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 Richmans' Trade and Taxes Blog

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.” ...


Comments: 1

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...


Comments: 0

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:


Comments: 0

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....


Comments: 2

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.


Comments: 1

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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]