Don't Buy the Hype: 20 Years of Data Reveals 'Free Trade' Fallacies

[RiverLover]

12. Another -really- good article in Forbes yesterday~

...A February 2014 report from the Economic Policy Institute shows that trade deficits have contributed to the elimination of 5.7 million American jobs over 15 years. Even though President Obama promised to hold China accountable in the last election, he has done nothing about currency manipulation. So the primary losers under our current policy of accepting growing trade deficits are working people, U.S. manufacturing, communities, states, and many industries.

The U.S. free traders naively carry the banner of free trade in the global war, as we continue to grow the trade deficit, lose jobs, and go deeper into debt. I think we should develop a plan to reduce the trade deficit and balance our trade no matter what it takes. We are being sucker punched by mercantilism while the multi-national corporations and Wall Street lobby Congress for the status quo.

Any kind of plan to grow American manufacturing must address the trade deficit first. In my opinion we are not going to make any real progress in creating manufacturing jobs unless we recognize that the trade deficit is the biggest job killer and currency manipulation and VATS are the tools.

The good news is that taking action on reducing the trade deficit (other then setting goals) could have an immediate affect. The Economic Policy Institute EPI reports that realigning our exchange rates could:
• reduce our trade deficit by up to $500 billion by 2015
• Increase our GDP growth by 4.9% per year
• grow the number of manufacturing jobs by 16% or 2,300,000 jobs
• and the increased tax revenues could reduce the federal budget deficit $266 billion by 2016

Robert Scott, the primary author of the report says, “New fiscal stimulus is all but impossible, so ending currency manipulation is the best available tool for stimulating demand for domestic spending and ending the hangover of excess unemployment from the Great Recession.”

You don’t have to be an economist to see that accepting growing trade deficits with no plan to reduce the debt is a house of cards waiting for some kind of macro economic trigger to cause a collapse. The winners and supporters of trade deficits assume that financing trade deficits can go on ad-infinitum, but I believe the trade deficit is not sustainable over the long term. At some point in time the lenders may decide that they are holding too many dollars or U.S. Securities and reduce or stop loaning us money. Or even more likely, we may get into a military or state department dispute with China and they could punish us by cutting off the loans. This could cause a rapid devaluation of the dollar and lead to a currency crash.

...The trade deficit is slowly hollowing out our economy and neither liberals nor conservatives seem to care. I thought that free enterprise conservatism would rise up against mercantilism and unfair trade. I mean, after all, isn’t conservatism about conserving, paying down debt, balancing budgets, and saving money for a rainy day?

I believe in the free enterprise system, open markets, reducing tariffs, eliminating VAT taxes, but free enterprise and free trade depend on open competition and a level playing field for all trading countries. I am sure that many people will cry that stopping currency manipulation or countering VAT taxes is protectionist and will cause a trade war. But we are already in a trade war and are losing decisively. The future is now.

http://www.forbes.com/sites/mikecollins/2015/01/15/americas-trade-deficit-the-job-killer/3/