In many ways identifying the correct trade policy for the United States is more difficult than nailing down a good immigration policy. For the last 40 years we’ve been highly focused on negotiating multi-lateral trade agreements, advertised as “free trade” but which really benefit service businesses, media and pharmaceutical companies, and retail at the expense of mining and manufacturing.
I’m in favor of free trade and think we should have it with any country willing to open their own trade up to us completely. Since genuinely free trade would require us to abandon all sorts of policies on which well-to-do people depend for their incomes, I predict that would receive almost no support.
I don’t think that businesses owned by foreign governments should be allowed to do business in the United States. I don’t think that we should import goods from those businesses at all. I think that our general policy on trade should be oriented towards reciprocity rather than on imagined free trade. We should abandon our myriad of subsidies and we should impose tariffs on imports from other countries to the degree that they subsidize those export goods. If countries impose quotas on what they’ll import from us, we should impose corresponding quotas.
I’m also tempted to think that we should impose tariffs on goods from other countries in the amount of what those countries would have spent if they had the same safety, environmental, and labor regulations we do.
What should our trade policy be?
“Since genuinely free trade would require us to abandon all sorts of policies on which well-to-do people depend for their incomes, I predict that would receive almost no support.”
I suppose that depends on the definition of well to do. But you might just have well to do people in manufacturing instead of services. After all, people wanted to work for big money in auto and steel in the 50’s and 60’s.
“I don’t think that businesses owned by foreign governments should be allowed to do business in the United States.”
Amen.
“If countries impose quotas on what they’ll import from us, we should impose corresponding quotas.”
Yes, but WaPo, NYT, CNN and MSNBC etc would call you reckless and probably xenophobic. Perhaps worse: anti-globalist ‘Merica lover. Seriously, the transition would be brutal, but the result a good one.
“…tempted to think that we should impose tariffs on goods from other countries in the amount of what those countries would have spent if they had the same safety, environmental, and labor regulations we did.”
I don’t know about that one. The world’s behavior and values police? What next, wars to enforce democracy?
I’ve never studied it, but I wonder how much of our subsidy is directed towards the ADM’s, Monsantos and Big Sugar’s of the US.
Most of it. It ain’t for nothing that I refer to Dick Durbin as “the senator from ADM”. And then there are outrages like the mohair subsidy. It’s less than $10 million but it’s absolutely unnecessary. And to add insult to injury the mohair is mostly shipped to France where it’s spun into yarn and made into garments which are shipped back to the U. S. for sale.
Nah. We’d be policing our own values. If you believe that something is wrong, you believe it’s as wrong in China as the U. S. They can always sell their goods elsewhere.
I basically agree with all of that.
It’s telling how the media discuss tariffs. Even my beloved NPR is on the bandwagon about how we cannot upset the apple cart.
Corn, soybeans and sugar. Subsidized out the wazoo by govt. And all poisons.
And you wonder why im sceptical about being the values police. The loudest politically correct mouth or deepest pocket guiding trade. Perfect. Why bother with reform?
@Drew (AKA @Guarneri)
I agree with everything but your last point, and those disagreements are philosophical. That said, see below.
(I think somebody may have kidnapped the real @Drew.)
@Dave Schuler
‘values tariff’
I agree with the concept, but I think it is unworkable. Slavery is unacceptable, but what about no paid maternity leave?
Pertinent reading.
http://conversableeconomist.blogspot.com/2018/03/misconceptions-about-trade-deficits.html
“would have spent if they had the same safety, environmental, and labor regulations we do.”
Many European countries spend more on those things than we do. Would they be justified placing tariffs on us that we should just accept. What if they think we should provide health care for everyone? Should they add another tariff for that?
“we should impose tariffs on imports from other countries to the degree that they subsidize those export goods.”
Who should make those calculations? Is there really an impartial expert or body that could do these calculations? Not necessarily opposed to the idea, or supportive, just seems like difficult from the pragmatic POV.
Agree in principle that we should not have companies owned by other governments do business here. So no petroleum products from the ME, Norway or Russia? Is that really possible?
Steve
The original form of this post had a paragraph on just that subject along with a brief discussion of negative tariffs. Why, yes, they would be justified in imposing tariffs on our goods.
Honestly, that doesn’t particularly concern me one way or another. Our merchandise trade with Europe just isn’t that great and they already have bans on some of our products for reasons along those lines. So does Japan. My suggestion isn’t really particularly farfetched.
It doesn’t need to be any more impartial than the EU’s committees are impartial.
@steve
Europe imposes value taxes on foreign companies. Google, Microsoft, etc. cannot sell their products without modifications to meet European regulations.
I do not have time to fisk your linked article, but I will quickly go over old ground. At best, Professor Taylor is being cute, and at worst, he is ignorant. He glosses over the monetary aspect of a trade deficit/surplus.
For international capital to exist, there needs to be an international monetary system, and that system needs to be independent of any and all national fiat currencies. The procedure to expand the international currency must be fixed and non-financially backed. If it were enacted, I suspect Professor Taylor would shit on himself.
In a world of credit backed fiat currencies, foreign currencies have no use in the domestic financial system. China (or any other country) has few uses for dollars. What Professor Taylor calls foreign investment is simply trade deficit dollars returning home.
With a trade surplus with China, there would be no use for yuan in the US. Banks do not use yuan. Merchants do not accept yuan. Bonds are not yuan based. With a few exceptions, those yuan must be used in China. Professor Taylor tiptoes around this little fact by discussing foreign investment in the domestic economy.
If those trade deficit dollars/yuan are invested in the production of goods or services, they can be as beneficial as Professor Taylor claims. The problem is that there is no requirement for this to occur. Those dollars/yuan can be lent, and there is the problem. The trade deficit dollars/yuan can be lent to the government or the citizens.
Lending should have a natural limiting mechanism, but with a credit based monetary system, these natural limits do not greatly affect the financial system. (RE: housing boom and subsequent financial collapse) ‘Investing’ in the financial system provides the dollars/yuan needed to increase the trade deficit.
When Professor Taylor explains the impact of the removal of the gold cover by LBJ and the elimination of the gold exchange by Nixon, it might be a sign that he has decided to stop being cute. (If he can explain the connection between the two, he gets extra points. He might want to continue on to the reason FDR outlawed private gold ownership, and if he would explain why Nixon was able to allow it again, he would hit the trifecta.)
With the exception of private gold ownership outlawed by FDR and reinstated by Nixon, I have covered these concepts in previous threads.
How about tariffs without morals, just to pay our national debt?
We’re the biggest importer, so no matter how you finangle it, we come out ahead.
For anybody confused about the currency issue. Think of dollars as iPhone apps and yuan as Android apps. If you own an iPhone, Android apps are useless. Being paid in them does you no good, and they are worthless to you and other iPhone owners.
Also, the apps may be the same (Candy Crush), but they are not interchangeable.
I’m also tempted to think that we should impose tariffs on goods from other countries in the amount of what those countries would have spent if they had the same safety, environmental, and labor regulations we do.
Bad idea. If our trading partners required the same of us, we might end up with all kinds of non-productive socialist policies like paid FMLA, kiddie care, 6 weeks paid vacation, meddling of unions in exempt employee affairs, breeders’ time off and so on. Though it would be a vast improvement if they imposed a weekly breakfast of beer and bratwurst on us.s