The United States needs a stronger foreign policy and it begins with trade. The current trade deficit for 2006 in the United States through April is $63.4 billion. When there is a trade deficit that means that there are more dollars leaving the United States than returning to the United States. This causes the United States to print additional dollars to account for the influx of other currencies thereby devaluing the dollar and causing inflation. A strong trade policy helps resurrect the dying industrial jobs in Oregon and throughout the nation.
This influx in currency is a major factor behind the recent increases in oil prices. As the dollar is devalued, the cost to buy the same quantity of a good is increased. Therefore, as the trade deficit increases we will see a direct correlation to the gas prices by an increase. To solve this trade deficit requires a few steps.
1. A reduction in the cost of labor – Labor costs are the driving force behind the departure of US Corporations to other nations because the primary reason for the existence of any business is to maximize stakeholders benefit. We do not need to reduce labor costs to that of a third world nation because doing so would tremendously hurt our productivity, rather the solution is to reduce to a point at which the labor cost and productivity exceed the output for the labor cost/productivity/transportation costs of foreign labor.
2. Strong illegal immigration policy — Decreasing the labor costs in America through an increase in illegal immigrants is not going to help the average American. Although increasing the supply of labor decreases the cost of that labor, it hurts average Americans to do so.
3. Reform the tax system — The current income tax system encourages individuals to not invest money. The greatest benefit to residing in the US is that we have excess capital, but the government restricts the incentive for people to utilize that capital in a manner than would positively affect the GDP of the nation by taxing capital gains.
4. Utilize our natural resources — We need to be able to utilize those resources else what good is it to have them.
There are only two ways to bring a trade deficit back to zero, either increase exports or decrease imports. It is near impossible to increase our exports because other nations are nearly tapped out on being able to import America goods. Therefore, the only solution to reducing our trade deficit is to increase production in the US and decrease imports. These steps outlined would help to increase production in our nation at a comparable cost to that of other nations. Many businesses do not care where they produce goods as long as they can do so cheaply and thereby cornering the market of a good.
When we rely upon American goods as opposed to foreign goods, it means that we do not have to depend on another nation to support us in times of economic downturn. Other nations cannot hold us hostage through refusing to import goods. As we adopt a stronger US policy toward a trade deficit, we will see the long term benefits of a stronger, more unified United States.