Hello,
Here's that breathlessly awaited post on what? You said it trade!!!
The definition of TRADE in relation to the US: If it crosses customs and is intended to be sold in the US, it's an IMPORT. If it passes through customs from the US to be sold overseas, it's an EXPORT. Pay a TARIFF (bridge toll) either way.
Couldn't be simpler--Right????????? Uh huh. Uh Huh. Uh Huh. Well remember there's nothing so simple that we humans can't make complicated!!!!!!!
Tariff is a system of government decreed duties placed on imported or exported goods.
A TRADE DEFICIT is when the value of IMPORTS is GREATER than the value of EXPORTS. We owe money that way!!! Like our 1-2 TRILLION dollar debt to China.
GLOBAL TRADE is a political phenomenon NOT technological because it is so easy to undermine politically. It traces its roots to the 19th century in Europe.
Okay, we're off and running on trade.
Our old familiar corporation, "UP YOURS" has expanded again and a new CEO is looking covertly at foreign trade so that it can increase the sale of its suppositories in China where they have studied the market and find a great need for suppositories.
The CFO immediately begins negotiations and find the Chinese very interested. A trade agreement is reached. "Up Yours" will ship to "One Hun Lo" Corporation in Beijing, who will be the DISTRIBUTOR (seller) in China. The trade will mean that the suppositories must clear customs in the United States.
A financial agreement is reached so that "One Hun Lo" agrees to an opening shipment from "Up Yours" for 500,000 suppositories. Simple trade between foreign companies. Of course, now "Up Yours" must take into consideration a tariff (tax) on those goods by China. The same COST OF DOING BUSINESS will include shipping. A large order is usually freight prepaid so "UP Yours" must be sure their prices include the many extra costs of international trade. They are now also subject to the political pressures of international trading.
This kind of trade was not always possible in the good old USA. The early days of our new country had a lot of trade barriers to foreign imports plus high tariffs until the early 1900's when those barriers all but disappeared. When times got rough in the late 1920's The SMOOT-HAWLEY Tariff Act of 1930 (a name like that should have sounded alarms) and signed by Herbie (Herbert Hoover, generally blamed for the 1929 great depression but not alone in the deed) cooled trade drastically by raising the import duty (or tariff) 59%.
The SMOOT-HAWLEY ACT had the effect of causing tariff increases by about sixty retaliating countries. The result was a collapse of world trade and US imports fell to 31% of the l929 level and exports fell even more. This was a major contributing factor in the GREAT DEPRESSION. Thanks Herbie. ARE YOU GETTING THE IMPRESSION OUR WORST ENEMIES ARE SOME US PRESIDENTS??????????!!!!!!
Frankie (FDR) and his Congress saw the error of Herbie's ways and decided to change the rules. Loosen the ties that bind and create a little more government controlled socialism.
The Congress passed the TRADE AGREEMENTS ACT OF 1934. A good enough trade act that its principles are largely the basis of all US trade legislation since that time. It was renewed eleven times until 1962 when we enacted the Trade Expansion Act.
Formulation of trade policy in 1934 shifted from Congress to the President to negotiate mutual tariff reductions by almost 50% of the SMOOT-HAWLEY levels.
In 1947 the General Agreement on Tariffs and Trade called GATT was created as an international organization and devoted to free trade through multilateral negotiations and had headquarters in Geneva, Switzerland. GATT called for three basics: unconditional acceptance with a few exceptions; elimination of non tariff trade barriers with a few exceptions; dispute consultation among member nations. There were appeals allowed. By 1993 GATT had 123 nations and more since that time with overall tariffs reduced.
In 1962 Jack Kennedy called for the Trade Expansion Act a socialist plan that provided welfare subsidies for company workers supposedly displaced by foreign competition. It was used heavily from the l970-80's. Kennedy also used GATT to reduce tariffs by 35% over 5 years from their l962 levels.
Our Prexy Jack (when not doing Hollywood) created more bureaucracy called the office of the Special Trade Representative (STR) to participate in the multilateral trade negotiations in the 60's under GATT. Of course by the 1970's STR was expanded and made it directly accountable to the President and Congress and became a Representative on Cabinet level.
UP, UP, and AWAY. A 1979 Executive order elevated STR TO USTR (office of the United States Trade Representative) to centralize Government policy-making and negotiate international trade and EXPAND the office. Surprise--surprise!! How these centralized government offices do grow. It was further expanded in 1988, 1994 and 2000. We'll deal with the agency and its power in the next post.
There were a number of trade reform acts after that called: Tokyo Round of 1974; trade and tariff act of 1984; Omnibus Trade and Competitiveness Act of 1988; The Uruguay Round, 1993. Each of these acts were related to specific problems of that time frame.
International trade and its policy are still controversial. NAFTA (North American Free Trade Agreement) was designed to open trade between the US, Canada and Mexico. Open markets (free trade) is supposed to benefit consumers not producers and that creates a lot of restrictions.
More next time.
Cheers, Connie
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