Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



Mercantilism and Free Trade Aren't the only Alternatives
Howard Richman, 7/18/2012

In his July 17 Foreign Policy blog entry, Daniel W. Drezner (You campaign in mercantilism. You govern as a free trader) excuses President Obama's hypocrisy on trade. Obama accuses Romney of being an outsourcer, even though his own trade deficits are dismal, as we pointed out in the July 12 American Thinker (Who's the Real Outsourcer: Romney or Obama?).

Drezner assumes that there are only two alternatives, the "mercantilist" philosophy of seeking a trade surplus and the realistic "free trade" philosophy. But free trade is not realistic when you let your economy be gutted by mercantilist predators.

In an July 2 OpEdNews commentary (Has Our Defense of Freedom Made America Less Independent), Hugh Cambell endorses balanced trade as a "3rd alternative," one that would work. He recommends Warren Buffett's import certificate plan, as does one of America's premier trade economists Ralph Gomory, as did my father, son and I in our 2008 book, Trading Away Our Future. Cambell writes:

The title of Dr. Stephen R. Covey's most recent book, namely, The 3rd Alternative: Solving Life's Most Difficult Problems implies that there is a globalization alternative that moves beyond the polar-opposites of isolationism and free-trade. Such a 3rd Alternative is a balanced trade model highlighted in a November 2003 Warren E. Buffet and Carol J. Loomis Fortune magazine article, titled: America's Growing Trade Deficit Is Selling The Nation Out From Under Us., which can be found at: http://www.berkshirehathaway.com/letters/growing.pdf  

Similarly, in a July 16, Huffington Post commentary, Representative Marcy Kaptur (D-OH) and Pat Choate point out that balanced trade would be a tremendous boost to the American economy (Fair Trade Can Help Close America's Jobs Gap):

[I]f the U.S. had run a balanced trade account last year, the economy would have produced not only more than 7.8 million more jobs, it would have created an additional $500 billion of goods and services in the Gross Domestic Product, and almost $200 billion more revenue for the federal, state and local governments. Take note, deficit hawks.

How to create a balanced trade program is not rocket science. It begins by demanding reciprocity in trade with other nations, what we call fairness....

Unfortunately, Choate and Kaptur don't have a realistic solution. They continue:

[Balanced trade] means confronting foreign government's currency manipulation to gain a price advantage in world markets. It means stopping foreign counterfeiting, product piracy and theft of U.S. intellectual property rights. And certainly it means ending U.S. tax and regulatory policies that encourage the offshoring of our domestic production and jobs.

More and more people are realizing that balanced trade is the answer to our current economic problems. But they haven't yet discovered the Scaled Tariff, the solution that we proposed in an academic journal.

Warren Buffett's import certificate plan would also work, but it violates WTO rules, requires the setting up of a new bureaucracy and adds a new element of uncertainty to importing. Furthermore, it penalizes those non-manipulative countries with whom the United States currently has balanced trade.

The Scaled Tariff is WTO legal, requires trade reciprocity from our trade-manipulating partners and increases our imports from non-manipulative countries. It strongly encourages the manipulative countries to change their behavior. It is a simple idea that can be implemented with no additional bureaucracy whatsoever. When we wrote it up as a bill, it was extremely short.

It is a tariff that can only be charged when the United States is running an overall trade deficit. It is only applied to those countries with which the U.S. has a trade deficit, and it is set separately with each country as the rate that would take in half of our bilateral trade deficit with that country as tariff revenue.

Drezner thinks that free trade, though unpopular, is always the best policy. But there is a much better policy. It is called balanced trade. And there is a simple straightforward way that it can be achieved.

Your Name:

Post a Comment:


Comment by Sebastian De Angelis, 9/7/2012:

I agree completely with you, what are we doing about getting this passed by congress?

 

Unemployed American,

Sebastian De Angelis




  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Archive
    Jun 2017
    May 2017
    Apr 2017
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015
    Apr 2015
    Mar 2015
    Feb 2015
    Jan 2015
    Dec 2014
    Nov 2014
    Oct 2014
    Sep 2014
    Aug 2014
    Jul 2014
    Jun 2014
    May 2014
    Apr 2014
    Mar 2014
    Feb 2014
    Jan 2014
    Dec 2013
    Nov 2013
    Oct 2013
    Sep 2013
    Aug 2013
    Jul 2013
    Jun 2013
    May 2013
    Apr 2013
    Mar 2013
    Feb 2013
    Jan 2013
    Dec 2012
    Nov 2012
    Oct 2012
    Sep 2012
    Aug 2012
    Jul 2012

    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010
    January 2010

    Categories:
    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax
    Consumption Taxes
    Economy - Long Term
    Economy - Short Term
    Environmental Regulation
    Real Estate Taxation
    Trade

    Miscellaneous

    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • TradeReform.org
  • Votersway Blog
  • Watt's Up With That


    Wikipedia:

  • [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]