Trump’s solution is to negotiate trade quotas or impose tariffs.
The President’s plan makes the government a middleman, separating willing buyers from willing sellers, and perhaps with tariffs getting a piece of the action.
Sometimes middlemen perform important services, but at other times middlemen just raise costs. How often do we hear about companies trying to cut-out the middlemen.
We don’t need to have the government be the middleman, raising costs without providing any tangible benefits to consumers. We can have thousands of middlemen doing the job.
There is no reason to have the government involved in commercial transactions and negotiating deals for favored companies with foreign governments. Instead, the government should more rigidly take our natural right to buy from anyone, and force everyone to buy locally.
First, we have to define local. I’ll leave that to the politicians – they are good at making arbitrary rules. For now, lets define local as the distance people can drive and return in the same day. So a 500 mile radius around each person’s home would define local for each person. Don’t worry, the politicians will also define local for homeless people.
My proposal would do away with mail order, phone purchases or internet sales, and require that all purchases be done face to face. The plan would both help the trade imbalance, and make everyone buy local.
If you want goods or services produced more than 500 miles from home, you would buy from a middleman who lives not more than 1,000 miles from your home. You would meet near your 500 mile border, and exchange your dollars for the goods. But since, the middleman is local, there is no trade imbalance.
This plan would make items produced a long distance from home more expensive. To buy a car produced 3,000 miles from home would take 3 or more middlemen. Each middleman would add a markup. It might workout that someone will build a plant closer to your home, to cut-out some of the middlemen. Of course, the new producers would have to live within 500 miles of their plants, and all the raw materials used by the plants would have to be bought from someone who lived within their 500 mile boundary or bought from a middleman on their border.
But at least the costs imposed by the middlemen would not be arbitrarily set. Middlemen would compete for business, with rates set by the market. If the middlemen make their markup too high, that will give local businesses an advantage. Just like tariffs.
Such a plan would also eliminate a lot of long distance business travel. You could only do business with someone less than 500 miles from home. There would be no reason to travel to distant parts of the world for business. All you have to do is deal with your middleman.
People living in places like Hawaii that are more than 500 miles from the mainland will especially like this plan since it will probably discourage people from moving there. If they need things not locally available, they would have to find middlemen willing to live on ships. Those ships would have to stay within a 500 mile radius of their base.
Shipping oil would be discouraged, since the oil would have to be off loaded at sea onto another tanker. Although middlemen could arrange to buy the ship with oil, and then sell it back on the return trip.
Want to take a vacation in a far off location. You would take a plane that goes, no more than 1,000 miles, and then land and change planes owned by another airline. Entrepreneurs may build airports in locations not currently served by airports, but if you live more than 500 miles from an airport, you will just drive to your boundary, and then take a bus, or taxi from your border to a site closer to an airport. Eventually you will get there.
This plan would be cumbersome, and it would make things more expensive than how we live today. But expense is not the issue. It is about having more local jobs, and not having a trade imbalance.
Banks, phone companies, stock markets etc would all have to be local. Just think of all the jobs that would be created.
You want to talk to aunt Sarah 1,500 miles from home. Your phone company would have to connect to a phone company whose base was less than 500 miles from your border, who would then connect to another phone company, and eventually connecting to aunt Sarah’s local phone company.
Maybe doing business this way would cost more, but everyone would feel good knowing that whether they like it or not, everyone will be buying locally.
Author’s comment: Please do not suggest this plan to anyone in Washington, DC. They might think it is a good idea.