Maybe, We Can Use The Constitution To Balance "Fair Trade"!

Judy Keen, of USA Today wrote an article titled Bush Pushes China On Trade Surplus. In this article, Ms. Keen wrote:

President Hu Jintao promised President Bush Sunday that China will reduce its $200 billion trade surplus with the United States and tighten protections on intellectual property rights.

I cannot say whether or not President Hu Jintao is sincere in his statements or not. It is not for me to say.

Why would President Hu Jintao want to reduce the $200 billion trade surplus? As it stands, China is winning.

"The two sides also expressed their willingness to join hands together to gradually achieve a balance of trade," Hu said. "The frictions and problems that may arise in this rapid development of the two-way trade may be properly addressed through consultations."

While the two sides are working "together to gradually achieve a balance of trade," American men and women are losing jobs to outsourcing.

Many of the manufacturing jobs that once produced things people buy in America have gone to countries like China. Our elected officials, those who are supposed to be representing our best interests, have made it more beneficial for companies to do their business elsewhere.

Businesspeople are in business for one reason: to make profits. Some can call that greed. Some can call that whatever they wish, but it changes nothing.

In order for these businesspeople to make profits, they have to produce something and they obviously cannot do it all by themselves. That is why they hire people to do the work for them.

These people get paid a certain amount for their work, either in salaray, hourly wage, comission, or any combination thereof. That is basically how the whole system works.

Why, then, would any businessperson not jump on the chance to still be an American company, but be able to use much cheaper labor in countries like Mexico, China, and India? They will be able to sell the same product for roughly the same price, or maybe a bit lower, and keep their overhead much lower! Thus, their profits can be more without having to raise their prices any and losing out on volume sales. For them it is a win-win situation and no one can blame them, not even John Heinz-Kerry.

Many people try to say that the American job market has gone away from manufacturing and into the service industry, but no one can seem to tell me exactly what that "service industry" is. Even if what people say is true, Christian Weller puts it best when he states in this article

On the other hand, why should people even care about manufacturing’s decline? Is the destruction of old industries and the creation of new and better industries not part of capitalism’s progress? At the same time, manufacturing’s decline means that a sector that is crucial for productivity growth, employment creation, good quality jobs, and for economic stability is disappearing in many communities. This decline is so far not compensated for by increases in other sectors that could be equally important for the U.S economy. It is important to remember that currently, manufacturing is more productive, has larger employment spill-over effects, pays higher wages, and provides more benefits than other sectors of the economy. Moreover, if the U.S. economy wants to shrink its large trade deficit by increasing exports, it needs to rely heavily on the manufacturing sector since about 70 percent of trade is in manufactured goods. Manufacturing is important for the U.S. economy and there is no real alternative for it. Hence, the prolonged decline in this sector needs to be taken seriously.

Even if we were moving towards a more service-industry base, people tend to buy a lot more goods than services. Goods last a lot longer than most services.

Adam Smith writes in The Wealth of Nations:

When the necessaries of life have been taxed in any country, it becomes proper to tax not only the necessaries of life imported from other countries, but all sorts of foreign goods which can come into competition with anything that is the produce of domestic industry.

Under this premise is how our nation was managed, "From the ratification of the Consitution to World War I..." (Buchanan, p. 154). The Tariff Act of 1789 was designed to:

raise revenues for the new government by placing a tariff on the importation of foreign goods (averaging more than 8 percent).

AND

encourage domestic production in such industries as glass and pottery by taxing the importation of those products from foreign sources.

Henry Clay was the architect of the American System, which was:

a new form of federalism that included:

Support for a high tariff to protect American industries and generate revenue for the federal government

So, why has our nation done a "180" on all of this? Have they been pressured by the business lobbies? I can only speculate, so I will leave that alone for some other time.

What I do know is that Article I Section 8 of the United States Consitution states, in part:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

So, America can actually generate revenue by doing what the Constitution says it can do. Our elected officials can do something to make it more advantageous for Americans to do business in, *gasp*, America.

Instead of trying to look elsewhere for the solution to the trade deficit with China, maybe the solution is right in front of us. China wants to do business with the United States and the United States wants to reduce its deficit(s). How can the United States go about doing this?

The solution is in the tariffs. Place a tariff on China to do business with the United States, as well as place a tariff on other nations also. I doubt there would be many nations who would be unwilling to pay those tariffs in order to do business with the wealthiest nation in the world.

It is kind of like going to a theme park. You know you might have to pay a lot of money to enter into that theme park, but it will be worth it after all the fun you have.

The same is true for doing business with the United States. You may have to pay to do that business, but the pay-off is worth it.

Now, some of this revenue we as taxpayers are paying now and yet losing jobs can be offset with these tariffs.

American businessowners may turn around and see the advantages of coming back home and doing business here. This, in turn will create more jobs. More jobs equals more people working. More people working is more people earning money, which of course the government is going to tax. However, more people employed makes for a greater pool of people to tax! This means the tax burden can be lessened for all of us, although I doubt the government would wish to do that. They would probably just vote themselves another raise!

Either way, more Americans working is a good thing! More Americans working in better paying jobs like those found in the manufacturing industry is even better!

Reference

Buchanan, Patrick J. Where The Right Went Wrong: How Neo-Conservatives Subverted the Reagan Presidency Revolution and Hijacked the Bush Presidency. 2004. St. Martin's Press. New York, NY.