How to Boost U.S. Exports

Includes: DIA, FXI, PGJ, SPY
by: Howard Richman

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 (NYSE: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