trade deficit is the dollar value of the excess of the cost of
imported goods over the dollar value of exported goods. It
is the major component of the Balance of Payments deficit, which
adds the dollar value of financial transfers and services
performed by foreigners (i.e., trips taken abroad by Americans)
to the trade deficit.
The trade deficit has exploded from $100 Billion annually a decade ago to almost $700 Billion annually, or more than 6% of the Gross Domestic Product. Much of the cost of financing this deficit is being met by recycling dollars borrowed from abroad and lending them back to the United States, which increases its total indebtedness to foreigners. The remainder is being financed by rapid increases in the domestic money supply by de facto counterfeiting by the Federal Reserve to offset the continuing drain from our economy of our dollars to pay for imports. The USA's foreign trade deficits are also magnified by various export barriers such as the European union's 28 percent import tariff on goods purchased from non-member countries which reduces the amount of U. S. exports. For fair trade that results in equal exchange, temporary annual trade deficits must be offset subsequently by annual trade surpluses among the participants.
The unending cumulative accumulation of many billions of US
dollars by foreigners that are then lent back to the USA
to pay for their exports to us is unprecedented by its magnitude
and duration. Obviously, it cannot continue indefinitely
because the debt service (interest) cost alone, not to mention
repayment, from the United States borrowing from
foreigners will eventually become unsustainable. It
is not "free trade", because trade requires an equal exchange of
goods over the longer term, with year-to-year imbalances
previously being offset by gold transfers between the central
banks (i.e., the Federal Reserve Bank in the United
States). Since leaving the modified gold standard in 1971,
the United States has been sending out tens (and now hundreds
of) of Billions of dollars annually to cover its balance of
payments deficit.. Dollars are debt: they represent claims upon
the real economy which ultimately must provide services or
things of value to their holders (or claimants).
The willingness of foreigners to hold dollars used to pay for our imports as a secondary domestic internal currency in unstable countries has enabled the United States to defer the real economic cost of repatriating those dollars back to this country. China and Japan recently have signed a bilateral agreement for their mutual trade, eliminating the need for dollars to finance their transactions by exchanging their own currencies. Another troubling consequence is the purchase of vast farmland holdings by foreigners and other assets such as shopping centers inside the USA. There have been limits of foreign ownership of airlines, but I am not aware of other industries that also could be shielded from foreign controlling ownership.
the cost of imported oil by its long term replacement through
renewable domestic energy supplies is becoming an absolute
necessity, both from the financial as well as the environmental
(i.e., greenhouse gas emissions reduction) perspective (see the
Energy and Environment Issue Paper). Domestic natural gas
provided by the new fracking technology is a temporary "bridge
fuel" expedient until it also could be replaced by renewable
energy sources. Furthermore, that technology has not been proven
to be without its adverse health and environmental impacts.
to eliminate profits from human exploitation should be imposed
upon imports produced by workers receiving slave labor wages and
having to endure substandard employment conditions. The
revenue from these tariffs should be used to compensate American
workers displaced by foreign slave labor. If we don't tolerate
such treatment of human beings in this country, how can we
morally justify condoning and encouraging treatment of other
human beings abroad by purchasing products made with their
labor? It is impossible for American workers to
compete on this basis even if they were to be forced to
accept similar treatment because our workers could not survive
living in America’s colder climate under such conditions.
In the 1920s, imports from the Soviet Union were banned because
the Congress said that they were produced by slave labor.
Why doesn't the Congress use the same rationale toward slave
labor produced imports now?
Finally, the United States must increase its exports to achieve a trade balance with China and other countries that now hold hundreds of billions of our dollars to reduce the USA's foreign debt service costs and stimulate our economy. Facilitating foreign tourist visits by simplifying and expediting visa processing creates many clean low skill jobs in areas that desperately need increased employment. For example, these countries should be requested to buy American made wind powered electricity turbine generators solar power systems, a solution which would stimulate the renewable energy industry in the United States and benefit its foreign creditor nations as well as the world's environment by reducing future fossil fuel consumption and greenhouse gas emissions. It is far better to earn our dollars back from increased exports and tourism than have foreigners acquire ever increasing ownership of our land and other physical assets lest we Americans become tenants to foreign owners inside THEIR country. Some countries (i.e., Mexico) learned that lesson the hard way and now do not allow majority foreign ownership of their assets and only 99 year leases on their lands. We should follow their example!
Return to home page
Designed by Imad-ad-Dean, Inc.