1) The imports from any individual country in a calendar quarter shall not exceed the average quarterly U.S. exports to that country over the prior year designated as IQmax for that country.

2) Once imports from any country in any quarter exceed IQmax for that country, imports shall cease until the beginning of the next quarter except for the following remedies:

a) Any quaterly trade surplus from the prior 3 quarters may be applied to increase the value of IQmax for the current quarter. This provision accounts for seasonal variations in trade. The amount applied reduces the surplus for that prior quarter.

b) Any nation about to exceed their IQmax may negotiate with another country running a trade surplus with the United States to purchase some of that surplus and apply it to their IQmax. This is totally a paper transaction; the goods do not have to be shipped through the third country. This exchange of trade credits rewards countries who are in trade surplus with the United States while allowing trade deficit countries to exceed their normal IQmax as long as the total US world trade is in balance.

3) In recognition of the substantial trade imbalance that currently exists, this import limited balanced trade plan shall be phased in over a period of three years. Using the current year as a reference, in the first year each trade deficit country shall be allowed to have a trade deficit equal to 75% of their deficit for the reference year. This shall drop to 50% in the second year, 25% in the third year and to 0% in the fourth and all subsequent years. These trade deficit countries may further mitigate this transition by purchase of trade credits from trade surplus countries, but a US/world trade balance would be achieved starting in the fourth year.

4) Once US world trade has been brought into balance, the Commerce Department my apply a multiplier not to exceed 110% to the past year's US exports to that country as the limit for the current year's imports to account for anticipated annual growth in trade.

Justification: The issue we are addressing is the overall trade balance. Import duties reduce imports by making specific products more expensive. However this reduces competitive pressures on domestic producers and the whole system fails if foreign countries put similar duties on our exports. While this "Balanced Trade Import Limits" approach does not preclude duties on selective products, the favored approach is a free market. Since American imports are limited to American exports, foreign countries will concentrate their exports on their "highest value added" products and US producers will do likewise with our exports. Encouraging each producer to concentrate in their areas of comparative advantage is exactly what a free market is all about. Therefore under this proposal the free market decides what goods and services will be traded, but the trade balance requirement limits the amount of goods traded to maintain each nation's sovereinty over its domestic wealth.

Author: John M. Humphrey Email: Humphrey@aimnet.com