Free Trade: Is It Fair?

The Trade Imbalance

Most economists, politicians and Americans believe that trade should be free. Good and services should travel from country to country with minimal difficulty and resistance. The beauty behind free trade is that it should be a ‘win-win’ situation for all participants. It is assumed that ‘free trade’ will also become ‘balanced and fair trade’ in which there is a sense of parity among participants. Sadly, for America, that has not become the case.

As you can see from the chart below (census.gov) we run trade deficits with thirteen of the top fifteen.

Current Trade Deficits (Jan-May 2020)

Rank	Country	Exports	Imports	Total Trade	% of Total Trade
	Total, all	491.5	734.5	1,226.0	100%
	Total, top 15	339.0	568.5	907.5	74.0%
1	Mexico	72.8	103.3	176.1	14.4%
2	Canada	84.2	89.8	174.0	14.2%
3	China	30.6	107.0	137.6	11.2%
4	Japan	23.6	42.9	66.5	5.4%
5	Germany	19.9	39.5	59.4	4.8%
6	Korea, South	18.6	25.2	43.8	3.6%
7	United Kingdom	21.4	18.3	39.7	3.2%
8	Taiwan	10.7	18.0	28.7	2.3%
9	India	10.0	17.3	27.3	2.2%
10	Switzerland	5.2	21.6	26.8	2.2%
11	Netherlands	16.9	9.9	26.7	2.2%
12	Vietnam	3.7	22.3	26.0	2.1%
13	France	11.4	14.5	25.9	2.1%
14	Ireland	3.0	22.6	25.6	2.1%
15	Italy	7.0	16.3	23.3	1.9%

There are numerous reasons for the imbalance in which the finger of responsibility can be pointed in all directions. Here are just a few:

American Mistakes

1. Companies have focused far too long on domestic market share instead of enlarging their sales overseas.  Only 1% of our companies do 80% of our exporting.
2. Many US companies have moved their manufacturing facilities abroad, thereby becoming importers to America.
3. Politically, we have embraced the virtues of free trade while allowing other countries to disregard those values.
4. American consumers are oblivious to the need to support domestic industries.

Trading Partners

1. Many countries with flat domestic consumption (Germany, Japan, Sweden) look to overseas markets (America) to increase sales.
2. We allow our largest importer, China, to manipulate their currency to our detriment.
3. Many countries not only have trade barriers but cultural and social barriers as well.  The Japanese will not buy a computer from an American company nor rice that would cost half the price.  China has huge duties on American autos while insisting that major products be made in China.
4. Many countries protect their domestic industries either through direct government funding or subsidized loans.  As a business model, Air Bus never would have gotten off the ground without huge subsidies and support. 

If we wish to influence our trade deficit and help create American jobs, you can do that as a consumer. Please consider the following:

1. Ask or determine where a product is made.
2. If possible and affordable, consider the American item first.
3. Let retailers know that you are searching for ‘Made in America’ products.
4. Encourage other family members and friends to do so.

We all have the ability to create jobs and influence change.  Please do so with your wallet.  After all, you make your money in America, try to spend it on America.  Thank you.