A quote from Warren E. Buffett's November, 2003 FORTUNE Magazine article titled America's Growing Trade Deficit Is Selling the Nation Out From Under Us. Here's a Way to Fix the Problem--And We Need to Do It Now., follows:
"We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits. At a point, so it was claimed, the spree of the consumption-happy nation would be braked by currency-rate adjustments and by the unwillingness of creditor countries to accept an endless flow of IOUs from the big spenders. And that's the way it has indeed worked for the rest of the world, as we can see by the abrupt shutoffs of credit that many profligate nations have suffered in recent decades."
Based on this quote, currency-rate adjustments and unwillingness of creditor countries should have precluded the United States from amassing our $11 billion cumulative trade deficit, but China's manipulation of the U.S. Dollar and willingness to accumulate several trillion dollars of our debt has provided our leaders with the means to cannibalize our economy.
The President's Trade Agenda, recently published by The Office Of The U.S. Trade Representative, boasts about taking on the status-quo, but, regarding U.S. imports justifies maintaining the status-quo, with the following justification:
"Whether we continue to pursue trade agreements or not, the United States will continue to see foreign imports because consumers demand them and we have virtually no barriers to imports."
Since imports account for two-thirds of U.S. Trade and The President's Trade Agenda is unwilling to address the status-quo regarding imports, the Administration's proposed trade agenda is two-thirds empty, at best, in addressing America's growing trade deficit, which was so troubling the Warren Buffett twelve years ago.
As a further insult to the American people, The President's Trade Agenda touts dispute settlement mechanism as a means for raising standards, but fails to mention how foreign corporations will be able to use an expanded version called the Investor-State Dispute Settlement (ISDS) mechanism to potentially extort money from governments for lost profit opportunities and ultimately force standards to be lowered.
In the fascinating and frightening book "The Coming Jobs War" by Jim Clifton, chairman of Gallup, Clifton reminds us that the sweet spot for economic growth is in the small to medium-sized business realm because these companies create and grow far more jobs than jumbo companies do. Instead of leveling the economic playing field for small to medium-sized businesses, ISDS will give foreign jumbo corporations an unprecedented competitive advantage not available to any domestic business regardless of size.
The famous political economist, David Ricardo's 1817 theory of comparative advantage has provided the justification of free trade for going on three centuries. In his book "On the Principles of Political Economy and Taxation" Ricardo lists the flight of capital among the destroyers of comparative advantage in manufacturing. This is highly relevant to why the The President's Trade Agenda will potentially be a cup more than two-thirds empty, because Investor-State Dispute Settlement mechanism will encourage a flight of capital from the United States to the counties of our trading partners where the ISDS mechanism will be available to them, rather than to the U.S. where it will not be available.
In summary, The President's Trade Agenda is a disaster waiting to happen due to its unwillingness to address imports into the U.S, which accounts for the lion's share of our trade challenge and because of Investor-State Dispute Settlement mechanism which lowers the risk to corporations exporting jobs, as well as our tax base.