Information about Taxes, Government Spending and the Economy - Solving Trade Deficit 

A Southern Party of Georgia Position on solving our country’s Trade Deficit

In a series of articles over the last year we have demonstrated to the best of our ability the magnitude of this problem. In many ways this is the ultimate test of the economic policies being implemented by our elected and appointed officials. It demonstrates very clearly how our country fares in international trade.

The numbers are conclusive. Our country is failing and has a steadily deteriorating international trade position.

In this article we are submitting what we consider to be viable proposals that would turn the steady deterioration around into a position that is steadily improving. It is not an over night fix, there is not an over night fix to this problem. But every year that our country continues the failed policies will only increase the recovery period.

We propose implementing two simple policy changes. BOTH promote free trade – in the absence of foreign country and/or corporate generated unfair trade practices. NEITHER place unconstitutional restrictions on those engaged in international trade.

1. Our current policies called "Free Trade" have proven to be anything but Free. Foreign countries and many American corporations are abusing the policy to the detriment of Americans. We propose "FAIR" Trade.

The stated goal of the free traders has been that a level trading field would spur economic activity, thus allowing American talents to excel and improve. In reality this has NOT created a level playing field. Instead it has created an environment where American production of goods and services by Americans is at a disadvantage.

Many American corporations have discarded concern for Americans in search of lower labor costs, lower standards, lower environmental concerns and lowered health risks. Foreign governments and corporate management can easily manipulate the system by creating trade advantages to their benefit and do so regularly.

What we propose is to take the free traders at their word –  the goal is to establish a level trading field. This means that trade with a foreign nation is roughly balanced as far as exports and imports are concerned. We believe a viable solution is very simple and is comprised of three simple points implemented on an annual basis:

1. Establish a fair trade threshold. We suggest 100 Million Dollars. If imports vs. exports are within this threshold, the current trade policy with that country is considered to be fair and equitable and the current status would be maintained.
2. If the imports exceed exports to a foreign country by more than the threshold then it is a sign that there is a trade policy imbalance. The import tariff base on all products and services will be raised by 2%. It does not matter what is causing the imbalance, if it is a major imbalance within a few years the imbalance will be removed by the increased tariff base. Note this tariff applies to all products and services from the foreign nation so there will be internal pressure to implement fair trade policies and discontinue specific product or service subsidies.
3. If exports exceed imports to a foreign country exceed the threshold then it is a sign we have a trade imbalance in our favor. The tariff base for that country will be reduced by 1%, unless it is already at 0%. This will be an incentive for fair trade.

These three simple steps if applied on an annual basis would have the effect of improving our international trade position at a steady rate - without entering a period of isolationism or other disruptive actions. Foreign countries and American corporations would be faced with a direct incentive to work toward equitable policies rather than face steadily increasing tariffs and loss of their investment. Effects of lower standards, lower salaries, and other foreign unfair economic advantages would steadily disappear.

2. Many American corporations unfair trade advantages to the detriment of American citizens:

To provide our multinational corporations an economic incentive to remember their roots from which they sprung, we propose this same technique be allied in the form of a surtax on foreign investment and foreign profits computed on an annual basis.

1. Establish a fair trade threshold. We suggest 100 Million Dollars. If imports vs. exports are within this threshold, the current trade policy with that country is considered to be fair and equitable and would be maintained.
2. If the imports exceed exports to a foreign country by more than the threshold then it is a sign that there is a trade policy imbalance and the tax surcharge for that foreign nation will be increased by 5%. American corporations that want to invest or are participating in the trade imbalance should be responsible for the effect on our economy. If they insist on exercising their right to participate - let them provide revenue in the form of the surtax to pay for a portion of the damage to American society.
3. If exports exceed imports to a foreign country by more than the threshold then it is a sign we have a trade imbalance in our favor. The corporate surtax for that country will be reduced by 2 1/2%, unless it is already at 0%.

American corporations that have no regard for America or its citizens will face loss of their foreign investment within 20 years; ie. surcharge reaches 100%. In a much shorter timeframe investments in foreign countries which practice unfair trade will have a declining profit status. Thus American corporations driven by greed and dependence on unfair trade will have to change their ways.

Long Term Effect

The long term effect of these two simple policies will be three fold:

1. Over the course of a few years trade imbalances will begin to disappear. Foreign countries that insist on policies that would result in unfair trade advantages will be restrained by the increased tariffs and will become less of a factor each year. Today these countries are given a free ride at the expense of American workers and our future generations and use the ill gained funds to increase their unfair trade advantages.
2. Corporate greed will be diminished. The potential for both increased tariffs and surcharges will increase the risk of investing in foreign nations which practice unfair trade and will minimize the risk of investing here in our own country. Today these corporations are given a free ride at the expense of American workers and our future generations.
3. Those foreign nations and American corporation that insist on exercising their rights to participate in unfair trade advantages will provide some direct revenue which can be used to offset the cost of their unfair trade practices on the American economy and our citizens - and become less competitive at the same time.

Where these policies conflict with any existing treaty, such as NAFTA, the treaty should be repealed.

We welcome your comments at fair_trade@spofga.org.

Some Reference Articles:

• Failed Bush Economic Polices - Trade Deficit grows, grows, grows ...
• Bush Economic Policies have failed - more proof coming on Friday, March 11
• Bush Trade Policy - a look behind the scenes of a failed economic policy - its ugly!
• Trade Deficit exceeds 600 Billion dollars for 2004 ... growing faster than a fire ant nest!
• US Trade Deficit - Bragging about failure

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