of billions per year causing the loss of millions of American manufacturing jobs. US multinationals account for a substantial share of manufactured goods  exports to the US, so it is not at all surprising that these companies should prefer a tweedledee candidate to Hillary’s tweedledum candidacy, lest a tariff be imposed on their exports to the U.S..

U.S. policies contributed to the growth of China as the number two manufacturing power. Pres. Richard Nixon normalized relations with China in 1972. On 24 January 1980 Congress passed a trade agreement conferring Most Favored Nation (MFN) status on China.  Despite this move, China’s MFN trade status (which was not granted permanently) created new legal and political impediments to Sino-American trade relations which were not removed until 2001, when China joined the WTO, whose rules prohibit members from imposing trade restrictions on other members except when they are experiencing chronic trade deficits. 

Growth in the U.S. goods trade deficit with China between 2001 and 2013 eliminated or displaced 3.2 million U.S. jobs, according to a study by EPI Director of Trade and Manufacturing Policy Research Robert E. Scott. Trade with China has caused job loss in all 50 states and the District of Columbia, including all but one congressional district. About two-thirds of jobs lost, or 2.4 million, were in manufacturing. The U.S. Bureau of the Census reported that American companies abroad and US subsidiaries of foreign corporations trade accounted for about 50.9 percent ($1,178.7 billion) of total consumption imports ($2,314.0 billion) in 2014. Republican and Democratic presidents Pres. Bill Clinton and George Bush did not concern themselves with the trade deficits’ disastrous consequences for American manufacturing workers and the US. Economy tanked as a result, no doubt contributing to the popularity of Trump’s candidacy....


Comments: 6

Conservative analyses of EU's failure cite regulation, ignore trade imbalances
Howard Richman, 7/1/2016

I've noticed that conservative analyses of why the EU failed invariably focus upon regulation, but miss the trade imbalances. For example take the British Conservative Party's Daniel Hannan's eloquent and humorous oration at the Oxford Union in favor of Brexit:

Daniel Hannan is correct that the European Union has been an economic disaster. He cites some good statistics to prove his point. But like many other conservatives, he only attributed that disaster to one of its causes: the regulations of the European Commission. He missed the other major cause: the trade imbalances.

Eventually, every trading system which sustains imbalanced trade eventually slows economic growth....


Comments: 0

Western Politics at a Point of Disjunction
Jesse Richman, 6/23/2016

Politics in the West -- in Europe and the United States -- it at a break point.  A phase shift.  If as currently appears the British have chosen Brexit, one might say that the moment of disjunction is upon us.  What does it mean, and where is it going?

For more than half a century, the dominant political battle in the US and in much of Europe has been between economic and cultural left and right -- a fight principally over the degree to which governments will regulate, and the extent to which governments will tax and redistribute, and secondarily over secular versus traditional values.  Major parties of the left and right have been relatively united in pursuit of globalism -- free movement of people, goods, and capital.  With the strong vote for Brexit, the political toxicity of TPP and TTIP, and the strong performance of Trump and Sanders in US primaries, that epoch may be ending.  The new lines of conflict are between nationalists of the left and right and globalists of the left and right.  



Europe, threatened with fragmentation, may yet find the way to a new and more effective synthesis.  What is called for is a continental nationalism akin to the nationalism that draws Californians, Alaskans, New Yorkers, and Texans together in the United States.  And one that moves effectively to address the critical challenges faced -- defending the great good at the core of the enlightenment project Europe, the UK, and the United States share against both the narrow temptations of nativist nationalism and the dangerous naiveté of globalists who think that a world of perpetual and democratic peace will follow if only they shut their eyes to the folly, short-sightedness, and counter-productivity of their own policies, and the enemies of liberal democracy and the enlightenment on the march abroad.    



Comments: 0

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]