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More on "Free Trade Doesn't Work"

Ian Fleming wrote a very good book, “Free Trade Doesn’t Work”. He explains in great detail why free trade doesn’t work and offers a solution that if implemented would restore America’s trade imbalance, bring some high-end industries back to the US, and create needed jobs. His solution would have general acceptance in the world economy.

Ian recommends implementing a flat tax on all imported goods and services in the range of 25-30%. He refers to this tax as a ‘Natural Strategic Tariff’. He believes that a tariff in this range would not cause industries, like the apparel industry to relocate to the US the difference between foreign and domestic labor costs are too large to tip the balance in America’s favor in an industry based on semi-skilled labor. However, he believes that a 30% tariff would be sufficient to cause the relocation of certain high-tech manufacturing, like semiconductors, to the US and this key as this is the type of industries you want to attract and retain.

Alternatives discussed are the VAT, used by more than 153 countries around the world. Ian say’s that a VAT, if implemented as a national tax policy to replace the income tax, would be legal within the framework of WTO and NAFTA agreements. Ian acknowledges that implementing a natural strategic tariff would be illegal under WTO and NAFTA agreements. And, he notes that a ‘Border Adjustable Tax’ such as a VAT for import/export only would also be illegal under WTO and NAFTA.

Ian relates that both parties are playing a double game on trade in America. Senator Kerry, in his Presidential bid, waited until he had secured his party’s nomination before backtracking on renegotiating NAFTA. During her bid Hillary stated “I have said that I will renegotiate NAFTA—“ and Obama stated “ I will make sure that we renegotiate; in the same way that Senator Clinton talked about—“. John McCain stated “The global economy is here to stay. We cannot build walls to foreign competition and why should we want to?”

Ian believes that the ground is shifting under the ‘free traders’ feet for two reasons; the trading order depends financially upon America’s inexorably doomed international credit and second, it depends politically upon the public continuing to believe that free trade is sound economics. The anti-free trade and anti-immigration crowd now have the numbers on their side. It is my opinion that the ‘globalist’ will hang on to their ‘free trade’ policy until it is no longer politically feasible. Reason is that corporations are in a win-win situation while the Corpocracy continues to work to break the back of the middle class workers, supposedly getting us ready to compete in the globalized economy.
Pat Choate, in “Saving Capitalism”, also writes that adopting the VAT as a national tax policy would be legal under WTO and NAFTA agreements and would do much to bring our trade imbalance into order.

Hopefully, our years of resisting the globalized economy, as we know it, on WB has played some small part but, it’s clear, the tide is changing. Some solution will be forced on the Corpocracy within a couple of years, IMO. And, wouldn't it be nice if some well-centered person floated to the top advocating a centrist postion?

Otherwise, we have the Corpocracy we deserve.

Posted by Roy Ellis at November 28, 2010 11:50 AM
Comments
Comment #314166

“Ian recommends implementing a flat tax on all imported goods and services in the range of 25-30%. He refers to this tax as a ‘Natural Strategic Tariff’.”

Not a bad idea and worth considerable debate amongst the people of this country. I would also add that any corporation requesting H1B visa’s and such be required to pay an upfront fee for processing the visa, say $50k, and an annual fee for record keeping of $50k on top of any other fees. In addition any company that has such a demand for this type of visa should be required to create 5 additional jobs that can only be filled by American citizens.

Posted by: j2t2 at November 28, 2010 8:56 PM
Comment #314176

J2t2, indeed there are simple solutions to ‘globalized free trade’ and indeed, the tide is starting to turn on the Corpocracy relative to free trade. Problems with the economy are not like immigration problems, some 30 years and counting, 30k dead and all that. Economical problems are $$$ problems and the corpocracy can no longer make the people believe that things ‘are really rosy’.

The political system would have to be brought, kicking and screaming, to the table on tax reform. IMO, only a 3rd party with a different political attitude could ever hope to change the tax code significantly.

IMO, The Natural Strategic Tariff (NST) and a VAT for imported good/services would serve the same purpose. Cause some high-tech companies to relocate to the US and come close to balancing our trade deficit. But, the NST and a VAT, if not for domestic use as well would otherwise be illegal per WTO/NAFTA. To implement VAT for domestic taxation would be more of a consumption tax, affecting the middle and lower economic classes moreso than the wealthy. There would be no taxation on investment income which would be a boon to the wealthy and no so much for the lower economic classes.

Seems an import/export trade VAT on goods/services coupled with a flat income tax is the better way to go. Of course that would mean renegotiating WTO/NAFTA or termination, which I would prefer, as both are unconstitutional to begin with. The VAT and the flat tax involve minimum accounting/paperwork, are both fair in their application and give the politician the least wiggle room to manipulate the tax codes in making winners/losers, for a small fee mind you!

Congress was able to squeak out an increase in cost for H1B’s but, far from the $50k + $50k you suggest.

http://www.deccanherald.com/content/87652/us-house-votes-hike-h1b.html

http://www.eweek.com/c/a/IT-Management/H1B-Visa-Fee-Increase-Unpopular-Across-the-Board-278065/

And jobs, j2t2? If you read some of the url’s in the above article you will understand that corporations are doing very well in this jobless recovery, that corporations are still leaving the US for foreign lands, that corporations are investing heavily in 2010, just not in the US. I feel confident in saying that you can’t even buy a job in this country right now. The billions expended by the gov’t on ‘recovery’ and ‘stimulus’ bear that out, IMO.

Otherwise - -

Posted by: Roy Ellis at November 28, 2010 10:24 PM
Comment #314180

“If you read some of the url’s in the above article you will understand that corporations are doing very well in this jobless recovery,”

Roy I don’t need to read these links to know corporate America is sitting on tons of money. Jobless recoveries are the new norm. Has been for the past 2 decades the great recession being no different. The incentives for business to create jobs are useless and have been for 20 years yet that is all we hear from the supply siders as the answer to the lack of jobs. I did however read the site you linked to and found them informative.

http://www.roubini.com/globalmacro-monitor/259163/jobless_recoveries

Posted by: j2t2 at November 28, 2010 11:24 PM
Comment #314184

This would be completely stupid policy. See the Great Depression and Smoot Hawley.

Posted by: gergle at November 29, 2010 2:18 AM
Comment #314191

Fair-Trade?

More like Un-Fair-Trade.

The U.S. should (in many cases) impose tarrifs on imports into the U.S. that are at least EQUAL to the tarrifs imposed on our U.S. exports to foreign nations, and see how those foreign nations like that $#!+ . Then offer those foreign nations the opportunity to negotiate something more fair, but warn them that any tarrifs they set will be matched. And if foreign nations restrict imports from the U.S., then the U.S. should restrict imports from those foreign nations.

Otherwise, money will continue to flow OUT of the U.S., and that is a recipe for eventual disaster. It’s already been going on far too long.

But ofcourse, that ain’t going to happen, because the federal government is incompetent, corrupt, FOR-SALE, and 83% of all federal campaign donations of $200 or more come from a very tiny 0.3% of the wealthiest voters in the U.S. (who own the transnational corporations, that want cheap labor and higher profits; and don’t give a damn what it’s doing to the nation, jobs, trade imbalances, jobs and corporations leaving the U.S., etc.). Never under-estimate human greed.

At any rate, the majority of voters have the government that they elect, and re-elect, … , and re-elect, at least, possibly, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, arrogant, greedy, and corrupt incumbent politicians in Congress with perpetual re-election rates finally becomes too painful.

Posted by: d.a.n at November 29, 2010 9:03 AM
Comment #314193

See item # 4.

Once again, Unfair Trade practices are just one of the 10 major abuses that are hammering the majority of working Americans.

To understand the problem, just follow the money.
Who benefits most from unfair trade?
Who is hurt by unfair trade?
What are the long term effects of money leaving the U.S.?
Whose getting sold-out?

At any rate, the majority of voters have the government that they elect, and re-elect, … , and re-elect, at least, possibly, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, arrogant, greedy, and corrupt incumbent politicians in Congress with perpetual re-election rates finally becomes too painful.

Posted by: d.a.n at November 29, 2010 9:16 AM
Comment #314200


FOR-SALE: arrogant, greedy, corrupt and indifferent American citizens who have and shall continue to support a boom and bust economic system, and a corrupt political system until the Hammer Of God comes down.

Posted by: jlw at November 29, 2010 3:05 PM
Comment #314229

Recall that I posted some time back about corruption in Pr. Georges Co Md? At that time 3 police officials had been charged along with the Co. Exec and his wife. Now the FBI count of those being scrutinized for charges is 46 police officials. Noteworthy that the FBI seems to have moved away from the ‘money handlers’ in gov’t. Otherwise, they might have to close down Md’s gov’t altogether.

As for the Wikileaks revelations; what else would one expect from throwing a bunch of intel and pseudo intel agencies together and told to play in the same sand box?
And, wonder of wonders! There is a lengthy article in today’s Wash Post by Robert Barnes? as to whether we need a constitutional convention or not. Barnes says Scalia said at a recent Texas Tech Univ event “there’s very little that I would change” about the Constitution, adding that activists should not ‘mess’ with it. But has voiced before, and agrees with the TEA Partiers regarding the 17th amendment, “We changed that in a burst of progressivism in 1913, and you can trace the decline of so-called states’ rights throughout the rest of the 20th century”.

Michael Paulsen, Law Prof, Univ of St Thomas Law School in Minn., thinks the federal gov’t has so stretched its constitutional limits that a constitutional convention called by the states is the only way back. He notes that 32 states , at one time or another called on Congress to convene a Constitutional Convention, just shy of the 34 required. Former Texas Solicitor General R. Ted Cruz, predicts a ‘real move in the coming year’ toward calling a convention. Says Harvard Law Prof Mark Tushnet, “it’s very hard to defend amending the Constitution on the grounds of today’s current viewpoint. The idea of “amending the Constitution to preclude future democratic decision-making, that one’s a little puzzling to me,” he added. Univ of NC law prof Michael Gerhardt agrees with Tushnet in the view that the elected reps of the people should be the ones who work out the nation’s policy differences, without amending the Constit or involving the courts. “Elections matter,” he said, adding: “One of the things we’ve got to come to terms with is whether or not we still believe in politics.”
To the naysayers I would say we could wait for hell to freeze over before the Corpocracy gets around to any kind of reform.

Most interesting to read recent books about some elites having second thoughts about ‘free trade’ and now some people of reknown talking of a Constitutional Convention, even as ConventionUSA.com is gearing up to put Article V Convention before the public. That’s a WOW!

Posted by: Roy Ellis at November 29, 2010 9:33 PM
Comment #314240

Roy do you find it a little ironic that your first paragraph is discussing corruption at the county level in Maryland, and it doesn’t even get into the county officials recently charged in the same county with influence peddling, while in the second paragraph you are discussing the possible repeal of the 17th amendment to the Constitution. The repeal of this amendment would only lead to more of the same corruption just as it did prior to the 17th amendment becoming part of the Constitution.

Posted by: j2t2 at November 29, 2010 10:25 PM
Comment #314256

Roy,
Free Trade could be dealt with by the American Consumer simply being educated on why they should purchase their Basic Needs from locally owned and operated companies which use local resources; however, that would mean we would have to educate an entire generation on the same material knew by our ancestors.

No, I will leave it to folks like Dan to show how free trade is a cover up for the exploitation of global resources while preserving oue own. And though I cannot say that has been a bad thing over the last 40 years nor is the idea of employing the world a bad idea. I do believe as Americans are once again challenged with growing the Wealth of the Nation Congress should take serious measures to limit what the American Consumer has to import in order to tend to their Basic Needs.

For as natural rsources around the world such as oil will only lead to higher and higher debt and prices. Educating this generation on the advance innovations and technology that can save the American Consumer money should become an export which will put our own natural resources to the test.

Posted by: Henry Schlatman at November 30, 2010 2:58 AM
Comment #314259

Roy, you have finally put forth something from Fleming that I can agree with. Good for Fleming. :-)

However, (there’s always a however to good ideas), three hurdles stand in the way.

First is Remer’s maxim: ‘There is no public policy possible that will not pick winners and losers’, and the losers to the VAT will fight it vociferously, no doubt, using the Citizen’s United S.C. ruling.

Second, and you or Fleming pointed this out, a VAT will not equalize labor issues between countries. America will still be left with an undereducated and ill-trained work force segment forcing legal immigration of foreign workers to fill American jobs. Which is another way of saying a VAT will not be a panacea for what ails America economically. Though a VAT will surely strengthen America’s manufacturing sector, but, that raises the automated productivity issue vs. human manhour jobs. (The new normal unemployment rate for America going forward is going to be around 7%, due to productivity increases by automation).

And third, a VAT cannot, and will not, politically replace income tax in America. Not even remotely possible. VAT taxes put the bulk of the tax burden on consumers, and consumers earning less than $100,000 per year drive 70% of our economic activity. Increase their tax burden, and you decrease our economic engine output. A VAT which resides along side a modified income tax system which precludes shifting the tax burden on the middle class, would have to be in the cards, and that is politically dubious.

Posted by: David R. Remer at November 30, 2010 4:02 AM
Comment #314276


Senate rejects earmarks ban; 56-39. Who would of thought??

And a Senator Pearcy (?) is on the tube recommending a flat tax. Of course that rates right up there with suggesting an ear marks ban but it is amazing that a politician, a Repub no less, would voice the words.

I would think no one is looking for a 100% fool-proof system, just a much better system. Ian likes the Natural Strategic Tariff, a 30 or so percenter across the board on imports. He believes that would be a tipping point to bring some high-tech back to the US while leaving the apparel industry in place. Like a VAT, an NST would go a long way towards balancing our trade deficit.

Yes, as I made note, a VAT acts much like a consumption tax which would hit the middle/lower class harder than the wealthy with no tax on investments, etc.

So, what is needed, IMO, is a VAT trade tax and a flat income tax. Would mean the WTO/NAFTA agreements would have to be trashed which is a good thing as both are unconstitutional. Since other countries already use the VAT for trade our changing our tax system should not upset the ongoing trade among nations.

On education, maybe someone can explain that while there are supposedly no high-tech hiring in the country during this great recession, the universitites are packed full with foreign students. Are they, by chance, finding jobs in this country while joe citizen cannot?

Otherwise - -


Posted by: Roy Ellis at November 30, 2010 11:28 AM
Comment #314299

j2t2 I’m not sold on repealing the 17th amendment, was just reporting that there is some talk of ‘real’ gov’t reform going on these days. I can recall that one of the reasons people wanted the 17th was because state govt’s were so corrupt but, I don’t know the facts relating to that.

I’m not sure repealing the 17th would create any more corruption than we have now, just squeeze the grape a little differently, IMO.

And, if the Republican Sentry Party ever gains traction on the political scene then that party’s membership would provide an oversight function for their elected senators. Corruption might become less of a problem.

Henry, I’m not up on the US exploiting 3rd world resources. IMO, Europe is way more of a problem than the US in that regard. Overfishing the Med and Africa and whacking down the rainforest in Indonesia come to mind.

One has to wonder why we won’t use our natural gas to hedge against oil. And, subsidizing Ethanol in using a food product to produce energy is about the craziest thing I can imagine.

I agree technology could do a lot to save us from ourselves. But, you have to remember that the Corpocracy is in charge of the technology. For example when the Corpocracy talks about population control they are suggesting that all people reside within the city limits, in small self sufficient condos, moving sidewalks take you around, liquid food pumped through piping like water with each household fitted out with a few ‘spigots’. Thirty minutes a day on a gravity treadmill mandatory. Everybody works taking care of corporate and gov’t accounting, writing ads, processing tax forms, etc. Everyone making over $5M a year will live in the high places in Colorado, etc. Plants will be fully automated, only people on site are the manager and a security guard, etc. Population control for the future, IMO.

Otherwise - -

Posted by: Roy Ellis at November 30, 2010 9:47 PM
Comment #314327


Roy, when the wealthy are living on the mountain tops and technology has reached a level where most agricultural and manufacturing needs are fully automated, including artificially intelligent robots handling 90% of the management responsibilities, what need will the wealthy have for a massive human workforce and a consumer economy?

Do you think they will put 90% of the human race on the dole or find a more permanent solution?

I imagine many of those high tech foreign students will be finding employment in whatever low wage countries the jobs will be located.

If you are a betting man, bet on nuclear fission for our future energy needs. It is the most costly and most profitable way we can approach our problem and the odds on favorite of corporate interests. It is another decade or so down the road but, we will be seeing BP, Shell and Exxon promoting electric cars and an electric highway grid.

There is nothing new or unique in the current talks of government reform. It is a subject that has been a part of our political dialogue since our first government took office.

Most Americans aren’t interested in knowing how much we are exploiting third world peoples. We would rather believe that we are the good guys. We help rather than exploit those people.

The WTO is dominated by the U.S., the E.U. and their many special interest groups. Third world countries send 3 or 4 delegates to the WTO negotiations. the U.S. and the E.U. have about 600 delegates each, most of whom are members of special interests rather than government employees. Most of the negotiations are conducted, behind closed doors, between the U.S. and the E.U.

Posted by: jlw at December 1, 2010 2:54 PM
Comment #314329

Roy,
Why Jay makes a good point I do believe it will be a few more generations before the Wealthy can afford a robotic workforce. And why the exploitation of natural resources from third world countries may be explained as helping those citizens move toward a more civilized society I do hope their leaders will realize that everything that shines is not gold.

No, the current fight between the Wealthy today is not so much on natural resources or a robotic workforce as once thought 30-40 years ago. And why I am sure that there are those who wish they couls maintian the Status Quo, understanding they risk their Corporate Parenthood if they don’t want to build a better World. I smile and wonder as I know the Wealthy do not want to see their world colapse.

Thus, bold enough to challenge the political thinking of the Left and Right I have to ask when Independents will stand up and demand the Corporation either pit up or shut up. Given that the day of Labor and Management is numbered provided the Wealthy keeps on its current path. And why that is not new, I wonder what a Trickledown Society will do when the American Workforce realize they can only prosper under a Trickle-Up Economy considering the Wealthy cannot make a dollar until the worker builds and sales their products and services.

Posted by: Henry Schlatman at December 1, 2010 3:23 PM
Comment #314440

Henry wrote: “we will be seeing BP, Shell and Exxon promoting electric cars and an electric highway grid.”

Well, our current energy grid could not handle that additional load from highway charging stations. It is already stretched thin during the Summer months. If we are moving further into electric energy across transmission lines, then our entire electrical grid must be overhauled and upgraded to accommodate that increased demand. Some automated shut down equipment throughout the entire grid to respond to a major solar flare coming straight at us will be essential, as well. Failure on that front, could take America down for as much as a year without electricity in myriad places throughout the country. At the very least, stockpiling transformers to replace damaged ones would be prudent in the absence of investing in automated shut down equipment which can be initiated within the 6 to 7 minute warning period before transformers around the globe, fry!

Posted by: David R. Remer at December 3, 2010 11:06 AM
Comment #314493


David, JLW made the statement about the oil companies and he agrees with your evaluation of the current electric grid and that it is in definite need of a major overhaul which takes into account our future needs and threats.

Paying for the new grid is the responsibility of consumers and taxpayers. The oil companies may push government for the grid because they want to sell nuclear generated electricity across it when their oil and gas revenues begin to decline. Of course, they will want the consumers and taxpayers to pay for their nuclear plants and all the hidden costs associated with nuclear power.

Posted by: jlw at December 3, 2010 10:59 PM
Comment #314575

Agree jlw, and the companies will say they have to charge high prices for their energy as they invested so much in R&D, etc.

Article in todays Wash Post relating to the Corpocracy buying in on the election of State Supreme Court judges. These elections regularly attract millions of dollars in contributions from trial lawyers, businesses and other special interests hoping to shape the outcome of the vote.

Said one judge, who dislikes being turned into a politician during election season, if we are going to allow the courts to be politicized with more and more money coming in, we might as well shut down the third branch.

Just one of many reasons we need to work to abolish corporate personhood law. And, being crystal clear, the only way that can happen is through a new 3rd party with a different political attitude. If we can’t muster up the gov’t to levy a little tax on the wealthy during this great recession then, most assuredly, there won’t be any rush to abolish corporate personhood.

Otherwise - -

Posted by: Roy Ellis at December 5, 2010 3:35 PM
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