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Tuesday, January 24, 2017

Ditching TPP Won’t Solve the Trade Deficit

Jared Bernstein:

Ditching TPP Won’t Solve the Trade Deficit: President Trump wasted no time tackling his campaign promise to reverse America’s trade deficit: On Monday he signed a memorandum withdrawing from the Trans-Pacific Partnership, a move he promised would be a “great thing for the American worker.” The withdrawal dovetails with promises to impose tariffs on imports and crack down on American companies that manufacture overseas.
These steps make for great optics. But in economic terms, they’re unlikely to move the needle. For the country to improve its trade balance, the president’s going to have to do a lot more.
Ripping up trade deals won’t achieve much. ...
And it’s hard to imagine much good emanating from Twitter-shaming China, or writing a check to the occasional factory to prevent it from outsourcing some of its jobs. Such measures are far too ad hoc to make a systemic difference.
So what would work?...

After explaining five possible ways to improve the trade balance (duties on imports from countries that manipulate their currency, countervailing currency intervention to neutralize attempts to manipulate a currency, capital controls, import certificates equal to the value of a countries exports, and enforceable rules on things like currency manipulation and rules of origin), he concludes with:

... In the 1970s and ’80s, as trade deficits became persistent, politicians did not hesitate to respond through these sorts of interventions. Our obsession with unfettered markets has since precluded such efforts, even though our trading partners have not been nearly so constrained. President Trump’s ascendancy may change that equation. The question is whether his administration will get it right.

    Posted by on Tuesday, January 24, 2017 at 05:04 AM in Economics, International Finance, International Trade | Permalink  Comments (65)


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