Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Globalization and Free trade Agreements Set the U.S. on the Road .to Decline
George Washington in his farewell address urged the US to avoid foreign entanglements. How right he was. US foreign entanglements began with a vengeance under Pres. Franklin D Roosevelt beginning with the Bretton Woods agreements (1944) which created the World Bank and the International Monetary Fund.These agreements were negotiated by Harry Dexter White on behalf of the US. (White was later exposed as a Communist spy.)
Benn Steil (senior fellow and director of international economics at the Council on Foreign Relations and founding editor of International Finance) in his book The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order (Council on Foreign Relations, Princeton University Press, 2013), he discusses the creation at Bretton Woods of the World Bank and the IMF. He writes:
New Deal innovations included the minimum wage and the Davis-Bacon Act, two laws to advantage labor unions, which returned blacks to conditions worse than slavery by denying Blacks equal opportunities for employment, since the unions at that time were lily-white. Black rates of unemployed males are twice those of whites and in the 1st quarter of 2014 the unemployment rate of black male teenagers reached the astronomical level of 44 percent. Until 1950, blacks had lower rates of unemployment than whites. Other innovations included was the regulation of labor relations, the initiation of farm subsidies, the creation of the Social Security System, the creation of the Securities and Exchange Commission(SEC) and the Tennessee Valley Authority.
The U.S. in 1947 began the General Agreement on Tariffs and Trade, conducting eight rounds of talks during the ensuing decades The Uruguay Round, which was completed on December 15, 1993 after seven years of negotiations, resulted in an agreement among 117 countries (including the U.S.) to reduce trade barriers and to create more comprehensive and enforceable world trade rules. The agreement coming out of this round, the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, was signed in April 1994. The Uruguay Round agreement was approved and implemented by the U.S. Congress in December 1994, and went into effect on January 1, 1995. This agreement also created the World Trade Organization (WTO) in 1995.
But all this globalization, initiated by the U.S., turned out to be an economic disaster for the U.S. U.S. manufacturers in droves moved their factories overseas and out-sourced production leading to a decline of manufacturing in the U.S. which is making the U.S. a second-rate economic power. Millions of well-paid jobs of American workers were eliminated.
The U. S. continued with its free trade policy. Congress passed the North Aerican Free Trade Agreement Implementation Act in 1993. Pres. Clinton, while signing the NAFTA bill, stated that "NAFTA means jobs. American jobs, and good-paying American jobs. If I didn't believe that, I wouldn't support this agreement." He may have believed that but he was wrong.The US goods trade deficit with NAFTA was $94.6 billion in 2010 and accounted for 26.8% of the overall U.S. goods trade deficit.
The trade deficits caused the U.S. to go from being the world’s leading creditor before 1970 to becoming the world’s leading debtor. The huge accumulation of U.S. Treasury bonds abroad has made the U.S. vulnerable to a collapse of the dollar as the world’s medium of exchange, which now appears to be unavoidable. The dollar will be replaced by the IMF’s Special Drawing Rights (SDRs) and a currency of the new international fund being organized by China and Russia. It will very likely cause a depression in the U.S.
Why didn’t U.S. corporations move their factories abroad before the era of trade liberalization? Because their exports to the US would have been subject to tariffs. American firms open factories abroad to produce products to be consumed in the countries they invest in and/or to produce products to be exported to the U.S. and the rest of the world. The US trade deficits have been exacerbated by the imports from American companies producing their products abroad and exporting them to the U.S.
The effect on American manufacturing has been disastrous for American workers. Millions of well-paid American jobs were lost as American manufacturing moved overseas.
A world free trade regime is only possible if countries retain the ability to impose single-country variable tariffs which they can use to compel balanced trade. Of course, if a country’s total trade is in balance, it should not have the right to impose single-country variable tariffs. A world trade organization is unnecessary and costly. The right to impose single-country variable tariffs is all a country needs to prevent other countries from employing mercantilist practices to achieve a trade surplus.
The number of international agencies has exploded since the end of World War II. The UN alone has created dozens, many of them anti-U.S., and inherited some from the League of Nations. Most have outlived their usefulness, and many are counter=productive like the World Bank, but remain a burden on taxpayers around the world. The U.S. is their principal financial supporter. Calling the U.S. “Uncle Sucker” is close to the truth.n
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