Connect with us

Economy

Free but Fair Trade – Is it Possible?

Published

on

Free but fair trade is an expression which we often hear today from President Trump; just as we hear that millionaires and billionaires must pay their fair share from Senator Sanders. When asked what percentage is fair; since these millionaire and billionaires are in the highest tax bracket and pay the most in taxes, we never seem to get an answer. All we hear is from the progressive left that they have too much and need to pay more.

Similarly, the expression free but fair trade sounds great, but the meaning of “fair” is utterly void of any substantive meaning. The idea of a 25% tariff may be fair, but it is by no means free. So the question is, how can we obtain free but fair trade?

The Reality

Before we can answer this question, we must first examine the deficiencies in our current trade policies. The first thing we must realize is that we do not currently have free trade. Think about it like this. If we did have free trade why would we need complex trade agreements? The fact is we have thousands of tariffs in the United States. Just like every other country, we seek to protect some industries over others.

Some are for supposed national security reasons, and others are simply to protect an industry in a member of Congress’ district.

The second and most significant reason we do not have free trade is that true free trade is optimal but not politically expedient. For instance, let us use China and the United States as examples and let us say we currently do not trade with each other.

Establishing trade with one another is beneficial for both countries regardless of tariffs. Since trade never existed, an unfavorable trade agreement is preferable over no trade at all. Reasons being both countries will benefit from trade. Industries may open, and some may close, but there will be a net positive for both countries. It is a mutually beneficial arrangement.

Now instead of unfavorable trade agreements, what if we had free trade. All products coming from China into the United States and vice versa are tax-free. In this situation, you will see the greatest mutually benefit as both countries will have positive net growth. If this situation exists for years, you will see a fluid economy as some industries will be created, grow, decline, or shut down.

The problem that arises is not the creating and growth of some industries but the decline or elimination portion.

If a software engineering firm which sells most of its software to China opens up in a congressional district, you will be sure to see that member of Congress at the ribbon cutting ceremony will a plethora of other politicians stating their policies fostered the creating of this software engineering firm.

On the other hand, you won’t see these same politicians at the factory down the street which is packing up and moving to China. The same policies that opened up the software engineering firm eliminated your manufacturing job. What is an elected official to do?

What they will try and do is give tax incentives and add tariffs to prevent the closure. If they succeed, they will once again take credit; even though the biggest net benefit to the economy as a whole is to allow the factory to shut down, though it isn’t politically expedient.

Back in China, they will also try and protect their software engineering firms by adding tariffs and regulations on the US-based company. The result of all this will be less than optimal, but a long-term net benefit is not politically expedient. So protectionism will inevitably begin.

Possible Solution?

Therefore, how do we create complete free and fair trade? The honest answer is you can’t; as we have demonstrated allowing complete laissez-faire trade policy will never occur because it isn’t politically expedient. Some may be for good reasons and some for bad reasons.

To achieve the most optimal outcome would be to eliminate tariffs. But how do you do that without cheating and allowing politically expedient policies?

Maybe this example trade policy below might help in this endeavor.

All products, goods, materials, and services, entering the United States and its territories shall be free of tariffs. Any fees, including but not limited to docking, storage, and inspection imposed at points of entry shall be uniform at each location regardless of country of origin. Likewise, all products, goods, materials, and services produced in the United States and its territories shall be free of tariffs. Any country that imposes a tax on any of said products shall immediately, have the highest equivalent tax impose on all their goods and services at the same rate plus 10%; until eliminated.

Likewise, any fees should not favor any other country over the United States and its territories. Fees must be uniform or to the benefit of the United States. If fees are to the disadvantage of the United States, those same rates shall be immediately imposed on said country plus 10% until eliminated.

How it works

I postulate this trade policy would allow greater free trade then we have ever seen.

For instance, if China has a combined 20% tariff on mid-sized trucks and 25% on sedans, then since 25% is the highest tax imposed on US products then 100% of all items coming into the United States from China will have a tariff of 27.5% immediately imposed on it. This scheme would also apply to any value added tax or border adjustment tax which would disadvantage the United States over other foreign or domestic products. Therefore, I believe the consequence would be so devastating to China they wouldn’t dare put a tax on American products, and likewise, the United States would not want to engage in a trade war just to protect one industry or factory.

Let us say that we just succeeded in creating Free Trade the vague notion of Fair Trade can never be quantified or defined.

For instance, if China is subsidizing its steel industry and shipping Chinese steel into the United States cheaper than the free market can produce it, is that still Fair Trade?

Is it Fair?

It’s still Free Trade because no taxes or tariffs are imposed but is it fair?

Some would argue that it is not fair for China to subsidize their steel industry because that puts the US steel industry at a disadvantage. The US could impose a tariff but as stated that would eliminate free trade. The only other option would be for the United States to subsidize the US steel industry or let it possibly collapse. Sidenote, we only receive 2% of our steel from China, and U.S. Steel production makes up 70% of the steel used in the United States.

Some might see this as unfair; others see this as a plus benefit to the United States.

American economist and Nobel Memorial Prize in Economic Sciences recipient Milton Friedman viewed this as reverse foreign aid. If China wants to tax their citizens to provide US citizens and companies with subsidized steel why not let them. In a Milton Friedman perspective, this might seem unfair to Chinese taxpayers and more than fair to US taxpayers.

Some may argue that US steel production is vital to US national security. Having enough steel is crucial to our national security, but that doesn’t mean that we can’t stockpile Chinese steel. Also, it neglects the fact that other countries like South Korea protect their steel industry by subsidizing steel in their country to prevent monopolization by Chinese firms. The US can also buy from South Korea or even Canada.

Countries may also put strict regulations on how steel is produced in their countries as well as impose those rules on foreign producers. These policies may not have a defined numerical value as a tariff but in a sense act as a protectionist trade barrier. Since there is no quantitative value to these types of regulations, having US laws automatically trigger countermeasures would be impossible.

So can we truly have Free but Fair Trade? As we have seen having Free Trade is possible, but Fair Trade is really in the eye of the beholder. Ultimately, the best interest of the United States and its continued success is by having a free trade policy, maybe something like I have spelled out in this article, as well as, limiting regulations and limiting government interference in the economy.

Nothing can be put in place to be completely fair and balanced, but the most reasonable thing to do for the overall benefit of America and Americans is to maximize laissez-faire economic policies void of politically expedient measures.


Konstantinos Roditis is a candidate for California State Controller. You can learn more about his campaign at cacontroller.com, and you can follow him on Twitter & Facebook.

Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Democrats

Veronique de Rugy: Green New Deal would be hundreds of TRILLIONS of dollars in federal commitment

Published

on

Veronique de Rugy Green New Deal would be hundreds of TRILLIONS of dollars in federal commitment

If there’s a word that’s not necessarily negative one could use to describe the Green New Deal, it would be “ambitious.” The deal has so much wrapped into it that it’s hard to tell which components are designed to save the environment and which ones are intended to destroy the economy.

Estimates put costs for the “green side” of the resolution at somewhere between $12-$20 trillion. Then, there’s the Medicare-for-All component that is estimated at $32 trillion over a decade.

And that’s just the start.

This isn’t just a “green” deal. It’s a hodgepodge of policy proposals that include massively growing the welfare state, inserting government even more into the job markets, and a universal basic income that they refuse to actually call a universal basic income. The much-maligned FAQ that was posted and quickly removed from the website of sponsor Alexandria Ocasio-Cortez (D-NY) mentioned paying people who were unable or even “unwilling” to work.

“Even in the best case scenario where you substitute a UBI for all the other forms of welfare, it’s insane,” said Veronique de Rugy, Senior Research Fellow at the Mercatus Center at George Mason University, on ReasonTV.

But here’s the problem. The Green New Deal doesn’t substitute a universal basic income for other welfare programs. In the Green New Deal, the programs recommended are supposed to be additions, not substitutions.

“It’s a really hard system to support even in its ideal form,” de Rugy continued. “Then there’s this Green New Deal version which doesn’t even seem to entertain this notion of actually substituting for all the rest, so it’s on top of what we have now.”

This site is 100% crowdfunded by readers like YOU. Please consider donating and keeping the right side of news going strong.

The real question we need to ask is whether or not the Democratic Party is actually going to support this. In its current form, the Green New Deal is a fantasy, and perhaps that’s what the more-sane Democrats are shooting for by supporting it. By giving it their attention now, they can work their way down to more reasonable proposals for everything from environmental protection to job creation programs to different versions of socialism.

In other words, they may be using the hyper-leftism of the Green New Deal as a gateway to get to the palatable leftism of what’s quickly becoming mainstream socialism.

The Green New Deal shouldn’t scare conservatives because it can’t happen. What should concern us is the end result negotiated down from this starting point. Given the GOP’s negotiating track record lately, we don’t know what we’re going to get when the Green New Deal is trimmed down to reality.

 


NOQ Report Needs Your Help

Continue Reading

Democrats

Even Drudge can’t deny the insane spending by Washington DC today

Published

on

Even Drudge cant deny the insane spending by Washington DC today

What did GOP control of the House, Senate, and White House do to spending and the national debt? Did Republicans demonstrate the fiscal responsibility that has been one of their alleged traits for decades? Did they match the spending under Presidents Bush and Obama, maintaining the status quo? No, and no. They looked at the spending and debt accumulation of the past and said, “Hold my beer.”

It’s not just the Republicans’ fault, but asking Democrats to stop them when they’re on a spending spree is like asking a bartender to stop serving alcohol. It just doesn’t feel right to them and the results of bipartisanship have been quite apparent, as my friend Daniel Horowitz noted on Conservative Review:

The bipartisan spending binge is now worse than under Bush and Obama

https://www.conservativereview.com/news/bipartisan-spending-binge-now-worse-bush-obama/It feels like it was yesterday when I was watching the news as a kid with my parents in 1995, listening to Newt Gingrich, during the infamous shutdown fight, warn about the dire consequences of crossing the $5 trillion debt milestone. It feels like it was yesterday when I was writing press releases for candidates in “the year of the Tea Party” on how Obama and the Pelosi Congress took the debt to $14 trillion in such a short period of time. Now, over eight years into varying degrees of GOP control of Congress and the White House, we have crossed the $22 trillion mark, expanding the debt more rapidly than at any time in our history. Whereas the debt exploded by $5 trillion during Bush’s eight-year tenure, a shocking figure at the time, it has now increased $8 trillion just since Republicans controlled the House in 2011 and by $4 trillion over the past four years, since they controlled at least two of the three political organs of government.

It has become so bad that even Matt Drudge, whose conservative news aggregator Drudge Report has been consistently defending President Trump since well before the 2016 election, is starting to ask questions.

Drudge Spending Binge

Washington DC has had a spending problem for a century. Republicans run on solving this problem during election time, but they’re acting like Democrats between elections. It’s time to let them know we’re watching and we’re not happy about it.

 


NOQ Report Needs Your Help

Continue Reading

Economy

Trump administration is optimistic about failing economic policies

Published

on

Trump administration is optimistic about failing economic policies

In an article I wrote last week following Trump’s campaign rally disguised as a State of the Union Address, I documented how his claim that his trade war and tax cuts had produced “the hottest economy in the world” were merely the rhetorical ramblings of a failed “Republican” running for re-election.

Trump’s trade war has created an economic hell that will take years to recover from, and his tax cuts have failed to provide tax relief for the middle class. In addition, when you throw Trump’s big-government spending into the mix, the federal deficit now exceeds $22 trillion.

The stock market fell late in 2018 and all gains made in the year were wiped out, a crash the administration blamed on Democrats and Fed Chairman Jerome Powell.

While the slide on Wall Street was dismissed as a market correction, recently released economic data from the Commerce Department shows that the overall economy ended the year much worse than the White House would have you believe.

U.S. retail sales recorded their biggest drop in more than nine years in December of 2018 as receipts fell 1.2 percent across the board. This is the largest decline in retail sales since Sept. 2009 when the economy was in a recession.

Trump brags about low unemployment numbers, but according to a Department of Labor report released yesterday, unemployment claims increased by 4,000 to a seasonally adjusted 239,000 for the week ending Feb. 9th.

While it’s tempting for some to dismiss yesterday’s report as an anomaly, let’s take a look at the data from another angle.

The four-week moving average of claims — considered a better measure of labor market trends because it irons out week-to-week volatility — was 231,750, an increase of 6,750 from the previous week’s revised average. This is the highest level for this average since January 27, 2018 when it was 234,000. The previous week’s average was revised up by 250 from 224,750 to 225,000.

Of course, the administration famous for identifying unfavorable news as “fake” went right to work trying to spin these economic failures into policy victories.

Saying that he was still “optimistic” about the economy, White House Economic Advisor Larry Kudlow called the retail sales number a “glitch,” and he invited the feds to “step aside” while praising the president for “ending the war on business.” He then parroted SOTU talking points about how the overall economy was “very strong” despite these recent reports.

There are those who label me a pessimist because I refuse to whitewash the political graffiti of optimism Trump and the GOP spray paint on their crumbling wall of lies and broken promises, but in the words of C. Joybell C.: “Some people are optimists. Some people are pessimists. I’m just a realist who believes that some things are worth fighting for.”

Originally posted on StridentConservative.com.

 


David Leach is the owner of The Strident Conservative. His daily radio commentary is distributed by the Salem Radio Network and is heard on stations across America.

Follow the Strident Conservative on Twitter and Facebook.

Subscribe to receive podcasts of radio commentaries: iTunes | Stitcher | Tune In | RSS

 


NOQ Report Needs Your Help

Continue Reading

Facebook

Trending

Copyright © 2019 NOQ Report