Tariffs, Taxes and Trade
Explaining 'Balance of Trade'
Below is the text of a radio broadcast by an Australian political party.
The academic economists tell us that an excess of exports over imports is a favourable trade balance, while an excess of imports over exports is an adverse trade balance. Presumably therefore the most favourable trade balance occurs when there are no imports. Or does it?
Surely it is obvious that we export goods of which we have a surplus with a view to receiving payment for them, and that this payment comes only as goods in the form of imports. Without these imports the exports would be an utter loss. Yet our politicians tax imports, indeed in some cases ban them, as if it were a crime to receive payment for what one produces.
Trade is a two-way process. Consider the following facts given by Colin Clark in an article published by the Commonwealth Bank in 1951. Since 1938/39 our rural labour force decreased by 13 percent, while our factory labour force increased by 13 percent. Each rural worker is now producing on the average fifty percent less in quantity of goods per year than he was in 1938/39. By exporting our primary goods we can obtain three times the quantity of imported goods from each man employed in primary industry than we could obtain in 1938/39, and Colin Clark stressed that this was not predominantly due to high wool prices. But the average produce per man-year of those engaged in manufactures scarcely changed since 193/39, which in turn was near the 1928-29 level. Colin Clark also stated that imports supplied thirty-five percent of our requirements in manufactures in 1938/39, and thirty-eight percent in 1951. Clearly as a nation we cannot be independent of imports. We are now not only faced with the possibility of importing food stuffs, but also must bear the moral stigma of failure to produce food in the presence of the needy and destitute of other countries, despite our abundant natural opportunities.
The acceptance of this practice of encouraging inefficient secondary industry through high tariffs which inflate prices and lower living standards, is perhaps due to the psychological effect of the word "Protection," which suggests that tariffs, by excluding foreign goods, protect the jobs of Australians. But the fact is, as official statistics clearly show, that as imports increase, the numbers employed in Australian factories increase, and conversely. In the depression of the early 1930s, when prohibition against imports and customs duties were at their maximum, employment in Australian factories was at a minimum. Likewise, after the 1952 import restrictions there was a drop in employment in our factories. Protection does not promote employment; by restricting trade it has precisely the reverse effect.
The Henry George Justice Party believes that the principle of the division of labour should be extended to and recognised in the international realm; that a free, unhindered flow of trade is essential for economic efficiency, for the prosperity of all people, and for the development of international harmony.
--- G.A. Forster
Also see the text of a great
Protection and International Trade
presentation by Mike Curtis
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