Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Trade Agreements Are "Entangling Alliances" That Are Difficult to Exit Once They Are Approved.
Pres. Thomas Jefferson, in his inaugural address, declared his devotion to "peace, commerce, and honest friendship with all nations, entangling alliances with none", using a phrase which is often attributed to Pres. Washington. warned against entangling alliances. He thought they could involve us in wars that we did not want to fight. e thoushht An exTple of an entangling alliance is the European Union and the difficulty the UK is experiencing to make a British exit from it. Multilateral trade agreements are eThe USA took advantage of its success in breaking up the USSR by getting some former members of the USSR to join the North Atlantic Treaty organization (NATO). It waged war against Yugoslavia and got Albania, Croatia, and Slovenia to join the European Union and NATO. ntangling alliances which become the law of the land even superseding the Constitution. The General Agreement on Tariffs and Trade created the World Trade Organization. The GATT agreement that it administers has a provision that members shall not require the country of origin to appear on the sales of imported products. The U.S. Congress passed a law requiring labeling meat products with the country of origin. The WTO warned the U.S. Congress that that was in violation of the treaty. The U.S. Congress dutifully rescinded the labeling requirement.
It is amusing to observe the leaders of theThom Democratic Party pretend to be upset about an alleged Russian interference in the 2016 USA presidential election and argue that it smacks of collusion. They object not at all to USA intervention in Venezuela or to the inclusion in NATO of former Russian dominated countries, Poland, Hungary, the Czech Republic, Bulgaria, Estonia, Latvia,Lithuania, Romania, Slovakia, and former parts of Yugoslavia like Slovenia. Albania and Croatia. The most recent member added was Montenegro in 2R017. As of 2018, there are three aspiring members: Bosnia, Herzegovina, and Georgia. The incorporation of countries formerly parts of the Soviet Union and of Yugoslavia probably induced Russia when she became able to to behave likewise taking counter measures in the Ukraine, Georgia, Syria, Turkey, Iran and Venezuela. American media are united in considering Russia the aggressor whereas Russians can reasonably consider NATO an aggressor. A military alliance like NATO is “permanent” and “entangling.
Trade agreements are also entangling alliances. Trade agreements do much more that deal just with trade. They set up new governments like the World Trade Organization (WTO) to enforce the treaties and they require members to adopt policies that would never pass in democratic legislatures such as measures to control global warming. They reduce trade barriers to a selected group of industries in each country and are good examples of crony capitalism. They get into subjects like the minimum wage. The agreements have provisions for compulsory arbitration, anti-child labor laws, even climate change, and created a new international agency with powers of its own, the World Trade Organization, to enforce the agreements. Treaties in the USA become the supreme law of the land, even superseding the Constitution. The WTO, for example, ordered the Congress of the USA to cease requiring domestic vendors to label the country of origin of meats. Congress meekly repealed the law requiring such labeling.
Both the GATT and PACIFIC trade treaties lacked any serious requirement that countries balance their trade with the rest of the world. America’s trade deficits exploded since the adoption of the GATT agreement in 1994 with the obvious negative effects on USA manufacturing and the loss of millions of well-paid jobs. Workers laid off as a result of the loss of manufacturing jobs had to find jobs in the remaining industries at much lower wages. When the opportunity to turn against the two major parties which supported the trade agreements, citizens rebelled and elected a non-politician who called attention to the cause of their losses of well-paying jobs. It has become a world-wide phenomenon. It is true that ade deficits do not cause unemployment. They simply destroy well-paying jobs forcing those who lose their good-paying manufacturing jobs to seek employment in other industries at lower pay or remain unemployed.
It is easy enough to avoid a trade war. Changes in foreign exchange rates seldom if ever cause trade wars though they tend to balance trade. Similarly, our invention the Scaled Tariff is unlikely to cause a negative response from the trading partner affected, It is a single country variable tariff whose rate and falls automatically with with changes in the size of the trade deficit. (It is described in our book Ballanced Trade (NY Lexington Books,, 2014)
I suppose it is too much to ask elected representatives to be rational; after all, voters themselves are irrational as evidenced by their electing incompetents to represent them.
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