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Take the politics out of trade

January 20, 2007|by ROBERT GARY

Trade has gotten away from us, and the reason is we have gotten away from trade. Strictly speaking, to trade is to exchange goods/services for other goods/services of equal value.

Any transaction that is unbalanced can be partially trade, but must be partially the unilateral access of one party to the markets of the other. So if you sell me $1,000 worth of computers, and I sell you $1,000 worth of soybeans - that's trade. But if you sell me $1,000 worth of computers, and I only sell you $500 worth of soybeans - that's half trade and half my gift to you of $500 worth of access to my home market.

Trade policy is filled with discretionary decisions that are made very quietly by politicians. These are complex and out of the public view. Accordingly, these decisions become bargaining chips that politicians can sell in exchange for campaign contributions.

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Besides being rife with corruption, trade is frequently used as a diplomatic tool to get other nations to do what we want them to do. The problem there is that the other nations do not respect us more for doing this; they respect us less.

Globalism amounts to corruptly selling one-way, unbalanced access to U.S. markets for the benefit of politicians and diplomats.

Protectionism is using tariffs, embargoes and duties to interfere with the free flow of goods/services across borders. Since these things also fall under the control of politicians, they can make illicit money with protectionism just as with globalism.

Both globalism and protectionism are bad - for the same reason. They create politicians and diplomats as the arbiters of how trade will be conducted. Thus they create a huge opportunity for corruption. Such opportunities never go unrecognized in Washington, D.C.

What's good is true trade - a two-way balanced transaction of buying and selling that produces no deficit on either side. True trade does much good and no harm. It would be possible for the U.S. to adopt a policy of true trade. It would require an annual trading plan from each foreign country that trades with us.

The plan would only be accepted if it was balanced, producing no trade deficit on either side. All trade during the year with that country would be done pursuant to the trading plan.

There is no limit to the size and scope of a trading plan. It does not hamper free trade in any way, but every container, every shipload of oil, every car, every outsourced service would fall within one or another broad category in the trading plan and would be checked off as it was received.

Similarly, all exports from the U.S. would also fall within the broad categories specified in the trading plan. As they went overseas and as we got paid for them, they would be checked off. At the end of the year the plan would be fulfilled on both sides, and they would emerge with no trade deficit with each other. If as many jobs are created here as we export, we come out even on that score, and the trade itself has a large positive effect in terms of our national economic efficiency. If we did true trade and only true trade with every nation with which we trade, every Dec. 31 we would wind up with no trade deficit at all.

How would this make things better for Americans? Well, we would not hear that great sucking sound of our jobs going overseas, which H. Ross Perot warned about in 1994, and which we have been hearing ever since.

Our paper money would be stronger and hold its value over time much better. There would be a lot more farming, mining, timberland management, fishing and industrial production in U.S. One wouldn't have to be a UNIX programmer to get a job. There would be a wide range of jobs for a wide range of people. It might help us grow our middle class again. The U.S. seems to do well with a large middle class and smaller numbers of people on the extreme ends of the economic spectrum.

Japan, China, Italy, France and a lot of other nations have already adopted policies designed to nudge their economic distribution curve along such lines. The nations that have lost it, such as Russia in 1917, Germany in 1933 or Argentina in 1974 are those whose policies caused a bipolar society with virtually no middle class. That's where we are headed now, largely because of misguided and foolish trade policy, which can be cheaply and easily corrected by simply adopting and enforcing a policy of true trade.

True trade is a simple concept, not expensive to implement, that can really enhance the prospects of our citizens for better lives, without limiting the extent and scope of free trade in any way. It is simply a call for balance. It is a formal mechanism to ensure such balance on a yearly basis. It puts the traders in the driver's seat instead of the diplomats and politicians.

Robert Gary is a Hagerstown resident who writes for The Herald-Mail.

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