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 Richmans' Trade and Taxes Blog



The cosmic ray explanation of climate change -- an interview with Henrik Svensmark and his son
Howard Richman, 3/17/2018

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The USA Needs Balanced Trade Not Free Trade to Stimulate Growth
Raymond Richman, 3/14/2018

The US has experienced sky-rocketing international trade deficits over the past six decades reaching $796 billion in 2017. These trade deficits have inflicted considerable harm on the U.S. economy, causing the loss of millions of U.S. manufacturing jobs, closing factories, reducing economic growth, and   converting the U.S. from the world’s leading creditor nation to the world’s leading debtor nation. The nations who sell more to us than they buy from us are creating jobs for their own workers at the expense of American workers. They use a small proportion of the dollars they earn to buy businesses, assets like GE’s electric appliances division, high tech companies, hotels like the Starwood group, office buildings, etc. If they had used their surpluses to buy goods made in the U.S. the economies of both countries would have benefited and it would not have had beneficial effects on the U.S. economy, U.S. jobs, and the incomes of American workers.

A policy of free trade makes sense only when there are no tariffs or artificial barriers to trade, currencies are not undervalued, and national security is not endangered by trade in particular goods. Pres. Trump signed a bill imposing tariffs of 25% on steel and 10% on aluminum because the decline of those industries endangers U.S. security, authorized by Art. 21 of the 1994 GATT agreement. The GATT agreement probably limits granting an exemption to any single member country because others could claim the exemption under the most-favored nation clause. Trump was able to exempt e waTrump       Mexico and Canada from the tariffs because America has a separate trade agreement, NAFTA¸ with them.

Critics point out that the tariffs will raise the price of products fabricated with steel or aluminum. But the existing low prices of iron and steel and aluminum are at the expense of American workers. American consumers should not be favored at the expense of American wage-earners.

The reality is that most of the world’s output of steel and aluminum is made by a few countries which import less from us than they export to us. According to Wikipedia, total world crude steel production was 1,691.2 million tons (mt) in 2017. The biggest steel producing country was China, which accounted for 49.2% of world steel production and 47.1% of our global trade deficit of $796 billion in 2017. The U.S. produced 81.6 mt or 4.8 percent of the world’s steel output. The European Union produced 168.7 mt or nearly ten percent of the steel and accounted for $151.4 billion or 19% of our global trade deficit. Besides China and the European Union, Japan produced 104.7 mt of steel and accounted for 8.6% of our deficit, S. Korea 71.1 mt and accounted for 2.9% of our trade deficit. We have had huge annual trade deficits with China, Germany and Japan for decades. Imposing tariffs on imports from countries with which we have been experiencing huge trade deficits does not constitute an abandonment of the principle of free trade but is remedial, intended to balance trade. World trade rules permit trading partners to temporarily impose tariffs on goods from countries with which they are experiencing chronic deficits. ...

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On Trade, Trump is Acting in the Best Interest of the USA -- we're published in today's American Thinker
Howard Richman, 3/11/2018

Here's a selection:

The biggest steel-producing country in the world in 2016 was China, which accounted for about half of the world's steel production and more than half of the U.S. trade deficit.  Imposing tariffs on such products is a way to balance trade.

What of fears of a trade war?  Most of the above countries are already participating in a trade war with the United States, except that the United States has not been fighting back.  The governments of these countries have been manipulating the terms of trade to enhance their exports to the United States and keep out U.S. products.  As a result, we get debt, and they get the new factories and the R&D that needs to locate near factories.

To read it, go to:

https://www.americanthinker.com/articles/2018/03/on_trade_trump_is_acting_in_the_best_interest_of_the_usa.html

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On Trade, Trump Is Acting in the Best Interests of the USA
Raymond Richman, 3/7/2018

Two members of Pres. Trump’s inner circle of economic advisers are Wilbur Ross, Trump’s Secretary of Commerce, and Peter Novarro, professor of economics at the University of California at Irvine. The latter has just been named assistant to the president that places him among the ranks of the President’s top-level policy advisors. Both have been urging the federal government to eliminate our international trade deficits which during the past half dozen decades have inflicted considerable harm on the U.S. economy particularly its manufacturing sector, causing the loss of millions of U.S. manufacturing jobs, reduced U.S. economic growth considerably, converted the U.S. from the world’s leading creditor nation to the world’s leading debtor nation.

The problem is that the nations who sell more to us than they buy from us are creating jobs for their own workers at the expense of American workers. They use a large proportion of dollars they earn from exporting to us to buy U.S. assets which do not create any jobs, buying existing American assets like shares of American corporations often gaining control of American corporations, hotels, office buildings, and the like. If they bought goods made in the U.S. resulting in balance trade, the economies of both countries would benefit and it would not have disastrous effects on the U.S. economy, U.S. jobs, and the incomes of American workers.

A policy of free trade makes sense only when there are no formal or informal  barriers to trade, the rate of exchange between currencies is conducive to balanced trade, and national security is not endangered by trade in particular goods. Pres. Trump announced that he plans to impose tariffs of 25% on steel and 10 % on aluminum because a great power needs those industries for its security and free trade is endangering its security. ...

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Trump getting serious about trade
Howard Richman, 3/1/2018

Trump appears to be getting more serious about trade. He just promoted Peter Navarro to be Assistant to the President. He is also planning to impose tariffs on imported steel and aluminum.

On March 6, 2017, Navarro gave a great speech about trade deficits to fellow business economists. His main points were:

1. Trade deficits subtract from GDP growth.
2. Requiring balanced trade would reduce barriers to U.S. products.
3. Balancing trade would increase fixed-investment and long-term growth.
4. Trade deficits give us debt, which will have to be repaid with interest.
5. Trade deficits endanger our national security.

We discussed it in the American Thinker:

https://www.americanthinker.com/articles/2017/03/do_trade_deficits_matter__the_debate_heats_up.html

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    Wikipedia:

  • [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]