How to Boost U.S. Exports

Many economists hope that the falling dollar will boost American exports, stimulating our recovery. But the boost may be small if we continue to let the mercantilist countries exclude American products from their markets. For example, the Chinese government is currently minimizing all of the following American exports:

1. Autoparts. The Chinese government has high tariffs (about 25%) on foreign-made autoparts. Otherwise the Ford (F) and GM plants in China would be importing them.
2. Automobiles. The Chinese government has high tariffs (about 25%) on foreign-made vehicles. The Doha Round of the WTO agreement collapsed because China and India refused to reduce them.
3. Video Games and DVDs. The Chinese government allows piracy of these products while delaying approval of import licenses for the legitimate products.
4. Chicken. The Chinese government stopped issuing import licenses for import of American chicken at the same time they filed a complaint over U.S. rules against the importation of Chinese cooked-chicken products.
5. Commercial Aircraft. The Chinese government is currently building its own commercial aircraft industry through huge government loans.
6. Mining Equipment. The Chinese government currently has high tariffs (about 25%) on foreign mining machinery, a major U.S. export.
7. Computer Products. When the U.S. government hands out consumer subsidies (such as "cash for clunkers") foreign products are eligible, but when the Chinese government hands out subsidies, including subsidies to computer products, only domestic manufacturers are eligible.
8. Motorcycles. The Chinese government has numerous barriers to foreign motorcycles, starting with 25% tariffs and continuing with restrictions against using motorcycles with large motors on many Chinese roads.

If the United States were to tie the value of American imports from China to the value of Chinese imports from the United States, the Chinese would have to give up their mercantilist strategy of maximizing their exports to the United States while minimizing their imports. The result would be a U.S. export boom. Such action would be sanctioned by WTO rules which state:

(A)ny contracting party, in order to safeguard its external financial position and its balance of payments, may restrict the quantity or value of merchandise permitted to be imported.

Instead, we let China grow by about 7% per year, while we shrink, proving to the world that American democracy is incapable of electing competent leadership.

Disclosure: No Positions

Comments

[Dave Wrixon:]

Ensure that less than 50% of "Value Added" is down to the kind of Hard Sell Advertising that passes for marketing in the US.

I get a lot of cold calling from people with American accents. My first reaction is always, "whatever they are selling I don't want it". What you need to remember is that we have not been the US college system and are not about to grab a set of pom-poms and rush to join the cheer-leaders backing team US at the touch lines.

What you need to do is emphasize with peoples problems and come up with cost effective solutions that are relevant and cultural tailored. In Europe, the MacDonald association with the hamburger is actually becoming more of liability than it is an asset, but I have to hand it to these guys, they are trying to adapt.

Oct 27 06:18 AM

[old guy:]

You can not poke your banker (China) in the eye with a stick.See our President backpedal... Cut spending Pres. And we can rethink this situation!

Oct 27 08:27 AM

[Alec van Ge...:]

Why don

Oct 27 09:56 AM

[Alec van Ge...:]

Why don't you learn from what has made China one of the world's fastest growing economies and unilaterally drop all trade barriers, which would give American companies - and "foreign" companies operating in the United States employing American workers - the best opportunity to compete in a global marketplace?

Your suggestion would only invite a mindless tit-for-tat from other countries, which paves the way for more government intervention when the opposite is what is necessary.

Oct 27 09:58 AM

[Alan Young:]

That was quite a leap from balance-of-trade issues to finding fault with "American democracy." Since we've had balance-of-trade problems through the last 4 or 5 administrations, it seems to be a more deep-rooted problem with our economy, not tied to electoral politics.

Oct 27 10:01 AM

[sunnsea:]

It's the US corporations that benefit from the 0% US tariffs and it is the US Chamber of Commerce among other lobbyists that promoted this. They have never been interested in exporting US- made products. Their entire interest has been in finding lowest wage, no tax or subsidized locations anywhere on the planet from which to increase profit and then reducing US tariffs from the same countries to zero under the false rhetoric of a "global economy." It has nothing to do with a "global economy" only in destroying uppity US workers. Of course, this foolish short-term thinking is the basis of our current economic calamity. Your article leaves out the critical percentage of the so-called "China trade" made up of US products made under contract or in a special economic zone in China and shipped bacl to the US. It may be as high as 60% of all "China trade" is simply US products made there.

Oct 27 10:16 AM

[KingGeithner:]

That is the worst hair piece I have seen...looks like road kill

Oct 27 10:23 AM

[flow5:]

Correcting the current account balance, and trade deficit, is an absolutely daunting task:

The U.S. is a $7.4 trillion dollar debtor country (since 1985) and compounding.

The volume of foreign financing required to float new government debt issues each fiscal year now averages about 49%.

The U.S. imports approximately $335,992,800,000 of oil per year (@78/barrel) & 12.1 MMbd.

There were 700 foreign military bases, in 130 countries, employing more than 500,000 military personnel (2003 figures). But these numbers didn't include bases in Afghanistan, Iraq, Israel, Kuwait, Kyrgyzstan, Qatar, and Uzbekistan (this constitutes a correctable drain on the dollar - multilateral claims to foreigners).

Oct 27 10:29 AM

[vman650:]

Why is it so hard to understand. We need to make stuff that people want at a competitive price. First things first, decrease imports. Obama campaigned on reducing imported oil, but has done little to spur energy creation and conservation at home. I am still waiting to see a single solar panel on anyone

Oct 27 11:03 AM

[Tom E.:]

I heard that the US Chamber of Commerce was in Europe trying to get them to take more Chinese made products. Sick.

Oct 27 12:47 PM

[H.J. Huneycutt:]

If you believe that, you haven't been paying much attention to American electoral politics. The primary reason we have one-sided "free trade" deals where we are expected not to have barriers to trades, but the other parties are allowed to have them, is because our politicians mindlessly pander to lobbyists representing industries that stood to benefit from the trade deals.

"Free trade" is great, when it's actually "free", but accepting lopsided trading terms does not actually promote greater economy efficiencies, nor does it really benefit the US in the long-run. The lopsided trading terms are definitely a sign of the weaknesses of American politicians. Which is amusing because they are known for pounding their chests in international diplomacy (which is counter-productive), but they are ready to capitulate without prompting on trading terms.

On Oct 27 10:01 AM Alan Young wrote:

> That was quite a leap from balance-of-trade issues to finding fault
> with "American democracy." Since we've had balance-of-trade problems
> through the last 4 or 5 administrations, it seems to be a more deep-rooted
> problem with our economy, not tied to electoral politics.

Oct 27 01:00 PM

[Ben Gee:]

The West invented the game of trade, the rules were made in the West.
The West got fat and lazy and started to complain about the game and the rules because they started to lose. An average Asian work about 60 hours a week. The West want to work 30. Terms of trade were negotiated among countries, I never hear winners complain, only losers do.

Oct 27 01:10 PM

[Billy Gee:]

Ben Gee, my possible distant relative, people are underemployed in the U.S. with their hours cut and most people cannot get by on 30 hours. People want to work 60 hours a week and many do holding two low wage jobs. The terms of trade agreed to by China to allow access to the U.S. and other markets are not being are not being fulfilled by China. The consumer class in China would benefit greatly if the U.S. could have the access promised. Read what the Office of The U.S. Trade Representative reports here:www.ustr.gov/sites/def....

Oct 27 03:52 PM

[Howard Richman:]

H.J. Huneycutt is clearly identifying part of the reason for US government inaction when he wrote, "The primary reason we have one-sided 'free trade' deals where we are expected not to have barriers to trades, but the other parties are allowed to have them, is because our politicians mindlessly pander to lobbyists representing industries that stood to benefit from the trade deals."

But there are other reasons as well:

1. Economists. Most American economists don't understand mercantilism, and the media follow their lead.

2. Bankers. Some banks think they can get rich as the middlemen for mercantilist loans.

3. Leftists. Some leftists want to see the Communist government of China triumph.

Howard

Oct 27 04:03 PM

[bob adamson:]

Mr. Richman -

In addition to the issues raised by others who have commented on your article, there is a further concern. it is highly doubtful that you are correctly interpreting the WTO rule you quote.

That rule is not designed to allow the quantity or value of merchandise of a specified country to be targeted for protectionist actions.

Oct 27 08:02 PM

[Duude:]

We could shake our fist at China or any other protectionist country demanding that we both eliminate all tariffs, but it won't do any good. While there may be an argument that we are much less protectionist than others and thus have more to gain, our relatively transparent lawmaking puts us at a huge disadvantage. If China didn't set up tariffs they could very easily subsidize to an even greater extent making the lowering of tariffs of no consequence while politicians in the US would reveal to all any secret subsidization of our own industry. Simply speaking we can't keep a secret and subsidizing industry is bad in the long run anyway. Just ask Japan. Any mutual agreement to drop tariffs would leave us the big loser as China, Europe, Russia,......everybody would secretly subsidize industry while in America loose lips would sink our ship.

Oct 27 09:49 PM

[Nettligent:]

While in huge debts, Americans are the Best Consumers of the World and continue to outsource jobs oversea. We will feel the pains for years to come.
Our retirement has little value. No Job. No Money. No Honey. No Health Insurance. No Problem.

Oct 27 11:15 PM

[Paco6945:]

Another way to increase exports would be to eliminate taxes on production (i.e., income taxes and payroll taxes) and replace them with a consumption tax such as the FairTax.

If the embedded taxes on production are, say, 20%, then the price of the product, when exported, is immediately reduced by 20%!

Oct 28 01:13 PM

[Howard Richman:]

Paco6945 correctly wrote: "Another way to increase exports would be to eliminate taxes on production (i.e., income taxes and payroll taxes) and replace them with a consumption tax such as the FairTax."

And Paco6945 is not even mentioning one of the huge advantages of the FairTax (and VAT), they are, what economists call "border adjustible." This means that they are excluded from American exports and charged on American imports.

Currently, American producers have to pay all US taxes, then when they cross the borders into our trading partners they have to pay their consumption taxes as well, and all of our trading partners have larger consumption taxes than us, usually 15 to 23%.

Howard

Oct 30 09:01 AM

[Howard Richman:]

bob adamson wrote that I had misinterpreted the very clear language of the WTO rule, specifically:

"That rule is not designed to allow the quantity or value of merchandise of a specified country to be targeted for protectionist actions."

He is clearly mistaken:

1. Invoking this rule would not be a "protectionist" action. The WTO rules do not allow protectionism. The purpose of this rule is to achieve "balanced trade" in order to prevent a serious financial crisis in the trade deficit country.

2. The language that follows the rule talks about discussions between contracting parties about other possible ways to alleviate the trade deficit. If a country were able to restrict imports from countries with whom it was *not* running a trade deficit, this language would not make sense.

3. If a country were *not* able to restrict imports from a country with whom it was running a trade deficit, as bob suggests, then the language of this provision could never be applied.

This provision recognizes the reality that trade deficits threaten the financial stability of the country running the deficit. Our experience in October 2008 illustrates this reality. We should have invoked this provision long ago!

Howard

Oct 30 09:25 AM