What the world needs now in addition to love is wisdom.
Thursday, February 25, 2016
King Solomon, Donald Trump, Fair Trade Post Eight
Is this the right way to decide how to pass a Trade Bill Agreement?
In my previous post I stated I will explore how to re-balance trade in reply to the questions posted by the skeptical bloggers I mentioned in Post One of this series. Specifically I will present the pros and cons of three proposals.
However, I decided to first give you an idea of what a skilled negotiator needs to do do before entering into a trade negotiation with numerous details.
A wise man has more strength than a strong man does, and a knowledgeable person consolidates power; for expertise is needed to wage war, and safety lies in many advisers. (Proverb 24:5, 6)
The recommendation is to make policy by consensus and to follow the course in which there is unanimity or the broadcast agreement. By stratagems you conduct your war. (Proverbs MC Kane)
Are We in a Trade War?
There is no metaphorical meaning for war of lives with a trade war. However, when a skilled negotiator sets out to make a trade deal, he needs to obtain consensus and agreement between all trade partners to avoid both types of war.
What skilled negotiators do before a major negotiation is first meet, plan, set goals, and obtain consensus among themselves before they set off to negotiate with a trade partner. Not only what they want to accomplish, but also to plan for all contingencies to monitor and control the agreements.
For example, China and the USA agreed to abide to allow the WTO, World Trade Organization, to act as the arbitrator to settle any disputes which might arise during the course of trade. For example, if one trade partner accuses another trade of dumping a product. However, by the time the WTO investigates and rules on the dispute, the complainer party many be out of business.
For some unexplained reason, none of the trade agreements made by US trade negotiators state any recourse of what to do when trade imbalances occur. Even though the WTO knows well that trade imbalances can be harmful to a trade partner. The WTO model includes this following clause which US trade negotiators did not include in our trade agreements
“Finally, as we highlighted above, Proposition 3(ii) is a consequence of the complementary between rigidity and discretion. This implies that rising trade volumes (higher α) may make it worthwhile to add contingencies to the agreement, but only because it is now worthwhile to contract over domestic policies, and the value of adding state-contingencies to the agreement is enhanced as a result.25”
Download the pdf file If you want to see the complexity of a WTO guidelines for an ideal model trade agreement to understand what it entails. I could not find any contingency in the guidelines that address currency manipulation or specifics how to balance trade.
So What Needs to be Done?
It is simple, in my opinion, begin by renegotiating all trade agreements to obtain agreement with trade partners how to control and monitor goods being traded to balance imports with exports. In the very least, include an agreement that if one partner does incur huge trade imbalance, the other partner will not implement retaliatory tariffs and set off a trade war.
If a trade partner will not agree, even though both know one partner will be harmed, why even bother trading with a horse trader nation who may harm you. Of course, reality is there will always be exceptions. For example, if you need oil, and are willingly to accept resultant trade deficits as being the lesser of two evils to endure.
So why did our trade negotiators fail to obtain trade balances stipulations in all the trade agreements? In my opinion, either it was because of what Trump keeps saying about beingstupid?……,, unskilled?……, foolish? ……..or is there another reason like some lobby interest or open borders philosophy?
Or perhaps our trade negotiators did what the former Democratic Majority Leader of the House of Representatives, Nancy Pelosi, said about Obamacare. Instead of reading and understanding the Bill, she stated we have to first pass Obamacare to find out if it works. Well in my opinion, neither free trade nor Obamacare is working out as was promised by Congress. The travesty is Congress is doing nothing to change either problem even though it is their duty to represent our interests and that is what they promised in the last election.
In my Next Post
I will first explore the Donald Trump Position on reforming the US-China trade relationship and offer my opinions and comments. You are more than welcome to comment.