I’m pretty happy with free trade as I tried to say in the post.

Import licensing as proposed would be merely another form of rent seeking, the trade in licenses create another artificial market to be exploited. Why can’t you simply give free trade a chance? Why do you insist on putting borders around trading parties? If you buy a car made in Adelaide or one made in Kyoto, both parties benefit, irrelevent of their proximity to each other. Trade is good. Limits on trade are bad. It is not that difficult to understand.

Like I said, the question you raise isn’t comvincingly refuted by Buffett - certainly for the US. But the mechanism would certainly be better - a lot better - than traditional protection and it could easily make sense for developing countries as a better form of intervention than they currently practice. It might also make a useful temporary contribution to adjustments in some circumstances.

Anyway, how is this really any different in its effect to a drop in the value of your currency? The cost of imports goes up and the cost of exports goes down by the same proportion. I don’t really see why this can’t be sorted out by exporters, importers, investors, consumers, currency speculators, financial markets etc etc in the way they price currencies, bonds, commodities, etc. Sure, things are out of wack and will have to adjust eventually. But maybe it’s not actually a good thing for them to adjust now - the US was in surplus for many years, was there a need for it to adjust then? Perhaps the ability for countries to run trade surpluses and deficits allows them to smooth out changes in demographics, productivity, the structure of their economies and a rule that a country’s trade should be in balance at any time would just impose a costly (and really rather arbitrary) inflexibility?

But none of this is necessary or as advantageous for either developed or developing countries as more balanced development would be

True, but consider China. Imagine if there was 10x the rate of investment (which would happen if they didn’t send 90% of their surplus overseas).

How many more people would be uprooted by housing developments? Environments destroyed through inaction by toothless regulatory agencies? Essentially, more money floating around to incentivise misguided investment (think large-scale soviet projects).

That being the case, I think it may be better that the US invests it by proxy. Then, when China (hopefully) democratises, they can call their money in and go crazy!

I’m afraid I don’t follow your reasoning. Why is the US better to the developing countries for importing more of their stuff (providing they - the developing countries - finance it at lousy interest rates) rather than other rich countries who save more and can therefore invest more in developing countries, and leave them with more of their own capital to invest in their own production.

It’s true that the US has facilitated the mercantilism of some developing countries by beggaring itself in the long term with huge budget and external deficits. And if the developing countries were hellbent on mercantilism then it’s nice that the US was keen to take a free ride on them at least until they get sick of investing in US bonds. But none of this is necessary or as advantageous for either developed or developing countries as more balanced development would be.

A trade deficit is the only credible way to flow wealth to poorer countries, which in the long run, stabalises the world in terms of population and social cohesion.

Not to say that a little saving wouldn’t go astray in principle, especially as the spending occurs in a mistaken belief that consumer purchases will provide lasting contentment, but nevertheless, it only accelerates the wealth transfer.

On the other hand, it also places the majority of the world’s investment in the 1st world, meaning we benefit in terms of R&D and infrastructure. At the moment, this is not so bad since the political climates of the 3rd world are so unstable that investment there is likely to be wasted, and only add to corruption. However, in the longer term, we will have to find a way to begin investing productively in the 3rd world to achieve the aforementioned population and social stabalisation.