The article was written with the participation of Peter Navarro, Director of the National trade Council
USA have the lowest control and the highest trade deficit in the world — $ 500 billion per year. That’s why the President, Donald trump has instructed the Ministry of Commerce within 90 days prepare a report with a detailed analysis of the economic situation and the smallest nuances of trading models of America. As soon as Mr. trump would receive the results of this analysis, it will be able to take a balanced and rational measures to address any deviations from the norm.
This analysis will include finding answers to some critical questions. Are non-tariff trade restrictions reasons for these deficits? Low rates mean nothing when the actual import restrictions. It is necessary to establish which of the bilateral deficits caused by the artificial lowering of prices or other scams. The individuals behind permanent impairment in the area of trade, undermines the entire system.
How serious the problem of theft of intellectual property and forced technology transfer? As the world becomes more technology driven, intelligent resources would determine economic outcomes.
What kind of bilateral trade deficits are structural, not mercantilist? The US, for example, can not provide themselves with oil alone, so they have to import millions of barrels every day.
To what extent non-market economy operating under the market system, create trade imbalances? If the behavior of state enterprises differ from conventional businesses, they unnecessarily change the playing field. In this regard, questions arise as to the degree of conditionality of the permanent over capacity state subsidies, which in turn causes artificially low prices. The excess performance affect the aluminum and steel industries.
What kind of bilateral trade deficits has been caused by free trade agreements, has not led to the expected results and why? And to what extent problematic weak monitoring and dispute resolution mechanisms? The Commerce Department wins anti-dumping case only for the purpose of identifying offenders who evade paying taxes by overload or use of shell companies-importers. The United States also it is important to establish which trade deficits arise in connection with currency misalignment, regardless of whether this is due to the fraud or not.
Another question: how much of the deficit is due to previous political decisions? For example, whether deviations from the principle of “Buy American” — a set of rules governing internal procurement practices in US — in our trade agreements more than compensated mutual possibilities of purchases from our trading partners?
Among the causes of US trade deficits may be, for example, asymmetric world trade organization rules and their interpretation. American companies cannot deduct taxes on profits from exports, but the foreign exporters receive the benefits of the value added tax.
And how problematic the lack of reciprocity? In the US customs duty on imported cars is 2.5%, while the tariff rate on exports of up to 25%.
Finally, trade deficits arise due to the movement of capital or, as some people assume, because of differential growth rates? Does it make sense to argue that trade deficits don’t matter, even if the active balance of trade clearly contributed to the development of many of our trading partners?
Once on the Desk of President trump, the report of the Ministry of Commerce will help it to fulfil its obligations to ensure protection of the United States from unfair trade policies. So he will make the recent announcement that the new interpretation of the NAFTA (North American Free Trade Agreement, North American free trade area) will sound like NAFFTA, North American Free and Fair Trade Agreement — the North American agreement on free and fair trade.