Author: Chris Macke

10 Global Trade Myths: Myth #1…Other Countries Want Free and Open Trade

Before we decry the evils of global trade or conversely trumpet its merits as the miracle cure to all our economic problems, we need first to understand the following:  The U.S. is nowhere near realizing the potential of global trade. In fact, there is a Grand Canyon-like chasm between the potential of global trade and current implementation of U.S. trade policy.  Just how far short are we falling from the potential?  Let’s put it this way, in the world of global trade we are clearly the chumps.  Warren Buffett is reported to have said, “If you are playing poker and you don’t know who the chump is, then you likely are the chump.”  Well, in the world of global trade that’s us.  Every country loves to trade with the U.S. because they will likely win. Of the fifteen largest economies we traded with in 2016, thirteen of them sold more to us than we did to them.  That’s right, of the fifteen largest economies we traded with, we “lost” nearly 90% of the time.  And, it’s gotten worse over time. While still embarrassing, in 1992 our record with these same countries was 4-11. COUNTRY 2016 1992 China L L Japan L L Germany L L U.K. L L France L L India L L Italy L L Brazil W L Canada L L S. Korea L L Russia L W Spain L W...

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SOLUTION: Tax Foreign Earned Profits Based on Jobs Created In U.S.

Whether companies bring profits earned overseas back to America is not what is most important. What is most important is whether the companies repatriating foreign earned profits increase the number of Americans they employ in the U.S. Solution: Base the tax rate each company pays on the increase/decrease in number of Americans each company employs in the U.S. This approach targets the primary objective – an increase in the number of American jobs. If we instead universally lower the tax rate on foreign earned profits repatriated to the U.S. with no connection to actual jobs created, there is no guarantee...

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Global Trade Reality: We Are Trading Wages for Welfare Checks

“Comparative advantage” states that a country should make what it produces most efficiently and buy from other countries that which the other country makes most efficiently.   The idea is to concentrate the country’s resources, people and raw materials on what it makes most efficiently, thus increasing the country’s standard of living.  While generally true, this principle has been distorted to mean that if a country can buy something from another country at a cheaper price, the country should always buy it from the other country rather than producing it domestically.  However, price alone does not determine whether a good is cheap or expensive. Thus, price alone does not...

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Hope Is Not A Tax Policy – Make Corporate Tax Cuts Contingent on Job Creation

Imagine you own a business, and in the interest of selling more of your products, you lower your prices. After cutting the prices, some customers buy more, some buy the same and some actually buy less of your products. Is that an efficient way to increase sales? No. Yet, that is what Congress would be doing if it universally lowered the corporate tax rate. This is a highly inefficient way to try and create more jobs. If companies that do not create more jobs receive the same tax breaks as companies creating more jobs, there are fewer tax breaks...

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10 Global Trade Myths: Myth #2…Trade Agreements Are Solely About Trade

“I explained to the President of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem!” This Tweet from President Trump is a continuation of many years of presidents from both political parties using trade policy in the service of foreign policy. Since WWII, trade agreements have been used as much to achieve foreign policy objectives as trade objectives.  During the cold war era, trade agreements were used to sway countries to the side of capitalism over communism.  If you doubt this, then consider the following question:  Have...

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