The following is a submission by W. Raymond Mills
We have reached a significant milestone. How far have we come and what obstacles are on the road ahead?
Milestone – We now have a significant number of Blogs on the internet that are populated by writers and commentators who agree that Free Trade was a mistake because it resulted in reducing the size of the U.S. economy and that the intellectual rationale for free trade is unpersuasive. There is also a consensus that Balanced Trade should replace Free Trade as the goal of U.S. trade policy. A logical consequence of these two conclusions is that the U.S. should withdraw from the World Trade Organization as it is now constituted. We need a new World Trade Organization aimed at increasing Balanced Trade among the nations of the world.
Appraisal – Development of consensus among so many independent commentators is important. The persuasiveness of ideas is the only weapon we possess. The more people agree on a proposal the more important it becomes. But we do not want agreement to support bad ideas that turn out to be blind alleys.
On Blogs, the quality of a proposal or an idea is determinative of how many people join in support. Quality can only be determined by argument. If enough people join in a critique of an idea or a proposal, an improved result can be anticipated. Consensus should be achieved not by shouting but by quiet deliberation.
The band of true believers is small. The potential of conversion to true believers is large. Over 80% of people in this country think we are “on the wrong track”. But so many things need improvement. And trade is not the first issue that comes to mind for most people. The impact of trade on the lives of ordinary citizens is not obvious. One must trace the consequences of purchases made in the U.S. to the decisions of business men to locate production of goods overseas to see how what we do every day reduces U.S. output of goods. And it is the total of all those purchases that is relevant, not just what one of us buys. In addition, the action of the government must be brought into focus. What is allowed to be imported and sold in the U.S. is controlled by the Federal government. Consumers make choices among what options are available to them. If we as a people insist that we want all the options for purchase of goods available to us without governmental restrictions on imports, then our economy will continue to struggle. The decision to maximize consumer choice at the expense of domestic production is not necessary. Balanced trade will provide plenty of options for consumers. Also, providing support for domestic production is a responsibility of the federal government. We should not expect consumers to by-pass or ignore what is available to be purchased because it is produced in a foreign country. The share of imports to domestic production should be decided by the national government as a part of U.S. foreign policy.
Most people find this discussion too abstract to follow and capture their attention. But the conditions under which local producers are able to sell to local consumers are critical for the size of our domestic economy. Local producers are competing against foreign producers that are subsidized by their government. Instead of subsidizing our domestic producers we should make it difficult for imports to come into this country that are manufactured in nations that have maintained a large trade surplus with the U.S. This action would be effective. And it avoids the difficult (probably impossible task) of attempting to determine exactly how much subsidy is provided by each government for each product. It is also better for the federal budget. Instead of large expenditures for subsidies, we are provided with revenue from tariffs on imports. It encourages competition among domestic producers, a result that is very important to many people. And it is an action we can recommend that all our trading partners adopt.
1. We must persuade more of the general public that free trade is making production difficult for domestic producers and that we can reduce imports enough to move toward balanced trade without destroying consumer’s ability to choose among many options.
2. We must persuade economists that the intellectual case for free trade has many faults and that the large trade deficit experienced by the U.S. for each of the last 36 years is proof that free trade does not benefit all participant nations.
3. We must persuade politicians that the growth of the U.S. economy in the last 36 years has been restrained by our continuous trade deficit and that import restraints applied to imports from only 3 nations (China, Japan and Germany) will be effective and will not result in a trade war.
Divide the tasks –
1. Persuading more people that free trade is a bad idea is perhaps the first task. The founder of the Blog Economy in Crisis has been sounding the alarm for years that Free Trade is harmful to the U.S. economy. He has been having some impact but he wants more. He is exploring other options, including other media, to try to reach more people. Some of the true believers will concentrate on this task.
2. Economists are a hard nut to crack. They are all wrapped up in the assumptions shared among economists. One of the most dangerous assumptions (from my perspective) is that precision in communication is of first importance and that mathematical models are the means to precise communication. Combine that view with the quite reasonable assumption that one must simplify to get to the essence of a causal relationship and we get models of trade that assume no unemployment and balanced trade. That mistake was made by none other than Paul Samuelson, the father of modern model building (Journal of Economic Perspectives, summer of 2004). This kind of behavior is one reason Economists continue to support free trade. They create models that ignore facts inconsistent with their prior beliefs. Not all true believers will wish to tackle economists – but some will.
3. Politians are risk-adverse. They think voters tend to vote against rather than far someone. They fear getting out on a limb that will give a competitor a good shot at them.
Some of the true believers will attempt to placate the fears of our elected officials. Thus, we can have balanced trade without significantly reducing consumer options. We can move gradually toward balanced trade without creating a trade war if we are careful to avoid the kind of triggers that created past trade wars. Domestic businessmen will be the major benefactors of balanced trade. Workers will be the major benefactors of balanced trade can also be whispered in the ear of politicians supported by unions.
Conflict among True Believers – Conflict among true believers is valuable if it increases the chances of winning more adherents to our side. We must have the best proposals possible. We cannot assume that any proposal or idea is good just because many people accept it. What the Unions have believed over the years should be up for discussion as much as any new idea. For example, I believe “fair trade” is a bad slogan because it is vague and incomplete. What is fair trade? And how do we work towards achieving it? I also believe depending upon improving trade agreements is a mistake. It puts us in the position of trying to figure out how to enforce an agreement on a sovereign nation – an impossible task. Also, attempting to negotiate an improvement in trade relations with a nation that has worked for years to create a trade surplus with the U.S. is a blind alley. Warren Buffett’s proposal for Import Certificates creates unnecessary problems. A tariff targeted at the 3 nations most responsible for our trade deficit in goods is a better idea.
Just because I advance an idea does not mean it is the best option available. Arguments are the fire that purifies our ideas.