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USA goods could be more price competitive.
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I’m a proponent of a unilateral substantially market driven global trade policy as described within the Wikipedia article “Import Certificates”.
If it were adopted by the USA it would almost, (if not entirely) eliminate USA’s chronic trade deficits of goods; it’s would likely increase and never be a cause of decreasing USA’s gross domestic production’s reduction, (GDP).
Referring to Wikipedia's "Import Certificates" article:
The certificates’ global open market prices per U.S. dollar of face values determine the extent of the policies almost direct effect upon prices of foreign goods sold to USA purchasers and the indirect subsidy effect upon prices of USA products sold to foreign purchasers.
USA exporters that request their goods to be assessed must also agree to pay the federal fees that are intended to defray entire federal direct expenses due to the USA unilateral substantially market driven Import Certificate policy. Exporters of USA goods would be motivated to profit from acquiring the valuable transferable certificates that are issued by the U.S. Treasury Department.
The U.S. Congressional Budget Office would annually monitor and advise congress as to the fee rate per assessed dollar value that would be appropriate to defray all direct federal expenditures due to the Import Certificate policy.
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Certificates expected price behavior in global competitive markets:
The federal fees are passed onto USA purchasers of foreign goods and that’s the reasonably expected minimum rate of the certificates’ global prices.
If USA consumers balk at paying any more for foreign goods, that would limit the maximum rate of certificates’ global prices.
If the certificates’ global price rates should be insufficient, exporters of USA goods would not trouble to deal with them and fewer certificates will be issued.
If issued certificates do not satisfy USA consumers effective demands for foreign goods, the shortfall would increase the global certificate markets' rates prices. But additionally the law could be drafted as to provide for congressional executive agreements to interrupt the enactment of this trade policy because there are no longer any reasonable expectations for chronic annual USA trade deficits. The Import Certificate laws and regulations can still remain “on the books”.
Refer to Wikipedia’s article entitled “Import Certificates”
Respectfully, Supposn
Or, America can be a big welfare/hand out state and buy things from third world slaves. Kinda like what we are doing now. Nobody really seems to mind, since they are voting for it with their consumer dollars.
At the end of the day, it is clear that US GDP would be lower than it otherwise would be -- our total wealth would be smaller. In this regard, it has the same negative effect as a broad based tax increase.
One question is where the incidence of this phantom tax ultimately lies. Would working class people end up better off or worse off as a result? Clearly they would face higher prices, but would they also see larger employment opportunities because of the increased incentive to manufacture on-shore? Or would on-shore manufacturing mostly be automated with few jobs for the working class & middle class?
I think the jury is out on that. After all, Warren Buffett talked about this 15 years ago, and since then the world has changed a fair bit.
So a poor people tax on all those Walmart shoppers. Fine by me but it would be pretty lousy if I were a poor person.
GeoffD, we all benefit from cheaper imports but they do not fully compensate for annual trade deficits’ detriments to their nations’ economies.
The economic costs of USA seeking pure free trade are primarily paid by USA employees and all persons and enterprises to the extent that they’re directly or indirectly dependent upon USA employees financial conditions.
At the end of the day, it is clear that US GDP would be lower than it otherwise would be -- our total wealth would be smaller. In this regard, it has the same negative effect as a broad based tax increase.
One question is where the incidence of this phantom tax ultimately lies. ...
SportyandMisty, we all benefit from cheaper imports but they do not fully compensate for annual trade deficits’ detriments to their nations’ economies.
The economic costs of USA seeking pure free trade are primarily paid by USA employees and all persons and enterprises to the extent that they’re directly or indirectly dependent upon USA employees financial conditions.
The Import certificate policy is primarily more market rather than government driven. The global free market price of the transferable certificates that are issued to exporters of USA goods are increased by USA purchasers’ willingness to pay somewhat more for foreign goods or they’re reduced if those purchasers balk at paying additionally more. The IC’s global market price also serves as an indirect but effective subsidy of USA’s exported goods.
I suppose it’s conceivable that USA purchasers refraining from purchasing increased prices for imported goods could also choose not to instead purchase more USA goods and service products. That’s not the expected behavior of USA purchasers but if that should be the case, then the wealth would be deposited in financial funds or invested in commercial enterprises which all would to some extent eventually increasing USA’s production.
Regardless of the consequences due to USA’s enactment of an IC trade policy, (e.g. USA increased savings and/or investments and/or purchases of USA produced products and/or increase exports of USA goods), USA’s GDP, numbers of jobs and their purchasing powers will benefit.
An interesting idea. ...
... Would working class people end up better off or worse off as a result? Clearly they would face higher prices, but would they also see larger employment opportunities because of the increased incentive to manufacture on-shore? Or would on-shore manufacturing mostly be automated with few jobs for the working class & middle class?
I think the jury is out on that. After all, Warren Buffett talked about this 15 years ago, and since then the world has changed a fair bit.
SportyandMisty, regarding the fear of automation, increased production and/or lesser per unit costs have generally increased USA’s aggregate numbers of jobs. Manufacturing industries’ “foot prints” may be larger but they’re not generally smaller than those of any other industry families. The costs due to delays or interruptions of automated production are comparatively high and thus any production supporting labor must be diligent and dependable that increases pay rates. It was not altruism but this consideration that Impelled Henry Ford to originally enact his $5 per workday policy.
Completely automated production facility requires engineering, maintenance, updating and services from production supporting enterprises. They do not perpetually keep producing products without additional production support.
Nothing within the past 15 years have reduced USA’s need for the Import Certificate trade policy.
The unemployment rate in the U.S. is at the moment relatively low. The labor participation rate in the U.S. is somewhat lower compared to the more affluent countries in Europe. But Americans work significant more hours compared to their peers in those European countries. The ratio total worked hours to the population is significant higher in the U.S. than in all other developed countries (except probably Switzerland). There should be normally no need to work even more. But why is the hardest working developed nation not able to achieve trade surplusses?
Restrict imports and work even more hours to compensate the missing imported goods? Should the U.S. restart the production of trousers, shoes, smart phones and toys? How many more million of workers would be needed to replace the imports? Maybe the U.S. should invite more immigrants from Mexico to reduce the labor shortage?
Restricting the imports are basically a bad idea (with the exception of short-dated restrictions to moderate adjustment processes). Instead of restricting imports, the U.S. should increase their exports. Many other rich countries have higher labor costs in manufacturing, and much higher energy costs. But those countries are mostly able to achieve export surplusses, some countries have even very high trade surplusses. Do those countries produce consumer goods like clothing, shoes, smart phones or toys? No. They don't import less, they just export more (as a percentage of GDP). Despite the higher production costs they are more price competitive (adjusted for quality or the desirability of the products). One reason is of course the actual current exchange rate. An other also very important reason, most industries in the U.S. are far less automated than in other rich countries. Much more operating processes are still done manually in the U.S. than in other rich countries. Do have countries with a higher rate of automation a higher unemployment rate or fewer employees in manufacturing? No, quite the opposite. Countries like Switzerland, South Korea or Germany have more employees in manufacturing. Not despite the higher rate of automation, but because of the higher rate of automation.
Domestic made products in the U.S. are astonishing expensive, despite the fact that the labor costs are moderate and engery costs are much lower. Why are domestic made products in the U.S. so expensive? Because so many processes are done manually and that's very inefficient. Many Americans think that the American worker is the most productive worker in the world. But that's just seemingly correct if one looks at the added value expressed in USD and compared to other countries by using the current exchange rate. But that's not adjusted for the price level for domestic made products. An average employee at Walmart has to work almost twice as long as an average employee at grocery retailers in countries with the most efficient food distribution. The income of low income earners in relation to the prices of domestic made products is extremely bad in the U.S.
There are so many examples for processes that are done extremely inefficienty in the U.S. Just look at distribution centers from grocery retailers. In the U.S. Order picking and palletizing is mostly done manually, whereas it's in other developed countries mostly automated.
The grocery chain Jewel Osco has 185 stores. The stores are supplied by a distribution center with 1,145 employees. In a more automated distribution center you would need just about one third of the workforce. And the work would be far less exhausting. Far less forklift drivers are needed and occupational accidents are less likely.
Sad to see that the guys at Jewel Osco are enthusiastic about their inefficient distribution center.
For a developed country the U.S. has a huge amount of workers that are doing very unproductive works. And that makes it very difficult for those people to achieve a decent lifestyle.
A big problem in the U.S. is that large corporations use a huge amount of their profits for share buybacks or acquisitions. They should invest more of their profits into the real economy. Into more advanced production technology and better training of the workforce. That would lead to a more efficient production. And then more goods and services could be produced with the same amount of work. And then more goods could be exported without reducing the domestic consumption. That's far better than restricting imports and replacing them by domestic production. Because that would mean more work for the same amount of domestic consumption. Doing processes as efficiently as possible is the best way to increase the standard of living.
Don't get me wrong. The U.S. has many state-of-the-art production facilities, many companies are world leading exporters. But there is also a huge amount of midsize manufacturers that are completely unable to export to other countries (with the exception of maybe Canada and Mexico). Because they produce way to labor-intensive or their products are lacking in quality and or design.
The U.S. government should hamper these share buybacks and give incentives for investments into the real economy. Also very important, the health care sector has to become much more cost-efficient. The U.S. uses more than 17% of its GDP for health care compared to about 11% in other developed countries. If such a huge amount of the GDP is needed for health care, it's almost clear that it's difficult to achieve a positive current account balance.
Even with the Prison Industrial Complex AND the Hispanics working their collective assets off on behalf of the U.S. GDP you guys can't turn a profit. Is the problem productivity or is it the GREED of the people who administer the gross receipts??? BMW uses 11% of gross receipts to pay the entire workforce. GM uses 50% of gross receipts to pay just the Executive Branch!! Similar hierarchical inefficiencies abound in all sectors of labor and government. Even having Slavery again couldn't make America price competitive given the modern penchant for siphoning off revenue to pad numbered offshore bank accounts.
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