For the decade just ended on 12/31/2009, the U.S total trade deficit with all nations totaled $5.8 trillion, by far the largest such deficit in our history. The U.S. is the only large industrial nation that runs trade deficits. Until the mid-1970’s we had a policy of maintaining balance of paymentssurpluses with the rest of the world. But with globalization growing, our multi-national companies urged adoption of more open U.S. trade policies to gain easier access to other countries’ markets. Such policies were adopted and have continued to the present with ever-increasing cost to the nation and damage to domestic industries and jobs.
Trade deficits aren’t added to the national debt. Instead they must be paid currently. Even though these deficits are created by the activities of U.S. corporations, they become obligations of the Government and are typically paid with interest-bearing U.S. Treasury Bonds. The bonds can be held as dollar investments by foreign entities or used as immediate funds for the purchase of U.S. companies or other strategic assets.
Where’s the rip-off? Answer, corporations benefited greatly by being able to maximize profits without concern for the trade deficits they’re causing that must be covered by the U.S. Government. During the last decade, our multi-national companies transferred much sourcing, production, and jobs overseas to low-wage countries like China. The Corporations increased their profits greatly, while U.S. workers lost millions of jobs and the U.S. Government and taxpayers got stuck with $5.8 trillion in new debt.
What’s the answer? A return to a surplus of balance of payments with the rest of the world is the best and only sure answer, and there would be many side benefits. Strong legislation was drafted several years ago – “The Balanced Trade Restoration Act of 2006,” by Senators Dorgan and Feingold. It got nowhere under President Bush and has not been taken up by President Obama due to opposition by some “free trade” economic advisors.
How would it work? The new law would require that our annual imports not exceed our own exports. Using current figures, our exports total about $1.6 trillion and imports about $2.4 trillion. Under balanced trade, the difference of $800 billion would be business shifted back to U.S. industry and its workers. An estimated 5 million new jobs would be created over a 2 or 3 year transition period, and the ruinous trade deficits would be eliminated.
Let’s act now to correct a badly failed national policy. It’s fully in accord with all GATT/WTO Rules and doesn’t require any deficit spending.
Kenneth N. Davis Jr.
President, Economic Strategy Associates, Inc.
Stamford, Conn.
Kenneth Davis
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Posted July 25, 2010 at 3:00 pm, in Free Speech Zone
