RUTHFULLY YOURS

One of the first advocates of balanced trade, Dr. Raymond L. Richman, died on October 23 at age 101. A commentary that he wrote in 2003 (The Great Trade Debate) recommended the very policy that President Trump is carrying out today — the negotiation of bilateral agreements that balance trade.  He concluded that commentary:

Is there any way to balance our trade? Let’s take a clue from the fact that barter is always beneficial to both parties. Instead of “Free Trade” as the slogan, how about the slogan, “Free and Balanced Trade”? We could announce to countries with whom we have large chronic deficits that their exports to us in the future will be limited to, say, 110 percent of what we bought from them last year. If you want to trade with us, you’ll have to buy from us. Let’s barter!

I’m sure the countries given this ultimatum will protest to the World Trade Organization (WTO) but there is precedent for bilateral agreements. We have a bilateral agreement with Japan now that limits the number of autos it can export to us.

The rules of international trade discriminate against the U.S. but the discrimination is not the cause of the deficit. The average level of U.S. tariffs is lower than that of any other large industrial nation. We have some barriers in the form of quotas but they affect a small proportion of our trade. The definition of dumping under WTO rules allows countries to rebate value-added taxes. Since we have no value-added tax and income taxes cannot be rebated, goods from many countries sell for less in the U.S. than in the countries in which they are produced. We could replace the corporate income tax with a value-added tax and subsidize exports by rebating the tax. Or we could change the rules to deny countries the right to rebate the value-added tax.

While such actions would do some good, the principal cause of chronic trade deficits was and continues to be capital flows from abroad. The U.S. went from being the world’s leading creditor nation in 1970 to become the world’s biggest debtor.

The situation calls for dramatic action. Stop the bleeding! Blue-collar workers have been bearing the burden of so-called “free trade” long enough. Let’s have balanced trade.

He was a well-respected economist who received a PhD from the University of Chicago in 1957 with Milton Friedman his dissertation advisor. Then he worked as a consultant for the OEEC, the World Bank, the IMF, the Inter-American Development Bank, the U.S. Agency for International Development and the Asian Development Bank. When he retired from the University of Pittsburgh in 1982, he became Professor Emeritus of Public and International Affairs.

He authored four books, dozens of journal articles and hundreds of commentaries about economic development, tax policy, and trade policy. In recent years most were co-authored with his son (Howard) and his grandson (Jesse), a unique three-generational collaboration. Many of their commentaries have appeared in American Thinker.

Meanwhile, the balanced trade policy that he recommended, which is being implemented by President Trump, has already contributed to the longest continuous economic expansion in American history.