“Free Trade” vs Fair Trade, Americans Need to Know the Difference
In 1984, President Ronald Reagan suggested that we pursue free and fair trade with free and fair traders. Note that Reagan said free and fair trade. Competing nations are not playing by the rules, and the consequences are alarming.
Goods coming in from the European Union face no tariffs, which is a special fee put on imports. However, American goods exported to Europe are marked up 15 to 20% due to a special tax known as the value added tax, or VAT. Thus, American goods sold in Europe cost significantly more than their competitors’.
With a similar situation occurring with other nations, it is no wonder the United States imports far more than it exports. Letting others fleece the economy for all it is worth is not free trade. Since other nations are not engaging in true free trade, it makes no sense for the United States to do so. Instead of free trade, we need fair trade.
Fair trade would consist of creating baseline levels of economic protection, to prevent American industries from going out of business due to unfair competition. The abandonment of fair trade has created a worldwide race to the bottom in wages and environmental standards. This is a situation that no one wins in, except for shareholders and executives of big companies that profit from the status quo. What can we do to correct this situation and make it beneficial?
First, we cannot forcibly change the laws and policies of other nations, so we need to examine our own trade policies. However, due to membership in the WTO, the U.S. lost the ability to implement some necessary policies. WTO regulations even supersede the U.S. Constitution, which is supposed to be the supreme law of the land. As FDR once said during the Great Depression, we must put first things first. Taking a time out from our current trade agreements and WTO obligations is essential to stop the bleeding and reevaluate those arrangements.
There is a clear process established by the WTO to do this that could be started by either Congress or the president. Our massive trade imbalance, caused by importing hundreds of billions of dollars of goods more than we export, is an allowable reason to do so. During this time out, we could effectively correct the problems facing the economy. There is even a precedent for this. In 1971, president Nixon took a temporary time out from trade obligations to implement a tariff against Japanese products to correct a minor trade imbalance.
Next, we must stop approving trade deals that make no sense for the United States. While the president has an admirable goal of increasing U.S. exports, these agreements always increase imports far more than exports and compound our problems. The solutions outlined here will prevent the United States from having to survive on imports and will increase employment. These measures will take time to reverse decades of decline, but if we do not take back control of our economy, we will lose the prosperity and freedom that has been known since the founding of this nation.
Our standard of living and future conditions are in a state of peril, but by working together to rectify our situation, we can create fair trade to benefit all.