Dynamics and objectives of international trade

Standard international trade models universally consider maximizing the availability of inexpensive goods as the objective of international trade. They then go on to show that tariffs and other impediments to trade cause a loss of economic efficiency. Fewer goods are available in the trading nations because of the impediments. The common method of analysis is to use price / quantity curves and two-nation / two-product curves.

Here we show that international trade is far more complex. It is a vast network beyond our present ability to accurately model. It can, however, be structured as a linear program. As a linear program it has many of the characteristics of a network. The chief difference is that linear programs provide static analysis. The world trade network is dynamic. However, by structuring it as a linear program, many of the components of international trade omitted by price/ quantity and two-nation / two-product analysis can be incorporated.

An important part of any programming analysis is determination of the objective function. Several objective functions are examined, particularly with respect to employment impacts. A variable compensatory tax (VCT) is selected as a means of dealing with the dynamics and complexity of international trade. It has the potential to repatriate 6 million jobs, is simple to implement, precludes retaliation, and would bring U.S. trade into a permanent balance of ± 5%.