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Richmans' Trade and Taxes Blog
Proposal for a Trade Reciprocity Act
[Note: This replaces our earlier "scaled tariff" proposal.]
To achieve balance in the foreign trade of the United States through the imposition of duties on goods and services from countries that have a bilateral trade surplus with the United States, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Trade Reciprocity Act’’.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) The purpose of international trade is to exchange a bundle of goods and services produced with comparative advantage in one country for a bundle of goods and services produced with comparative advantage in other countries.
(2) When trade is in balance, all trading partners benefit. But when trade is chronically out of balance, the trade deficit country loses jobs in import-competing sectors, but gains debt instead of productive jobs in exporting sectors.
(3) Because balanced free trade benefits all parties, a fundamental principle of United States trade law since the enactment of section 350 of the Tariff Act of 1934 (19 U.S.C. 1351; commonly known as the Reciprocal Trade Agreements Act) has been reciprocity.
(4) The large chronic trade deficit of the United States has cost millions of jobs and reduced United States power in world affairs. The international trade deficits of the United States continue to damage the economy, causing a loss of industry, a loss of millions of productive jobs, and a worsening of the distribution of income.
(5) The United States trade imbalance is due to a variety of factors, including unfair trading practices of some trading partners, escalating budget deficits, failure to exploit domestic petroleum and natural gas resources, inflow of savings by foreign governments and individuals, and the outsourcing by United States businesses of their production abroad.
(6) The chronic trade imbalance imperils the United States external financial position. Unless trade is brought toward balance, the international value of the United States dollar will eventually collapse, with terrible consequences not only for the United States, but for the entire democratic world.
(7) Article XII of General Agreement on Tariffs and Trade, annexed to the Agreement Establishing the World Trade Organization entered into on April 15, 1994, (GATT 1994) permits any country that has both a perilous external financial position and a balance-of-payments deficit in the current account to restrict the quantity or value of merchandise permitted to be imported in order to bring payments toward balance.
(8) With the United States net foreign debt in 2011 at 27 percent of Gross Domestic Product (GDP) and the balance-of-payments deficit in the current account in 2011 at 3.1 percent of GDP, the United States qualifies and is permitted to use import restrictions to balance trade. Such restrictions can include price-based measures such as import duties that are in excess of the duties inscribed in the World Trade Organization schedule for that member.
(9) Countries that impose import duties under Article XII of GATT 1994 must progressively relax such import duties as the trade deficit grows smaller, maintaining duties only to the extent that a continuing balance of payments deficit in the current account justifies such application. Therefore, an import duty that is implemented under the authority of Article XII of GATT 1994 should go down in rate as trade approaches balance and should disappear when the balance of payments in the current account reaches balance or goes into surplus.
(10) The import duties described in this Act comply with Article XII of GATT 1994 because they are suspended if the United States balance of payments in the current account goes to surplus and because the rates of the duties would go down when the United States trade deficit goes down with a particular country and would disappear when the United States trade deficit with a particular country nears balance or goes into surplus.
SEC. 3. DEFINITIONS.
In this Act:
(1) BILATERAL TRADE DEFICIT.—The term‘‘bilateral trade deficit’’ means, with respect to a country, the amount equal to the difference of— (A) the total dollar value of imports of goods and services from another country; and (B) the total dollar value of exports of goods and services to such other country.
(2) BILATERAL TRADE SURPLUS.—The term ‘‘bilateral trade surplus’’ means, with respect to a country, the amount equal to the difference of— (A) the total dollar value of exports of goods and services to another country; and (B) the total dollar value of imports of goods and services from such other country.
(3) CURRENT ACCOUNT DEFICIT.—The term ‘‘current account deficit’’ means, with respect to a country, the amount of payments made by the country for purchasing imports of goods and services is greater than the amount of payments received by the country for selling exports of goods and services.
(4) CURRENT ACCOUNT SURPLUS.—The term ‘‘current account surplus’’ means, with respect to a country, the amount of payments received by the country for selling exports of goods and services is greater than the amount of payments made by the country for purchasing imports of goods and services.
(5) CUSTOMS TERRITORY OF THE UNITED STATES.—The term ‘‘customs territory of the United States’’ has the meaning given the term in general note 2 of the Harmonized Tariff Schedule of the United States.
(6) FISCAL QUARTER.—The term ‘‘fiscal quarter’’ means the 3-month period beginning on October 1, January 1, April 1, or July 1 of a fiscal year.
SEC. 4. IMPOSITION OF DUTIES ON IMPORTS OF GOODS AND SERVICES FROM COUNTRIES THAT HAVEA BILATERAL TRADE SURPLUS WITH THE UNITED STATES.
(a) IN GENERAL.—Notwithstanding any other provision of law, the President shall impose duties on goods and services that are entered into the customs territory of the United States from countries that have a bilateral trade surplus with the United States described in subsection (b) in accordance with the requirements of this Act.
(b) COUNTRIES DESCRIBED.—A country described in this subsection is a country— (1) that has a bilateral trade surplus with the United States in an amount that is not less than $500,000,000 during the most recent four fiscal quarters; and (2) with respect to which the amount of exports of goods and services to the United States is more than 110 percent of the amount of imports of goods and services from the United States during the most recent four fiscal quarters.
(c) CALCULATION AND ADJUSTMENT OF DUTIES.— The President shall calculate and adjust as appropriate the rate of duties imposed under subsection (a)— (1) based upon trade data for the most recent four fiscal quarters; and (2) with respect to each country that has a bilateral trade surplus with the United States, so the amount of such duties equals 50 percent of the amount of the bilateral trade deficit that the United States has with respect to the country during the most recent four fiscal quarters.
(d) SUPPLEMENT NOT SUPPLANT.—The imposition of duties on goods and services under this section shall be in addition to the imposition of duties on such goods and services under any other provision of law.
(e) DEPOSIT IN TREASURY.—Duties imposed on goods and services under this section shall be deposited in the general fund of the Treasury.
SEC. 5. OPERATION OF DUTIES.
(a) VALUATION OF IMPORTED GOODS AND SERVICES.—The President shall establish a method for valuation of goods and services entered into the customs territory of the United States for purposes of imposing duties under section 4. In the case of valuation of goods, the method of valuation may include the use of the declared dollar value of the goods on the Entry Summary Documents (U.S. Customs and Border Protection Form 7501).
(b) DRAWBACK AND REFUNDS.—The President is authorized to refund as drawback the duties imposed under section 4 on goods used in the production or manufacture of articles exported or destroyed to the manufacturer or producer of such articles in accordance with section 313 of the Tariff Act of 1930 (19 U.S.C. 1313).
SEC. 6. TERMINATION AND REINSTATEMENT.
(1) IN GENERAL.—Except as provided in paragraph (2), the President shall terminate the application of the requirements of this Act beginning on the date on which the President determines and certifies to Congress that the United States carried a current account surplus for the most recent prior calendar year.
(2) EXCEPTION.—The President shall continue to carry out section 5(b) on and after the date described in paragraph (1) in order to refund as drawback the duties imposed under section 4 on goods described in such section 5(b).
(b) REINSTATEMENT.—The President shall reinstate the application of the requirements of this Act beginning on the date that is 180 days after the date on which the President determines and certifies to Congress that the United States carried a current account deficit that is not less than 1 percent of Gross Domestic Product of the United States for the most recent prior calendar year.
SEC. 7. REGULATORY AUTHORITY.
The President shall promulgate such regulations as may be necessary and appropriate to carry out this Act.
SEC. 8. EFFECTIVE DATE.
This Act takes effect on the date of the enactment of this Act and applies with respect to goods and services entered, or withdrawn from warehouse for consumption, on or after the date that is 180 days after such date of enactment.
Journal of Economic Literature:
Atlantic Economic Journal: