Thoughts on the Import Certificates
I stumbled upon Warren Buffet’s 2003 article about U.S. Deficit. The deficit simply cannot run forever, as it has negative consequences for both the US and foreign countries that are manifested in current economic debacle. I like Buffet’s idea of using the Import Certificate (ICs), a market-force friendly way, to achieve trade balance for U.S. import and export. The idea is that the US government issues ICs to all US exporters in the same amount of their export value. The exporter then sell their ICs to US importers or foreign exporters to the US, probably in a market.
I have a few additional thoughts on Buffet’s idea. First, the 1-for-1 ratio is too dramatic to get started. We can think the ratio as a continuum from the current actual ratio to the target ratio of 1-for-1. Thus, at the beginning, we can start issuing ICs comparable the current trade deficit ratio. With a target date when the trade balance should be achieved, say 5 years, we adjust the ratio month-by-month gradually toward the 1-for-1 target.
Second, different countries may have different deficit ratio now. We can let the beginning ratio to be specific to each country, while keeping the same pace for merging into the target ratio.
Third, we can have an even gentler ramp-up period, where we start the ICs ratio equal to the previous period’s deficit statistics. When the deficit reduce, we continue to adjust the ratio, but never adjust with any deficit increases. When the market is warmed up to the ICs, say in a year, we start the time clock to drive the ratio towards our 1-for-1 target.
Tags: deficit, import certificate, import certificates, warren buffet
