Warren Buffett's concept to significantly reduce USA's trade deficit

[expat_panama]

...Due to our nation’s legislatures’ seeking “pure” free trade, our GDP and median wage is less than otherwise...

That's what import tax advocates say. The BEA and the Census Br say GDP and median wages increase with trade treaties and stall with trade wars.

 

[editec]

What we see in this debate is obvious to some of us and obscure to others.

For the life of me I cannot figure out how so many of you cannot see something as obvious as the pernicious effects of the imbalance we have in trade.
I can only conclude that some of you are not remotely interested in the well being of this society as a whole, and that many of you are merely interested in how trade effects your own rice bowls.
Now if you are one of those people for whom the current system is working (say for example you work for GE and help them sell jet engine to china) then I can understand why YOU would support this system
OTOH, many of you do not directely or even indicrectly benefit from this policy.

Now you guys are just dupes.
I'll leave it to you folks to decide which of those two different supporters of FREE TRADE you are.
You know bar better than I ever will where your money comes from, I suppose.

Editec, this proposal would be of advantage to every U.S. entity that competes or aspires to compete with foreign goods within and beyond our borders. It would certainly be of advantage to companies such as General Electric Corporation.

Respectfully, Supposn

OPh yeah companies like GE WOULD make out like bandits, Supposn.

AFter all, they'd get to SELL their IMPORTING RIGHTS (they they got from exporting good) to companies which are interested in importing.

This idea therefore will give a huge windfall profit to EXPORTERS, and add additional costs to IMPORTERS of GOODS.

This is still another example of a so called market driven CARBON TAX kind of solution that I am having trouble with.

I understand how and why it would have a positive effect on the TRADE imbalance problem.

My complaint isn't that it won't work, (it will) but merely that it won't work as directly and cleanly as simply imposing TARIFFS directly on imported goods.

Now I assume that Buffet believes that the trade partner nations aren't going to percieve this plan as inposing tariffs.

I think he's wrong.

I think that the moment this plan starts to have the effect as intended, it will be perceieved as a TRADE WAR by another name.

 

[Supposn]

There is one problem, I think, with this.

It gives a huge windfall profit to companies that export without really doing much to increase their exports.
Since they'll be free to sell those certificates, it also give them enormous power to pick the winners and losers who IMPORT.
I'm not really convinced this is a goodmake market forces solve this trade imbalance problem.

Editec, anyone, from anywhere at any time can function or hire someone to function as an exporter of goods from the USA.

I would suppose there’s only a comparatively small community of persons of experience who regularly export USA goods, but there’s a much larger community of persons who doing other similar work. If exporting U.S. goods ever became a money machine, competent people from all parts of the globe would rush in to obtain their share of the wealth.

The inability to speak English does not indicate a lack of commercial competency. Foreign purchasers of U.S. goods naturally become fully aware of USA’s Import Certificate policy.

If negotiating among competing USA exporters does not provide them with sufficiently reduced U.S. exported goods prices justified by the global IC price, those foreign purchasers of U.S. goods will additionally become exporters of U.S. goods.

There are innumerable ways to acquire ICs; the global IC market cannot be readily corned for even a single day.

Respectfully, Supposn

 

[Supposn]

..................................First, the GDP increases with falling trade balances and they both reverse together--

Some point to one of the GDP's basic formula's having net exports subtracted from the total (GDP = Consumption + Investment + Government spending + eXports – iMports), and the imagined model never makes it to real life where the two move together. It's like thinking we can make the GDP bigger with more government spending, or like thinking a car can go faster by pushing the brake pedal forward. ........................

ExPat_Panama, we observe the monetary volumes of losses due to burglaries are greater for wealthier rather than poorer neighborhoods.
Neighborhoods’ wealth and their losses due to burglaries generally rise or fall together with each other.

Applying your method of logic with regard to nations’ trade balances’ correlations with changes of their GDPs, would you conclude that we could increase the wealth of our neighborhoods by encouraging burglars?

USA’s domestic market’s sales volumes and their nations’ GDPs generally rise or fall together with each other. This logically occurs because domestic and imported product sales within the same markets are being driven by the same economic forces.

Regardless of nations’ GDP amounts, due to trade surpluses their GDPs are ALWAYS more or due to trade deficits their GDPs are ALWAYS less than OTHERWISE.
[I.e. trade surpluses ALWAYS contribute and trade deficits are ALWAYS detrimental to their nations’ GDPs].

Respectfully, Supposn

 

[expat_panama]

...a huge windfall profit to companies that export without really doing much to increase their exports. Since they'll be free to sell those certificates...

...suppose there’s only a comparatively small community of persons of experience who regularly export USA goods, but there’s a much larger community of persons who doing other similar work. If exporting U.S. goods ever became a money machine...

Current annual exports is over $2 trillion out of a total $15T GDP, and every day virtually the entire US population consumes imports and participates in exports. Foreign trade is not a 'problem', we need it, and it's here to stay. While Buffet's scheme is untested and its potential harm can't be fully proven, we do know that past gov't micromanagement in a population's daily has been disastrous. Congress was right to reject it.

 

[expat_panama]

...losses due to burglaries are greater for wealthier rather than poorer neighborhoods. Neighborhoods’ wealth and their losses due to burglaries generally rise or fall together with each other...

That may or may not be true considering crime rates are much worse in poor than in wealthy neighborhoods; but we digress.

...trade surpluses ALWAYS contribute and trade deficits are ALWAYS detrimental to their nations’ GDPs]...

--and GDP's increase when 'trade deficits' get 'worse' and economies go into recession when the 'trade deficit' gets 'better'. Any way we word it, trade wars cause economic contractions and human suffering on a massive scale, so when we set policy we have to remember both foreign trade's expected negative formula effect and trade's observed positive empirical effect.

 

[editec]

...Due to our nation’s legislatures’ seeking “pure” free trade, our GDP and median wage is less than otherwise...

That's what import tax advocates say. The BEA and the Census Br say GDP and median wages increase with trade treaties and stall with trade wars.

Well then, they are obviuously NOT looking at the real numbers.

The American male worker hasn't seen any real growth in incomes in 40 years.

FREE TRADE is not free.

 

[expat_panama]

...The American male worker hasn't seen any real growth in incomes in 40 years...

True, and it's because all the income increases get spent by the female workers before the male can ever see it. This is a standard process that comes about whenever males work with females and start getting that 'real growth' feeling...

 

[Supposn]

...losses due to burglaries are greater for wealthier rather than poorer neighborhoods. Neighborhoods’ wealth and their losses due to burglaries generally rise or fall together with each other...

That may or may not be true considering crime rates are much worse in poor than in wealthy neighborhoods; but we digress.

...trade surpluses ALWAYS contribute and trade deficits are ALWAYS detrimental to their nations’ GDPs]...

--and GDP's increase when 'trade deficits' get 'worse' and economies go into recession when the 'trade deficit' gets 'better'. Any way we word it, trade wars cause economic contractions and human suffering on a massive scale, so when we set policy we have to remember both foreign trade's expected negative formula effect and trade's observed positive empirical effect.

ExPan_Panama, your transcripts are effectively modifying my messages to fit your own positions.
Within message #84 I wrote of “monetary volumes of losses due to burglaries” and “losses due to burglaries”.
I never wrote of “numbers” or “incidences” of burglaries.

Within that same message I wrote “Regardless of nations’ GDP amounts, due to trade surpluses their GDPs are ALWAYS more or due to trade deficits their GDPs are ALWAYS less than OTHERWISE”.
When you eliminate the qualifying word, “OTHERWISE”, you’re effectively modifying the messages meaning.

Transcript of message #84:
ExPan_Panama, we observe the monetary volumes of losses due to burglaries are greater for wealthier rather than poorer neighborhoods.
Neighborhoods’ wealth and their losses due to burglaries generally rise or fall together with each other.

Applying your method of logic with regard to nations’ trade balances’ correlations with changes of their GDPs, would you conclude that we could increase the wealth of our neighborhoods by encouraging burglars?

USA’s domestic market’s sales volumes and their nations’ GDPs generally rise or fall together with each other. This logically occurs because domestic and imported product sales within the same markets are being driven by the same economic forces.

Regardless of nations’ GDP amounts, due to trade surpluses their GDPs are ALWAYS more or due to trade deficits their GDPs are ALWAYS less than OTHERWISE.
[I.e. trade surpluses ALWAYS contribute and trade deficits are ALWAYS detrimental to their nations’ GDPs].

Respectfully, Supposn

 

[Supposn]

Now I assume that Buffet believes that the trade partner nations aren't going to percieve this plan as inposing tariffs. ...................
...............................I think that the moment this plan starts to have the effect as intended, it will be perceieved as a TRADE WAR by another name.

Excerpted from the message “Trade agreements”
Within WWW.USA-Imports.Blogspot.Com :

Trade agreements

The World Trade Organization will certainly be opposed to these transferable IMPORT Certificates. I’m told that most trade pacts, (including the WTO) provide for six months notice of resignation. The WTO could regretfully accept USA’s resignation or our trade policy of IMPORT Certificates. Sovereign nations often act in their people’s best interest. I object to USA accepting lesser median wage because it is in China’s best interest.

USA's policy of IMPORT Certificates advantage or disadvantage to any other nation would be dependent upon the nation's trade balance of goods with the USA. Importers of goods into the USA will try and usually succeed to raise their prices due to the expenses of acquiring IMPORT Certificates. Due to the extent that foreign good's prices increase within the USA and USA good's prices decrease abroad, foreign goods suffer some competitive advantage. Foreign purchasers of USA’s manufactured goods will be able to negotiate cheaper prices (due to the seller's profiting from the transaction’s byproduct, (the resale of their acquired IMPORT Certificates).

A world that couldn't prevent the trade and planting of land mines can not readily prevent sale of trucks and washing machines to the USA. If any nations choose to discard their shares of the USA market, other nations will be pleased to pick up the slack.

Nations that refuse to buy from us, (refuse to negotiate cheaper prices for our goods) would deny the opportunity of all, (including their own) entrepreneurs from acquiring IMPORT Certificates. Thus the world, (including themselves) will be to that extent denied the opportunity to sell to us.

All of this is dependent upon the mighty USA domestic market. Each year our trade deficit causes our domestic market to proportionally diminish as other nations grow greater. It is desirable that we initiate this trade proposal sooner rather than later.

////////////////////////////////////

 

[expat_panama]

...I never wrote of “numbers” or “incidences” of burglaries...

Ah yes, the old 'I never said' game. This is where I reply 'I never said you said “numbers” or “incidences”', and then you counter 'well I never said you said I said “numbers” or “incidences”' and on and on. Let's not, and anyway like I said we're digressing. Then again, what better way to spend the holidays....

...would you conclude that we could increase the wealth of our neighborhoods by encouraging burglars?...

Huh. I was about to ask you if you'd conclude that we could decrease the burglaries in a neighborhood by reducing wealth. Actually, one of the ways crime rates are reduced is by increasing prosperity in an area-- Dang, I'm digressing again! You can tell it's a slow day at the markets, but as long as my train of thought's derailed I've got to wish you and yours a very pleasant holiday season and hope y'all are having as much fun as I am.

Here's the point. We can't seriously believe that import tax hikes would improve GDP. Historical records show the failure of that effort. We also can't expect that any attempt to cut the Current Account by any other method would ever increase our GDP, based once again on the miserable track record of state run economies. FWIW, I'd take a dim view of any attempt by gov't even to force an increase in the current account. Ditto.

 

[EdwardBaiamonte]

Importers would be required to surrender transferable IMPORT certificates

A liberal's trade war of course helped cause the Smoot Hawley Great Depression. Since then most economist have been for free trade. Here's the simple econ 101 rule for you:

Simple rule: the more with whom you trade the richer you get no matter if the are across the street or across the world; the fewer with whom you trade the poorer you get. If you could not trade at all you'd have to make everything yourself and so starve to death or live a subsistence life style. Hence, the more with whom you trade the richer you get no matter if the are across the street or across the world.

Moreover, its exactly as Richard Nixon once said, "our goods have to be world class if we want to be a world class country". Imagine how backward our industry would be if it did not have to compete in the globalized market place? Our cars would be like soviet cars were, i.e., you had to use a dip stick to check how much gasoline you had and back them up hill because carburetors were gravity fed. This is what the liberals, in effect, propose because they lack the ability to understand free trade.

 

[bripat9643]

A VAT on imported good, you mean, Sparky?

Sure why not?

That's what happens to our exports when they arrive at most countries.

A VAT on imported goods is more properly called a "tariff." Smart people already know why those are bad.

 

[bripat9643]

An economic stimulus at no expense. Warren Buffett’s proposal to significantly decrease USA’s trade deficit.
I'm a proponent of Warren Buffett’s concept to significantly decrease USA’s trade deficit of goods. A senate bill based upon the concept was proposed in 2006 by Senators Dorgan and Feingold.
Trade deficit's detriment to the gross domestic product, (GDP) exceeds the amount of the deficit itself. Anything detrimental to the GDP is generally detrimental to the median wage.

As proposed to the U.S. Senate, goods leaving the USA would be assessed and transferable IMPORT certificates for their assessed value would be issued to the exporter.

Importers would be required to surrender transferable IMPORT certificates for the assessed value of their goods entering the USA. Surrendered certificates are cancelled. This would significantly reduce our trade deficit and induce the sum of our imports plus exports to increase.

This is nothing more than a quota system in disguise. Quotas are bad for consumers. They cause prices on consumer goods to increase, and they only benefit narrow segments of the workforce, normally unionized professions.

 

[Supposn]

.............................This is still another example of a so called market driven CARBON TAX kind of solution that I am having trouble with...........................my complaint isn't that it won't work, (it will) but merely that it won't work as directly and cleanly as simply imposing TARIFFS directly on imported goods......................................

Editec, I just posted the topic of “Transferable Import Certificates Vs a Tariff policy”. It deserves its own thread.
I bumped up “Cap and Trade certificates; to what companies and how distributed?” for the same reason.

Respectfully, Supposn

 

[Supposn]

Now if you are one of those people for whom the current system is working (say for example you work for GE and help them sell jet engine to china) then I can understand why YOU would support this system....................

Editec, this proposal would be of advantage to every U.S. entity that competes or aspires to compete with foreign goods within and beyond our borders. It would certainly be of advantage to companies such as General Electric Corporation.

Respectfully, Supposn

OPh yeah companies like GE WOULD make out like bandits, Supposn.

AFter all, they'd get to SELL their IMPORTING RIGHTS (they they got from exporting good) to companies which are interested in importing........................

....................................This is still another example of a so called market driven CARBON TAX kind of solution that I am having trouble with.....................My complaint isn't that it won't work, (it will) but merely that it won't work as directly and cleanly as simply imposing TARIFFS directly on imported goods............................

Editec, what’s “OPh”?
I’ve noticed that most of the products, particularly most of the GE products that are on the retail hardware shelves are imported products. GE is already deep into the import trade while still maintaining a domestic supplier position with U.S. Dept. of Defense.

The market driven Import Certificate proposal does not choose winners or losers; it prevents a trade deficit of goods assessed values.
I both hope and have good reason to believe that if this IC policy were enacted in the USA, it would increase some manufacturing industries. The economies of scale such as lesser labor costs per unit are particularly advantageous in manufacturing.

Respectfully, Supposn

 

[Supposn]

This is still another example of a so called market driven CARBON TAX kind of solution that I am having trouble with.

Editec, you seem to have already inclined to oppose Caps and Trade due to insufficient “checks and balances”.
I question it for the same reason.

Tansferable Import Certificates proposal's very well and extremely simply thought out.

Assessment of goods at U.S. ports, expressed in U.S. dollars is the only government determination. Government is granted no policy discretion. There are great many methods for anyone to act or employ someone to act as an exporter of U.S. goods. The global IC market cannot be readily cornered.

The IC trade proposal does not share the apparent weakness of Cap and Trade.

Respectfully, Supposn

 

[EdwardBaiamonte]

"Our trade deficit's net detriment to USA's economy is greatly under-estimated

Republicans since Jefferson have wanted a Balanced Budget Amendment so we'd have no debt for Japan and China to buy. With no debt to buy the Japanese and Chinese would have to buy our products and a trade defict would be 100% impossible.

 

[Supposn]

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Within this (economics) discussion board I’ve read many responses opposing the transferable Import Certificates proposal. Some of those responses are less than logical and/or are contrary to facts and/or falsely describe my own positions.

It’s contended that ALWAYS trade surpluses contribute and deficits are detrimental to their nations’ GDPs. I read responses that point out historically its usual for USA’s trade deficits and GDPs the rise or fall simultaneously.

These are not contradictory concept. Nations’ net global trade balances are only one of the factors determining GDP. Trade balances alone do not determine their nations’ annual GDP changes; but ALWAYS trade surpluses increase and deficits decrease their nations’ GDPs

Respectfully, Supposn

 

[Supposn]

The Import Certificate proposal grants government no policy discretion.
(Foreign nations now exercise greater affect upon our trade).

I’ve read responses objecting to an Import Certificate proposal being excessive government intervention.

This trade proposal’s only mandate is importers surrender Import Certificates with face values to cover the assessed values of their goods entering the USA. Assessing the monetary value of goods is a technical rather than a policy determination.

The values validities are themselves of much lesser importance. What’s important is that both imports and exports should be assessed in the same manner and it’s helpful if relative prices between goods are approximately valid.

[USA’s exports are now being negatively affected by other nations’ direct and indirect hindrances of U.S. goods sales within their nations’ domestic markets’ and their global currency manipulations.] These respondents prefer that rather than regulating what enter into our sovereign nation, we continue to accept foreign intervention?

USA goods are additionally at disadvantages due to international agreements negotiated by our own government. Often they’ve bargain away the interests of U.S. industries and their jobs for non-economic considerations. [Fortunately ‘one world” proponents have never yet been able to obtain a 2/3 U.S. Senate approval for any of our trade agreements. They are congressional-executive agreements with explicit provisions for granting 6 months notice of intention to withdraw from the agreement.

Respectfully, Supposn