Why harm our economy with bad trade agreements?
After WW2 we made the decision to accept lousy trade agreements to help allies and potential allies, the process going out of control with Reagan and his decision to finance his deficit with foreign funds owned by others because of the trade deficit, giving them in 1983 an incentive of not paying taxes on the interest paid on those bonds.
But in the case of a country, that we sort of ran at the time, whose economy was in trouble, we watched as they, Japan, in June 1952, put in effect the “Basic Policy for the Introduction of Foreign Investment into Japan’s Passenger Car Industry” which placed quotas, tariffs and commodity taxes on imports that closed the Japanese automobile market to American manufacturers for nearly two decades, while also making use of licensing agreements which would transfer foreign technology to Japan in exchange for limited market access. Embargoes and other non-tariff trade controls are everywhere but we do nothing. China now demands that technology access/co-ownership for technology and of the subsidiary firm set up in China from firms that want to use China’s low cost labor market.
Perhaps those folks that were hoping that we would have some “change we can believe in” in trade, and and that we would go back to the modest protection we used for the first 120 years, might contact Obama about his pushing his 3 trade treaties (one blogger thinks Obama wants to push US wages down 30% to make us competitive, others note that Panama’s proposed Treaty produces a tax haven for the rich that we agree we will not investigate, and the other two lose up to a half million US jobs).
The Tariff Act of 1930, otherwise known as the Smoot–Hawley Tariff did not cause the depression – how could it when trade was only 5% of GDP and its dropping in half appeared to initially produce jobs, until foreign banks began to fail and jobs in general became hard to find.
Our trading partners violate WTO rules and we do nothing, indeed the WTO is a self-inflicted harm that we should end by getting out of the agreement and doing bi-lateral only trade agreements. But with Obama in the White House is there any hope of change?