Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
U.S. free trade policy promotes worldwide authoritarianism
An annual report from Freedom House finds that authoritarianism has increased in the world for the fifth straight year. According to Breitbart:
Significantly, the report mentions China, Russian, and Venezuela as authoritarian regimes that have stepped up their repression of their own people over the last year. These are all countries that have run huge trade surpluses with the United States, stimulating their economies while sedating ours.
The following table shows these countries' trade imports and exports with the United States from October 2009 through September 2010. Although the China and Venezuela data are complete (both goods and services), the Russia data does not include services because I can't find service trade data with Russia on U.S. government websites.
These authoritarian regimes run huge trade surpluses with the United States partly by suppressing their own people's current consumption and then using the resultant savings to buy foreign financial assets. This economic strategy is called mercantilism. It only works when the authoritarian countries' trading partners tolerate trade imbalances.
If the United States were to insist upon balanced trade, the economic growth of these repressive regimes would slow, and American economic growth would speed up. We could place a WTO-legal scaled tariff upon our imports from trade surplus countries. Such a tariff would take in half of our trade deficit with each country as revenue. The duty rate would go down as trade moves to balance.
Currently America's free trade policy is contributing to the increase in worldwide authoritarianism. If America were to switch to a balanced-trade policy, the new policy could promote worldwide democracy.
Comment by , 12/6/2013:
Journal of Economic Literature:
Atlantic Economic Journal: