Free Trade Fallacy

Most economists, politicians and Americans believe that trade should be free. Good and services should travel from country to country with minimal difficulty and resistance. The beauty behind free trade is that it should be a ‘win-win’ situation for all participants. It is assumed that ‘free trade’ will also become ‘balanced and fair trade’ in which there is a sense of parity among participants. Sadly, for America, that has not become the case.

As you can see from the chart below (US Census), we run trade deficits with our top nine trading partners and twelve of the top fifteen.

The largest U.S. partners with their total trade (sum of imports and exports) in billions of US Dollars for calendar year 2010 are as follows:


Exports Imports Total Trade
Canada
248.8 76.5 525.3
China
91.9 364.9 456.8
Mexico
163.3 229.7 393.0
Japan
60.5 120.3 180.9
Germany
48.2 82.7 130.9
United Kingdom
48.5 49.8 98.3
South Korea
38.8 48.9 87.7
France
27.0 38.6 65.6
Taiwan
26.0 35.9 61.9
Brazil
35.4 29.3 59.3
Netherlands
35.0 19.0 54.0
India
19.2 29.5 48.8
Singapore
29.1 17.5 46.6
Venezuela
10.7 32.8 43.4
Saudi Arabia
11.6 31.4 43.0

There are numerous reasons for the imbalance in which the finger of responsibility can be pointed in all directions. Here are just a few.

American Mistakes

1. Companies have focused far too long on domestic market share instead of enlarging their sales overseas. Only 1% of our companies do 80% of our exporting.
2. Many US companies have moved their manufacturing facilities abroad; thereby, becoming importers to America.
3. Politically, we have embraced the virtues of free trade while allowing other countries to disregard those values.
4. American consumers are oblivious to the need to support domestic industries.

Trading Partners

1. Many countries with flat domestic consumption (Germany, Japan, Sweden) look to overseas markets (America) to increase sales.
2. We allow our largest importer, China, to manipulate their currency to our detriment.
3. Many countries have not only trade barriers but cultural and social barriers as well. The Japanese will not buy a computer from an American company, nor rice that would cost half the price. China has huge duties on American autos while insisting that major products be made in China.
4. Many countries protect their domestic industries either through direct government funding or subsidized loans. As a business model, Air Bus would never have gotten off the ground without huge subsidies and support. During the recent ‘Great Recession’, there was never any discussion in Europe or Asia about whether or not to support their automobile industries. It was a done deal.

If we wish to influence our trade deficit and help create American jobs, you can do so that as a consumer. Please consider taking the Amer1ca One Pledge.

1. Ask or determine where a product is made.
2. If possible and affordable, consider the American item first.
3. Let retailers know that you are searching for ‘Made in
America’ products.
4. Encourage other family members and friends to do so.

We all have the ability to create jobs and influence change. Please do so with your wallet. After all, you make your money in America, try to spend it on America. Thank you.