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Trade Proposed Position

The basic premise of our trade position is that the current approach to dealing with international trade through bilateral and multilateral trade agreements is not working. The most obvious indication of that is the continued existence or a large balance of trade deficit. Not only does this represent a net flow of jobs out of the United States , but it also means that other nations are accumulating enormous claims against the US economy. The trade deficit in nothing more than a form of debt being incurred by this country, a debt that may have to be paid off at a point in the future that we don't control. This isn't acceptable in terms of basic national security. In addition, the trade agreements mean that we give up some control over issues that are important to the US such as the environment and worker rights.

We propose the following alternative. First, scrape the current approach using treaties and commissions. We need a system that is self-regulating rather than one that needs constant intervention.

Next, accept that every country that trades with the US should be expected to contribute, through tariffs, to the maintenance of the social/economic system of this country from which it profits. This base tariff should be set at a low rate, say 10%, and apply to everything.

At the end of each quarter (or half year or annually, which ever is determined to be reasonable) the accounts with each country will be check. If we are running a trade deficit of more that 5%, the tariff on all goods from that country will increase by 10%. If we are running a surplus of more that 5%, the tariff will drop by 10%, down to the basic minimum. Undecided at this point is whether nations will be allowed to buy and sell their surpluses with US and if so under what circumstances. This is an interesting concept whose exact implications have not yet been worked. Related to this, whether the rules, and in particular the minimum tariff, should be slightly different for developing countries is still under debate.

There are several advantages to this system, besides its simplicity. First, it avoids the problems involved in trying to micromanage tariffs. The results of doing product by product tariffs is that raising the tariff on one product can adversely impact American industries who use that import as raw material. For example, an early attempt to help the computer chip industry in the country with tariffs on imported chips contributed to demise of computer production in this country since American companies faced higher prices for the chips they needed.

Second, it is effectively retaliation proof. In fact, we would encourage other countries to adopt the exact same system. If a nation does try to retaliate, this would simply prevent trade balancing and automatically trigger higher tariffs. A retaliatory approach, taken to its extreme, would still give us a balance trade even if the balance was at zero. Most countries would prefer balanced trade to no trade.

Third, our social values can be included. If we refuse to import a product harvested in a non-environmentally friendly fashion, we would have to accept that this would cut our inputs from that country resulting in lower tariffs and higher imports of other products, or possibly lower export to that country. But if were willing to accept these results, the decision on the use of environmental or other factors in controlling imports is again our decision.

There is a major difficulty with this approach. The cost of imports is almost certainly going to go up. In some cases, US producers will eventual enter, or in many cases re-enter, the market as the increased prices make domestic production profitable and thereby creating more jobs in this country. In other cases, such as with the imports from oil producing nations, we will probably have to accept higher prices, learn to lower our usage, or find another way to balance our trade with that country. What we have to accept is that by lowering or eliminating the trade balances we are in effect cutting ourselves off from a massive hidden loan program from overseas. And like anybody who has become dependant on credit card loans, eliminating those loans can be a painful experience resulting in real reductions in expenditures in some areas.

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