Managing Foreign Trade

Mills, W. Raymond (2010): Managing Foreign Trade.

Abstract

The U.S. economy is suffering because of misguided theorists/economists who continue to insist that the federal government should not intrude in international trade in a way that reduces imports into the U.S. This essay answers that perspective. A new way of looking at trade - in terms of the effect of trade on Gross Domestic Product - is developed that shows clearly the harm done to the U.S. economy by the trade deficit. The proposed intervention takes the form of a gradual increase in tariff rates for ALL imports manufactured in the 5 nations that are the main reason for the large trade deficit experienced by the U.S. By proposing a uniform tariff rates on all imports from selected nations, it avoids the problems created by traditional protectionism. No products, no industry receives favored treatment. This solution shows that an alternative to Free Trade can be developed other than traditional protectionism.

One merit of this proposal is that it bypasses negotiations with other nations. It is unilateral action by the U.S. to change foreign trade so that trade supports the U.S. manufacturing sector. Seeking to approach equal trade with all trading partners is a stance recommended for all trade deficit nations. This action, if duplicated, will move the world trading system toward the balance often advocated as a way to insure continuation of the international trading system.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade Deficit, Tariffs by country, Gross Domestic Product
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

References

Krugman and Obstfeld, International Economics, Harper Collins, 3rd edition, 1994.