Balanced trade
Encyclopedia
Balanced trade is an alternative economic model to free trade
. Under balanced trade nations are required to provide a fairly even reciprocal trade pattern; they cannot run large trade deficits.
The concept of Balanced Trade arises from an essay by Michael McKeever Sr. of the McKeever Institute of Economic Policy Analysis. According to the essay, "BT is a simple concept which says that a country should import only as much as it exports so that trade and money flows are balanced. A country can balance its trade either on a trading partner basis in which total money flows between two countries are equalized or it can balance the overall trade and money flows so that a trade deficit with one country is balanced by a trade surplus with another country."
Balanced trade has been advocated by Warren Buffet, who suggested a system of "Import Certificates
" (ICs) – exporters would receive $1 of ICs for each $1 of goods they exported, and importers would be required to present $1 of ICs for every $1 of goods they import. This would limit the value of imports to at most the value of exports (and presumably exactly the value of imports, assuming no leakage), and create a market of exporters to sell ICs to importers, effectively subsidizing exporters and taxing importers – compare cap and trade.
In the United States, the idea was first introduced legislatively in the Balanced Trade Restoration Act of 2006. The proposed legislation was sponsored by Senators Byron Dorgan
(ND) and Russell Feingold (WI), two Democrats in the United States senate. Since then there has been no action on the bill.
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
. Under balanced trade nations are required to provide a fairly even reciprocal trade pattern; they cannot run large trade deficits.
The concept of Balanced Trade arises from an essay by Michael McKeever Sr. of the McKeever Institute of Economic Policy Analysis. According to the essay, "BT is a simple concept which says that a country should import only as much as it exports so that trade and money flows are balanced. A country can balance its trade either on a trading partner basis in which total money flows between two countries are equalized or it can balance the overall trade and money flows so that a trade deficit with one country is balanced by a trade surplus with another country."
Implementation
A more extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. "A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance."Balanced trade has been advocated by Warren Buffet, who suggested a system of "Import Certificates
Import Certificates
Import Certificates are a proposed mechanism to implement balanced trade, and eliminate a country's trade deficit. The idea was proposed by Warren Buffett in 2003 to address the U.S. trade deficit. In the United States, the idea was first introduced legislatively in the Balanced Trade Restoration...
" (ICs) – exporters would receive $1 of ICs for each $1 of goods they exported, and importers would be required to present $1 of ICs for every $1 of goods they import. This would limit the value of imports to at most the value of exports (and presumably exactly the value of imports, assuming no leakage), and create a market of exporters to sell ICs to importers, effectively subsidizing exporters and taxing importers – compare cap and trade.
In the United States, the idea was first introduced legislatively in the Balanced Trade Restoration Act of 2006. The proposed legislation was sponsored by Senators Byron Dorgan
Byron Dorgan
Byron Leslie Dorgan is a former United States Senator from North Dakota and is now a senior policy advisor for a Washington, DC law firm. He is a member of the North Dakota Democratic-NPL Party, the North Dakota affiliate of the Democratic Party. In the Senate, he was Chairman of the Democratic...
(ND) and Russell Feingold (WI), two Democrats in the United States senate. Since then there has been no action on the bill.