Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



Does trading away our future buy the US friends?
Jesse Richman, 5/7/2015

Writing on May 3 in the Washington Post, the often thoughtful and perceptive Robert J. Samuelson made a fall-back argument for the Trans Pacific Partnership: it's good politics, even if the economics are lousy.  The fall back is a weak position, however.  Is it truly good politics in the long run to pursue imbalanced trade policies that undermine U.S. power?

Samuelson notes that the economic benefits of the deal would be extremely modest: "Still, plausible economic gains from expanded trade seem modest. By 2025, the incomes of the 12 countries could increase by 0.9 percent, according to a revised estimate by a study for the Peterson Institute."  He appears to assume that these will be divided equally though if current patterns hold and U.S. trade deficits with partnership nations grow substantially, the benefits will likely not flow to the U.S. much at all.

But he argues that US trade policy isn't about economics: it's about politics.  "Still, the pursuit of political ends by economic means remains at the core of U.S. trade policy." 

Defeat of TPP, he argues, would mark the end of the era of U.S. trade liberalization.

"A Trans-Pacific Partnership failure — because countries don’t agree or Congress kills the final result — could produce a historic watershed. Present U.S. trade policy dates to congressional passage of the Reciprocal Trade Agreements Act of 1934, which authorized the president to negotiate tariff cuts with other countries. (Before that, U.S. trade policy was highly protectionist.) A TPP rejection could mean the end of an era.

“It would be taken as a signal that the United States wasn’t able to maintain the consensus and commitment that we’ve had since [the mid-1930s] for trade liberalization,” says University of Maryland political scientist I.M. Destler.

...

"We seek to reassure nations that we’re still a Pacific power and that our proposal represents a useful framework to govern the region’s trade. A collapse would leave a vacuum that China would most likely fill. Through its own trade agreements, China might fashion a system that gives its exports preferential access to foreign markets, while securing guaranteed supplies of raw materials (oil, grains, minerals). That’s not in our interests.

Samuelson concludes:

"So when opponents criticize the Trans-Pacific Partnership, they need to answer a simple question: compared to what?"

The answer to the "compared to what" question needs to begin by noting that the fact that we feel the pressing need to reassure Asian allies that we are "still a Pacific power" through a weak trade deal that endorses continued mercantilism at the expense of American workers has almost everything to do with the failures of our trade policy. 

The rising economic and political challenge posed by China has a great deal to do with the enormous trade deficits the United States has run with China for decades.  The decline of U.S. industrial capability and by association U.S. power is what calls into question our continued role as a Pacific power, and the trade deficits have contributed mightily to that decline.  Doubling down on a policy that has contributed so much to U.S. decline hardly seems to be a good plan. Compared to what?  How about starting off by balancing trade with China.

A policy of balanced trade would force trading partners to reciprocally open their markets to U.S. goods and services if they want access to the U.S. market.  It would much more closely embody the reciprocal spirit of the 1934 reciprocal tariff act than the current strategy of tolerating imbalanced trade in order to buy friends.  Imbalanced trade has already worked so well at buying the friendship of China that we are now called on to 

Samuelson's reference to the reciprocal tariff law of 1934 is  misleading.  Reciprocal free trade is on the whole a good idea.  But the "reciprocal" policy began to metastasize when the advantages negotiated reciprocally with one trading partner began to be extended to other trading partners who had made no similar reciprocal concessions.  This has put the U.S. in it's current weak negotiating position.  We have few tariffs or other trade barriers to remove, our trading partners have many more.  And consequently they have little motive to make real concessions.

Your Name:

Post a Comment:




  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Archive
    Dec 2017
    Nov 2017
    Oct 2017
    Sep 2017
    Aug 2017
    Jul 2017
    Jun 2017
    May 2017
    Apr 2017
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015

    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010
    January 2010

    Categories:
    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax
    Consumption Taxes
    Economy - Long Term
    Economy - Short Term
    Environmental Regulation
    Politics

    Real Estate Taxation
    Trade
    Miscellaneous

    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • TradeReform.org
  • Votersway Blog
  • Watt's Up With That


    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]