Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Are Trade Agreements Necessary?
Most economists are believers in free trade but there is nothing in economic theory that justifies a free trade policy. There is plenty of international trade theory that shows that balanced trade is beneficial to trading partners but there is no economic theory that justifies free trade and then only when special conditions apply. Chronic trade deficits are to be avoided because they usually involve loss of jobs and growth in the trade deficit country in favor or gains in jobs and growth in the trade surplus country. Free trade between countries is justified only when the countries have the same monetary unit, labor and capital are freely mobile between the countries, and none of the countries impose barriers to the free movement of goods. In effect, all the countries involved are in a common market. This is the case in the U.S. where the Constitution imposes these obligations on the States.
U.S. economists have always favored increased trade between nations. When the U.S. experienced chronic trade surpluses, American economists opposed protective tariffs arguing for free trade. But they failed to distinguish between free trade and balanced trade. Prof. Milton Friedman is often quoted as favoring free trade but that was when the U.S. enjoyed chronic trade surpluses. Another great economist, Prof. John Maynard Keynes was an advocate of free trade but when the U.K. experienced chronic deficits, he stated that Britain should not tolerate being the victim of beggar-one’s neighbor policies pursued by countries to gain chronic trade surpluses at the U.K.’s expense.
The movement toward freer trade gained impetus with the inauguration of the series of General Agreements on Tariffs and Trade in 1947 culminating in the conclusion of the Uruguay round in 1994, and the creation of a new international agency, the World Trade Organization in 1995. What characterized these agreements is that they were all called “free trade” agreements even though countries continued to levy tariffs and impose non-tariff barriers on imports and to subsidize exports. As a result of the trade agreements, the U.S. in particular began to experience chronic trade deficits. In a paper written in 1995, I wrote:
It's Morning in America 2.0 -- Peter Navarro in SF Chronicle
Peter Navarro, Trump's chief economic advisor, had a commentary about Trump's election victory (It's Morning in America 2.0) in which he made the case that the Trump administration will lead to an economic resurgence. He states that the Trump program will create a stimulus to the economy in four ways:
Regarding Trump's trade policy he wrote:
Joseph Wharton is smiling down on Donald Trump
Joseph Wharton founded the Wharton School of Business at the University of Pennsylvania in order to insure that America would protect its industries from the economic attacks of other nations. Michael Lind pointed this out in a 2011 commentary:
Recent presidential candidates of the Democrat Party have promised, when running, to protect American industries from foreign attacks, but once elected, they have failed to do so. As Lind noted humorously:...
How the Media Show Their Anti-Trump Bias and Why I Favor Trump
You may believe that the media is anti-Trump because they believe he is unqualified to be President. Nothing is further than the truth. The real issue is his position on foreign trade. Free trade has become a Republican and Democratic ideology. There is nothing in economic trade theory that suggests free trade is an appropriate public policy unless the following conditions exist: the trading partners have a common currency, there is free movement of capital and labor, and no trading partner can impose artificial barriers to trade on imports from the other. The only place where these conditions hold is between the States of the USA because the U.S. constitution mandates them. Of course, multi-nationals are for free trade; it is the source of great profits.
And they favor globalization because it reduces the sovereign power of national governments. You did not hear a peep from any of them when the World Trade Organization ordered the U.S. government to rescind a law that the U.S. congress enacted requiring meat products to be labeled to show the country of origin. Can you believe that the U.S. Congress complied? And the U.S. media with the exception of Fox News, the Washington Times, and a few others fall in line with the desires of the multi-nationals as does the pre-Trump leadership of the Republican Party and the current leadership of the Democratic Party. Take as an example of media bias the following analysis of a single edition of a formerly conservative newspaper.
I read the Tribune Review, Pittsburgh edition, published on November 6, 2016, two days before the national presidential and Congressional elections, and what did I read? No news at all about the positions of either Donald Trump or Hillary Clinton. ...
Journal of Economic Literature:
Atlantic Economic Journal: