COVID-19 shows that imbalanced trade is killing US
We have been warning of the costs and dangers of imbalanced trade for decades. With the election of Donald Trump, U.S. voters showed they got it. But our country's elites in Congress and the bureaucracy have dragged their feet. Perhaps with COVID-19, U.S. elites will recognize that imbalanced trade is killing the U.S. and finally get behind President Trump to fix it.
When a country configures its policies so that it consistently buys almost a trillion dollars more in goods from abroad than it sells, several things happen. First, it stops making stuff. Second, it goes deep in debt to foreigners. Third, it becomes less resilient in the face of disasters and threats.
The consequences of imbalanced trade are dramatically apparent in the manifold weaknesses revealed by the current pandemic. When China fought the virus, its medical workers had available top-quality respirators and full-body protective suits. Millions of face masks were sent to the people of Wuhan, allowing each person to play a role in reducing transmission of the virus.
When American companies produce abroad, their factories may be taken over by the countries where the factories reside. In fact, that is exactly what happened in China during the COVID-19 epidemic, as President Trump's economic adviser Peter Navarro pointed out in an interview with Maria Bartiromo on February 23 (see the 2:15 mark):
In terms of the immediate issue, face masks — the N-95 face masks, China put export restrictions on those masks and then nationalized an American factory that produces them there.
As the U.S. attempts to fight the pandemic that spread from China, our hospitals have dwindling supplies of the most basic protective gear and no possibility of providing our medical workers with the kind of protection China's doctors and nurses had available.
The U.S. faces this crisis underprepared in large part because the stuff needed to fight the virus isn't made here. As our test kits run short of basic components, like swabs, and advanced components, like chemical reactants, the effort to ramp up testing continues to falter with ridiculously strict criteria that keep even people with classic symptoms and known exposure from getting tested.
In the face of shortages, public health officials have chosen to lie in order to conserve vital stocks of the face masks that have played a critical role in reduced public transmission in China, Japan, Korea, Taiwan, the Czech Republic, and Singapore. The absence of industry because of deindustrialization reduces the range of firms that could repurpose production to meet the shortfalls.
Many in the elite are still trying to undermine Trump on trade, just as they did on border security. Many in the bureaucracy even dragged their feet at implementing the measures that were needed to keep those with the COVID-19 virus out of the country.
The authors have developed proposals that would balance trade, including the single country import certificate (our 2008 book) and the scaled tariff (our 2014 book). Congress could enact one of our proposals or enact the United States Reciprocal Trade Act, proposed by the Trump administration.
Such a law would provide investors and companies with the sure knowledge that U.S. trade will be moving toward balance. It would accelerate their building of new factories and R&D facilities in the U.S., which would reindustrialize the U.S. and, more importantly, go a long way towards restoring our ability to survive shocks, such as COVID-19.
COVID-19 is just one of many crises to come that will reveal how imbalanced trade is killing U.S. jobs, power, and people. Comprehensive action to fix the problem is decades overdue.
The Richmans co-authored the 2014 book Balanced Trade, published by Lexington Books, and the 2008 book Trading Away Our Future, published by Ideal Taxes Association.