Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog

Distinguished Economist Attacks Free Trade as Bankrupting the U.S.
Raymond Richman, 6/2/2012

One of the most creative people writing about international trade, is Professor Ralph Gomory. The book on comparative advantage that he wrote with Prof. William Baumol (Gomory, R. E., and W. J. Baumol, Global Trade and Conflicting National Interest, Cambridge,Massachusetts: MIT Press, 2000)  is a modern economic classic. On May 22, 2012, he wrote in the Huffington Post (Mercantilism, Manufacturing, and a Political Problem):

"The modern Chinese government wisely exploits the fact that our great American companies take as their main mission in life to make as much money as possible for their shareholders. Companies can maximize profits by taking their technology and know how to China where they receive subsidies, in the form of tax breaks, shared investment, and undervalued currency. These are the factors that in high-tech manufacturing are far more important than lower wages. So our companies manufacture overseas and import the goods they once made in America back into the United States."

He asks what can we do to induce American companies to produce their products in the U.S.? He suggests tax incentives and tariffs. He approves the proposal of Warren Buffett to give our exporters import certificates equal in amount to their exports, which they can use or sell.

We believe this to be a bad proposal because it violates the rules of international trade that bans export subsidies and would require a new bureaucracy. By contrast we have proposed what we call the scaled tariff, a single country variable tariff that rises and falls with the rise and fall of our trade deficit with a particular country and is eliminated as trade becomes balanced with that country. Entitled “The Scaled Tariff: A Mechanism for Combating Mercantilism and Producing Balanced Trade”, it was published  in the Journal of International Law and Trade Policy, v. 12, no. 2, 2011, pp. 82-103. Its advantages are many. Besides it is in accord with the rules of the World Trade Organization which authorizes countries experiencing chronic trade deficits with another country to impose barriers to imports from those countries.

We are opposed to special tax incentives and general tariffs. We believe in free markets. One may argue that the scaled tariff interferes with the markets. No, it interferes only with mercantilist practices of countries that do not practice free trade.

"We, meaning most of the country, would benefit from taking .. [such actions], but there is another "we" that would lose from such a change; the global corporations. But the political power in Washington of the two "we"s is measured more by money and influence than by the number of people who would benefit, and the edge in money and influence is overwhelmingly with the global corporations. Given the real world we live in, and the current motivation of our great global corporations, it is time to apply to our own situation the immortal words of Pogo: "we have met the enemy and he is us".

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Comment by Mizzytan, 1/32/2013:

There are many good information and details so I hope you will read care fully and take more information.

Comment by Mizzytan, 1/32/2013:

There are many good information and details so I hope you will read care fully and take more information.

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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]