Fulfilling another campaign promise, President Donald Trump signed two trade-related executive orders this week. The president wants a country-by-country trade relationship investigation of the U.S. trade deficit. Of utmost concern is reports of trade cheating, weak enforcement, and the currency manipulation he accused China of undertaking.
The Coalition for a Prosperous America agreed with the move, adding an observation of it own. The organization’s CEO, Michael Stumo said “This is a very smart move to target countries with large bilateral imbalances. The administration should not only consider the export/import ratio but also unnatural and excessive savings and investment rates by mercantilist surplus countries.”
Trade deficits have hurt the U.S. and U.S. workers for many years. Poorly negotiated and managed trade arrangements have damaged or destroyed U.S. manufacturing industry. At the same time, they hinder economic growth while benefiting other countries.
The Coalition for a Prosperous America says 41 years of trade deficits helped hollow out U.S. manufacturing industry. They note that over the past 17 years, the U.S. lost 28% of its manufacturing employment, around 5 million jobs. The organization suggests that more than 2.5 million new jobs could be created by eliminating the trade deficit.
The president’s second executive order directed the Secretary of Homeland Security and the Secretaries of Commerce and Treasury to impose requirements and strengthen enforcement. The aim of this order is to increase the collection of duty.
Not surprisingly, CPA agrees with this move too. Stumo said, “Fraudulent duty evasion by trade cheaters has long been a problem.”
The range of trade cheating is wide and it involves massive losses of trade-related income to the U.S. The benefits flow to others – foreign governments, foreign exporters, middlemen and shippers – anyone but Uncle Sam. Among the methods of cheating are falsification of documents, trans-shipping products, product misclassification and use of sham importing companies that evade the law.
Stumo recently spoke on a panel at the Brussels Forum about the backlash against globalization. The panel headline was “Does the World Want to be Connected?”