Wednesday, February 1, 2017

Free Trade vs Duties

The United States has long been in favor of Free Trade because, as a leader of the industrial revolution, we were a major exporter with a favorable trade balance. Having free trade and open markets we could export into was to our advantage.  But times have changed.

Starting in the 1990's the US began to see a trade deficit. Today we have a huge Trade Deficit where we buy over 1 Billion dollars PER DAY more than we sell.  That is one billion dollars poorer that our country becomes each day and one billion dollars per day richer that foreign business men become who then buy our US businesses.  Currently they own about half of them.

Free Trade is no longer an advantage for the US as we are now the worlds largest importer and largest consumer market. The only advantage that Free Trade offers now is to the Elected Officials who get the campaign contributions from the companies that benefit from all the jobs they have moved out of the US.

Key points to consider:
  1. Both Corporate Taxes and Import Duties increase costs that are paid for by the consumer. 
  2. Corporate Taxes on US companies causes them to be less competitive against foreign imports.
  3. Import Duties make foreign imported products less competitive.
  4. Which ever is the most competitive sees job growth, the other sees job losses. 
So the question is who do we want paying our taxes and being less competitive:  US Companies or Foreign Corporations?

But lets talk about the numbers to put things in perspective.  According to the World Trade Organization, the average duty charged by the US is 3.5%. (trade weighted average is 1.25%).  The average duty charged by the rest of the world is 9.2%

Using the 3.5% and 9.2% rates and the US 2016 trade, US Citizens paid approximately 101 Billion dollars more in tariffs than we collected. Unfortunately, no one seems to report this information. This may be the Free Trade that our special interest funded politicians talk about but it is NOT Fair Trade. 

Oh, but what about trade wars???? As the biggest market in the world, the other countries need the US far worse than we need them.  But the problem is, they do not play fair. For example, when George Bush applied fair tariffs, other countries retaliated with tariffs on US Cars and Oranges.  Why these?  Because they are produced by "Swing States" Michigan and Florida in the US Presidential Election.  Americans need a tough person negotiating with these countries, not our bought and paid for political candidates in our House and Senate. 

The solution is:
  1. For every import in to the US; charge the highest tariff that the importing country charges the US on any product we export to their country.  If they want "Free Trade", then they must move to "Fair Trade."  How can anyone whine about this? This fixes the fair trade issue and saves 101 Billion dollars for American Citizens, although it may cost a lot of our politicians some campaign contributions. 
  2. Then we cap monthly imports from every country at the same dollar value they buy from the US and phase it in over 6 years to minimize repercussions and give the US manufacturers time to gear up production and hire employees to meet what will soon be a growing demand.  
  3. Any country or company that bucks the system is banned from importing in to the US for 1 year for the first offense; 5 years for the second and permanently for the third.  This includes trying to lobby or bribe our politicians with campaign donations. 
Problem solved.

Will there be some hiccups, yes, but often we must take one step back to take two steps forward.

  1. Free Trade is NOT good for American Citizens. 
  2. Free Trade IS good for companies that exported our jobs overseas and wants to bring the cheap Wal Mart Quality junk back in to the US to sell it.  Further, they will spend millions to brain wash the American public and buy off our politicians.
For additional information see the following:

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