Saturday, May 21, 2005


The word makes Free Traders tremble with anticipation, but has of late brought some tremors of fright. A axiom of truth must be entered at this point: American Exports will never grow to match the current American level of Imports. This leads to the second truth which must be stated: The only way to effectively close the Trade Deficit, and alter the fundamental structure of the Current Accounts Deficit, is to find some way to curtail American Imports.

This Author thinks We will get an example of the effectiveness of Economic Policy, but exhibited in the only place where it is effective--at the microeconomic level. West Coast harbor facilities are raising their usage fees in effort to regulate the flow of traffic. This will alter Shipping costs significantly for Carriers, who have no effective manner of determining whether they can get the cheaper or the higher rate (they quene for harbor usage, and cannot tell what Time they will be called). Carriers will thereby charge Shippers according the higher rate universally, and raise Shipping Costs by almost 11% per Container. Simple Economic models, unadjusted for outside propulsions, relate this will mean a 4% reduction in Imports (this Author expects no more than 1% decline, due to those exterior propulsions to Trade). It will still mean a 0.6 reduction in the Advantage of Trade Index.

China is already placing tariffs on Clothing Exports, trying to head off U.S. and EU imposition of Clothing quotas. The tariffs will not succeed, because the Quotas will be imposed. This Author can hardly wait for the Quotas, but not to reduce Chinese trade. The Quotas have a microeconomic effect! American Wholesalers and Retailers find the Quotas effectively block Overseas investment to establish cheap supply of Goods. Said Wholesalers must rely on World market forces to purchase Goods from native-owned Manufacturers, or they must set up foreign distribution networks (a huge Expense) to sell their own excess manufacture.

What is the total effect?

Guess-estimates of the Author imply American foreign investment will decline by 12-15% due to the Quotas concurrently emplaced in both U.S. and EU, while American domestic investment will rise by a late 2-3%. The increased Harbor charges will sustain the microeconomic effect of the Quotas, without affecting American Exports (concentrated Goods with low Harbor charge per item) more than marginally. The Energy shortage of the coming Winter is vastly overrated, and the U.S. and EU, along with China and Japan, will not meet the Energy usage of last Year. You can all tell the Author how wrong he was, at the end of the Year. lgl

1 comment:

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