Reduce the trade deficit; increase GDP & median wage

[Supposn]

Reduce the trade deficit; increase GDP & median wage

Warren Buffett’s concept to significantly reduce USA’s trade deficit.
It is not our global trade but our trade deficits’ that are a significant net detriment to our economy. Trade deficits’ amount of detriment to their nations’ GDPs are significantly larger than the deficits themselves.

I’m a proponent of a proposal to reduce USA’s trade deficit of goods that was first introduced to the Senate in 2006. This simple concept is not simplistic and is worthy of consideration.

The basic concept is for exporters who choose to pay the federal fees to acquire transferable IMPORT Certificates for the assessed value of their goods leaving the USA. Importers would be required to surrender IMPORT Certificates for the assessed value of their goods entering the USA. Surrendered certificates are cancelled.
This may seem as a boon to exporters of USA goods but it’s actually an indirect but effective export subsidy and the trade proposal’s entirely funded by U.S. purchasers of foreign goods.

The version of this trade policy I advocate would exclude values of specifically listed scarce or precious minerals integral to goods from goods assessed values.
This trade policy would significantly decrease USA’s trade deficit of goods and increase the aggregate sum of USA’s imports plus exports and our GDP more than otherwise. The GDP bolsters the median wage.

Wage earning families benefit from cheaper imported goods but every day of every year they’re dependent upon their U.S. wages. Regardless of how small the additions to imports’ prices due to Import Certificates, (unlike tariffs) USA’s assessed imports could never exceed that of our exports. U.S. wage earners can have cheap (but not the absolute cheapest) imported goods. We cannot afford the absolute cheapest.

Refer to: www.USA-Trade-Deficit.Blogspot.com
or http://en.wikipedia.org/wiki/Import_Certificates
or http://en.wikipedia.org/wiki/Gross_domestic_product
or Google: wikipedia, import certificates
or Google: wikipedia, gdp
And the discussion topic “Trade deficits are always detrimental to their nations’ GDPs”

Respectfully, Supposn

 

[GenSeneca]

How is this not an example of government exerting force to control economic behavior?

 

[Dr.Who]

Despite calling it simple it sounds complex. But lets recap:

A system of certificates will be used to extract money from people who import certain but not all products into the US. Then that money will be used to subsidize certain but not all products being exported from the US.

1. its a tax on imports
2. its a subsidy
3. it is applied by beaurocrats unevenly and unfairly

How will that not result in other countries slapping the same restrictions back on us? How will that not result in some companies receiving special treatment and upsetting the balance of the market? How will that not really just give more power to beaurocrats and corporatists?

If it were to work imports from other countries would be slowed while exports from our country increases. Other countries would still make products cheaper than we do just our citizens would not be able to buy them at the better price. That is not good for consumers. That just makes stuff cost more which is exactly what trade deficits are already doing without all the red tape and corruption. It is only good for companies that receive subsidies and the crats that hand them out.

 

[Supposn]

.......... A system of certificates will be used to extract money from people who import certain but not all products into the US. Then that money will be used to subsidize certain but not all products being exported from the US.

Dr. Who,
Transferable Import Certificates are only issued to exporters of U.S. goods who choose to pay the fees that defray all government expenses due to this trade proposal.

Importers of foreign goods cannot purchase entry for their goods with money; they must surrender transferable Import Certificates, (ICs) with “face values” covering the assessed values of their shipments into the USA; surrendered ICs are then cancelled.

All expenses, (including the proposal's behavior as an export subsidy) are eventually passed onto U.S. purchasers of foreign goods.

This proposal is applicable to ALL goods but the goods’ assessed values are reduced by the values of any specified precious or scarce minerals integral to the goods being assessed. The list of specified minerals would certainly include precious metals, ores, gems and petroleum.

Respectfully, Supposn

 

[Dr.Who]

Dr. Who,
Transferable Import Certificates are only issued to exporters of U.S. goods who choose to pay the fees that defray all government expenses due to this trade proposal.

Importers of foreign goods cannot purchase entry for their goods with money; they must surrender transferable Import Certificates, (ICs) with “face values” covering the assessed values of their shipments into the USA; surrendered ICs are then cancelled.

All expenses, (including the proposal's behavior as an export subsidy) are eventually passed onto U.S. purchasers of foreign goods.

This proposal is applicable to ALL goods but the goods’ assessed values are reduced by the values of any specified precious or scarce minerals integral to the goods being assessed. The list of specified minerals would certainly include precious metals, ores, gems and petroleum.

Respectfully, Supposn

Um, Yea, I'm not gettin' it. I guess it is not that simple. Would it be like the tax code and be thousands of pages long after congress gets through with it?

But if all expenses are passed on to US purchasers doesnt that mean that the prices are higher anyway. Why do I want my prices to be higher because of taxes rather than because of trade deficits? Trade deficits shrink and go away, taxes don't.

 

[Supposn]

....... it is, (the trade proposal will be) applied by bureacrats unevenly and unfairly ........... How will that not result in some companies receiving special treatment and upsetting the balance of the market? How will that not really just give more power to beaurocrats and corporatists?

If it were to work imports from other countries would be slowed while exports from our country increases. .......... It is only good for companies that receive subsidies and the crats that hand them out.

Dr. Who, why do you contend that this proposal would be applied by bureaucrats unevenly and unfairly?

Why would you believe this proposal result in some companies receiving more special treatment and greater upsetting the balance of the market?

This proposal is market rather than government driven, granting government no policy discretion and thus cannot choose winners or losers.

This proposal would be of advantage to any U.S. enterprise that competes or aspires to compete with foreign goods within or beyond our borders. It’s not limited to producers of goods. If a U.S. producer of service products should compete with foreign goods, this proposal would be of advantage to them.

This may seem as a boon only for exporters of USA goods but it’s actually an indirect but effective export subsidy and the trade proposal’s entirely funded by U.S. purchasers of foreign goods. Due to other competing exporters of U.S. goods and foreign purchasers of U.S. goods negotiations, the prices of U.S. exports will be reduced but export volumes will be increased; everyone gains.

Respectfully, Supposn

 

[Supposn]

Um, Yea, I'm not gettin' it. I guess it is not that simple. Would it be like the tax code and be thousands of pages long after congress gets through with it?

But if all expenses are passed on to US purchasers doesnt that mean that the prices are higher anyway. Why do I want my prices to be higher because of taxes rather than because of trade deficits? Trade deficits shrink and go away, taxes don't.

Dr. Who, trade deficits don’t shrink and go away; their economic harm continues.

For over a half century the USA has been experiencing increasingly greater trade deficits of goods that have been increasingly greater detriments to our nation’s annual GDPs. The GDP bolsters the median wage. Our trade deficit replaces better paying production and production supporting jobs with lesser paying jobs.

Wage earning families benefit from cheaper imported goods but every day of every year they’re dependent upon their U.S. wages. Regardless of how small the additions to imports’ prices due to Import Certificates, (unlike tariffs) USA’s assessed imports could never exceed that of our exports. U.S. wage earners can have cheap (but not the absolute cheapest) imported goods. We cannot afford the absolute cheapest.

Refer to: www.USA-Trade-Deficit.Blogspot.com ,
http://en.wikipedia.org/wiki/Import_Certificates
or Google: Wikipedia, import certificates


Respectfully, Supposn

 

[Supposn]

.............How will that not result in other countries slapping the same restrictions back on us?

Dr. Who, we have some laws with the purpose retribution when a nation discriminates between USA’s and other imports entering their nation.
Due to regulations of trade pact’ we participate in and the World Court’s interpretations of those regulations, we cannot exercise our own laws. I’m a proponent of USA’s global trade but not of USA trade deficits. I’m a proponent of a unilateral trade policy.

Our membership in those pacts were not done by international treaties confirmed by 2/3 U.S. Senate votes. We have better options available to us.
(Refer to the messages entitled “USA’s Trade Agreements”
and “Trade deficit’s benefits to USA’s economy?”
within www.USA-Trade-Deficit.Blogspot.Com ).

I am not opposed to any nation’s trade policy that does not attempt to treat U.S. products no less favorably than any other foreign nation’s products attempting to enter their domestic market. If a nation enacts any act of global trade mischief against us and our government did ABSOLUTELY NOTHING in retaliation, under this proposal the offending nation would almost immediately be doing their own economy more harm that they could possibly inflict upon us.

Respectfully, Supposn

 

[Supposn]

How is this not an example of government exerting force to control economic behavior?

GenSeneca, how many laws are you aware of that do not exert government’s force to regulate or otherwise influence behavior?

Respectfully, Supposn

 

[Dr.Who]

Dr. Who, trade deficits don’t shrink and go away; their economic harm continues.

I read your links and now understand the certificates. I like that they are market driven. I still do not think they are needed to a fix a problem that is not a problem.

Trade deficits only exist, in our current example, because labor in other countries is cheaper than here. When labor in other countries is no longer cheaper then the trade deficit will go away.

If we use certificates to drive up the price of imports or to drive down the price of exports the trade deficit will not exist but prices will still be higher and there will still be pressure to reduce our wages. Wokers in other countries will still work for less and that will still cause some sort of effect on the world economy. What that effect is I don't know right now but we will have simply traded one equalizing factor for another. The only difference is the situtaion has become more complicated. Complicated always translates into inefficiency which makes markets perform worse.

 

[Supposn]

This proposal's market rather than government driven.

Dr. who, all expenses are eventually passed onto those who are the ultimate cause of our trade deficit, (i.e. the U.S. purchaser of foreign goods).

This is a market driven proposal.

If U.S. purchasers’ effective demand, (willingness to spend and ability to receive shipments of and pay the going price) for foreign goods is greater than foreign purchasers’ effective demand for U.S. goods, the global open market price for Import Certificates, (ICs) sold by exporters of U.S. goods will be greater and the prices of import5s sold to U.S. purchasers will be greater.

The U.S. goods exporters’ additional revenue from the ICs are indirect but effective subsidies for U.S. exports, inducing lesser prices for U.S. goods sold to foreign purchasers.

If there’s lesser U.S. purchaser’s effective demand for foreign goods or greater foreign purchasers’ effective demand for U.S. goods, the additional prices of foreign goods sold to U.S. purchasers and the indirect subsidy of U.S. exports sold to foreign purchasers are less.

This all occurs with absolutely no federal IC market regulations or actions; that’s how the supply and demand for ICs will affect everything else. The supply of ICs, (unlike other commodities) can be quickly increased when driven by increased IC prices and that market CANNOT be “cornered”.

Respectfully, Supposn

 

[Hobo1]

The monkey in the middle of all these kind of arrangements is the US government and the bureaucrats. As much as you argue this is totally free market driven, which it appears to be, the government is always going to come in and twist the rules for some special interest.

Maybe the country of Chad, Africa deserves a break to enhance trade and reduce poverty. Maybe our agricultural markets need a break to keep them in business. History has shown us that the best of ideas can turn out bad when things turn out bad when Washington, D.C. gets its hands on it. This is particularly true when an idea deals with economic issues.

I will bet you this bill never went anywhere because export industries couldn't twist it to their benefit - like 2 export certificates = 1 import certificate.

Right now you can look out on the import deficit and see gross inequities. The prime example is the fixed, low value for the Chinese yuan. Since Feb. 2009 the exchange rate for the yuan has very deliberately down precisely 5%. No ups and downs like other currencies, but in stair-step fashion - exactly to the level the Chinese government wants it to move.

Personally, I am very hesitant to put another new idea in place when so many blatant causes for the import deficit are staring at us right in the face - and nobody takes action.

In a nutshell, government run programs show very little positive results to correct any of our international trade problems, not to mention this would never fly with the WTO!

 

[Dr.Who]

Re: This proposal's market rather than government driven.

Dr. who, all expenses are eventually passed onto those who are the ultimate cause of our trade deficit, (i.e. the U.S. purchaser of foreign goods).

This is a market driven proposal.

If U.S. purchasers’ effective demand, (willingness to spend and ability to receive shipments of and pay the going price) for foreign goods is greater than foreign purchasers’ effective demand for U.S. goods, the global open market price for Import Certificates, (ICs) sold by exporters of U.S. goods will be greater and the prices of import5s sold to U.S. purchasers will be greater.

The U.S. goods exporters’ additional revenue from the ICs are indirect but effective subsidies for U.S. exports, inducing lesser prices for U.S. goods sold to foreign purchasers.

If there’s lesser U.S. purchaser’s effective demand for foreign goods or greater foreign purchasers’ effective demand for U.S. goods, the additional prices of foreign goods sold to U.S. purchasers and the indirect subsidy of U.S. exports sold to foreign purchasers are less.

This all occurs with absolutely no federal IC market regulations or actions; that’s how the supply and demand for ICs will affect everything else. The supply of ICs, (unlike other commodities) can be quickly increased when driven by increased IC prices and that market CANNOT be “cornered”.

Respectfully, Supposn

I like that they would be market driven in theory. As Hobo said, the reality might not be that way.


Regardless, why should we get rid of trade deficits? You have yet to show that they are a problem. And if we do fix them why should we do it in a way that rewards exporters? It is not supposed to be American way to favor one group of people over another.

 

[Dr.Who]

Dr. Who, this proposal offers no solution for our trade deficit of petroleum goods, so it simply bypasses dealing with that problem.

I haven’t lately looked at the trade figures regarding our trade baslance of service products. Due to improved speed, quality and prices of communicating data, increasingly more tasks do not require geographic proximity. We’ve already begun to lose service jobs and that trend will continue at an increasingly greater rate. I’ve encountered extremely little discussion and no reasonable proposal that could significantly halt or reduce our losses of service jobs due to foreign outsourcing.

Other than scarce minerals or minerals that could be used as a substitute for money, this proposal offers an excellent remedy for our trade deficit of goods. It is not global trade but rather global trade deficits that’s ALWAYS detrimental to the nation’s gross domestic product, (GDP).

Regardless of labor cost differences or manipulation of currency exchange rates or any global trade mischief that now or in the future will befall us, regardless of any perpetrators of global trade mischief (within or beyond our borders), this trade proposal would significantly reduce our trade deficit while improving our GDP more than otherwise.

Our current trade policy has for more than a half century been detrimental to our GDP and our median wage.

Respectfully, Supposn

I appreciate you genuine concern and enthusiasm for certificates.

Yes we have had a trade deficit for over 50 years and we are not able to produce as many products as we otherwise would and we do not enjoy wages as high as we otherwise would if it were not for the underlying factor that is causing the deficits. Simply, labor in other countries is cheap and as long as it is there will be an economic imbalance. Right now that imbalance is a trade deficit. If we artificially arrest the deficit some other imbalance will crop up. Not to mention retaliations for subsidies and black markets.

It is not the trade deficit that is the problem. The deficit is the symptom of the underlying cause. Unless labor in other countries becomes more expensive there will continue to be an imbalance of some sort. Fortunately labor costs in other countries is rising rapidly. In the meantime we should take advantage of that cheap labor as much as we can by buying cheap products and hiring them to work for us. We must also do whatever we can to battle slave labor and sweatshops and unfair working conditions in other countries.

There are many solutions for when the competition makes a cheaper product but trying to coerce buyers to choose your product is not the answer. I suggest we make products that are too hard to ship from there to here. Or that we make superior products. Whatever we do we need to find our niche in the market. Of course we could just lower our wages which is exactly what is happening indirectly as the value of our dollar does down.

 

[Supposn]

I read your links and now understand the certificates. I like that they are market driven. I still do not think they are needed to a fix a problem that is not a problem.

Trade deficits only exist, in our current example, because labor in other countries is cheaper than here. When labor in other countries is no longer cheaper then the trade deficit will go away.

If we use certificates to drive up the price of imports or to drive down the price of exports the trade deficit will not exist but prices will still be higher and there will still be pressure to reduce our wages. Wokers in other countries will still work for less and that will still cause some sort of effect on the world economy. What that effect is I don't know right now but we will have simply traded one equalizing factor for another. The only difference is the situtaion has become more complicated. Complicated always translates into inefficiency which makes markets perform worse.

Dr. Who, this proposal offers no solution for our trade deficit of petroleum goods, so it simply bypasses dealing with that problem.

I haven’t lately looked at the trade figures regarding our trade baslance of service products. Due to improved speed, quality and prices of communicating data, increasingly more tasks do not require geographic proximity. We’ve already begun to lose service jobs and that trend will continue at an increasingly greater rate. I’ve encountered extremely little discussion and no reasonable proposal that could significantly halt or reduce our losses of service jobs due to foreign outsourcing.

the proposal doesn't apply to scarce minerals or to minerals that could be used as a substitute for money. This proposal offers an excellent remedy for our trade deficit of goods. It is not global trade but rather global trade deficits that’s ALWAYS detrimental to the nation’s gross domestic product, (GDP).

Regardless of labor cost differences or manipulation of currency exchange rates or any global trade mischief that now or in the future will befall us, regardless of any perpetrators of global trade mischief (within or beyond our borders), this trade proposal would significantly reduce our trade deficit while improving our GDP more than otherwise.

Our current trade policy has for more than a half century been detrimental to our GDP and our median wage.

Respectfully, Supposn