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Doing the Right Thing on Trade
Jesse Richman, 11/15/2018

The Trump Administration is right to pursue a policy aimed at addressing the trade deficits faced by the US around the world.  But the current policies are having only limited effect on the overall US trade deficit -- so far more than counterbalanced by the consequences of the tax cuts and higher interest rates which have pushed the dollar higher and kept imports cheap.  

The right approach going forward is to begin moving towards what Frank Kirkland calls a "closed loop" approach to the trade balance, or what Masch calls Compensated Free Trade, what we have termed the Scaled Tariff, or the country-specific import certificates.  This is particularly crucial because at some point, whether in 2021 or 2025, the Trump Administration will leave office.  And the advocates for Trump's trade policies in the administration could also be sidelined at some point even before Trump leaves office. The work should be aimed across various domains at creating institutions and a policy rationale able to sustain the push towards a more balanced US trade policy even once Trump is no longer president. 

This can be best done by creating a set of policies that will automatically balance trade whether Trump and his negotiating team are at the helm or not.  There are a number of different proposals available which aim to do just that.  The administration should work to put one or more in place using executive powers, while pushing for Congress to enact laws explicitly codifying the goal of balanced trade as part of the Federal Reserve mandate, and explicitly directing the president to implement the scaled tariff or one of its cousins to balance US trade with China and other powers. 

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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]