Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Will Obama Answer This Question
Part of Obama's Linked-in forum today involves the president answering questions submitted by Linked-in users. The following questiondeserves an answer. Wonder if it will get one. The question was posted by Jeff Tuttle, a GM account manager. Jeff wrote:
"I recently had to put together a business case for supply of $100 Million worth of worldwide high tech manufactured product. America's import taxes make it almost impossible to source here.
China: Requires a plant in China and also has 7-8% import taxes. We have to build a China plant to supply to China.
The United States should use its market power to push for balanced trade by implementing a scaled tariff. Given the huge Chinese trade surplus, the scaled tariff rates on imports from China would give Tuttle ample reason to advocate sourcing in the U.S. instead of China.
Several of the other posters on the forums have excellent insights into the way to approach the problem including John Friedson who wrote
There is a cost, multiplied at every level of manufacturing and distribution, to OSHA, and EPA, retirement, etc. We have move the pollution, danger, social safety net, etc. along with the jobs to China and elsewhere. Instead of encouraging the Chinese to raise the value of the RMB and sucking more $$ out of the USA, we should establish import duties that compensate, as objectively and accurately as we can, for the what we impose on our manufacturers and they do not. As they improve, the taxes reduce and go away.
And Mukhtiar Kataria wrote:
To bring jobs to USA, we need only one change in our Trade pact with other countries i.e. instead of paying cash for import, we should only send our goods in exchange.
This sounds almost exactly like the scaled tariff.
Of course there are concerns. Vince F. Golubic wrote:
My $0.02: This is a financial and economic question that also involves world markets, bonds, and many other complex financial investment issues. On the surface it appears to be a simple solution, but my reading of the financial industry trade journals & industry comments to this very same question tells me it is not as simple as it sounds. In fact it might spark another round of "trade wars" that in our current economic situation might destabilize markets in unpredictable ways.
The goal is to alter trade relationships so that they are balanced. Currently many countries (including our own) implement policies that encourage U.S. trade deficits and lead the US to live beyond its means. The scaled tariff counters those policies while insisting on the principle of balanced trade. We will buy as much from you as you buy from us.
Journal of Economic Literature:
Atlantic Economic Journal: