Bad solutions to a non-problem with the trade deficit

A recent posting at the American Compass describes a trade problem that is not really a problem and then prescribes three bold solutions that are not really solutions. If implemented, their proposals would in fact create real problems for an American economy struggling to tame inflation and dodge a recession.

Like many skeptics of trade, American Compass focuses on the trade deficit as a sign of failure of U.S. trade policy. Here’s how it summarizes the problem: “America imports massively more than it exports, leaving us deeply indebted to our trading partners. Rather than exchange American goods for foreign goods, we import on credit, sending back IOUs and ownership of our economy, which future generations will pay for. In the process, we allow the erosion of American industry and innovation, the decline of manufacturing employment, and the collapse of communities.”

To combat the deficit, the American Compass proposes three sweeping new tax and licensing systems on international commerce: 1) a Global Tariff on all U.S. imports starting at 10 percent; 2) a licensing system of Import Certificates that would ration the value of U.S. imports to equal the value of U.S. exports; and 3) a Market Access Charge of 50 basis points or more on all foreign purchases of U.S. assets, i.e. inward foreign investment.