The Trade Deficit Isn’t a Scorecard, and Cutting It Won’t Make America Great Again

[Dovahkiin]

This is a great piece on the NYTIMES. The 'trade deficit' is not something to worry about (as long as we have a government deficit), in fact, the only reason the dollar is the worlds reserve currency is that we're running a trade deficit. We're getting the benefit of cheap goods and helping developing economies, and all we're doing is marking up accounts. Now, in a situation where the government is not running a deficit greater to then the trade deficit, we have a problem. A trade deficit does indeed mean dollars are flowing out of the united states.
http://www.nytimes.com/2016/03/28/u...ng-it-wont-make-america-great-again.html?_r=0

The reality is different. Trade deficits are not inherently good or bad; they can be either, depending on circumstances. The trade deficit is not a scorecard.

What’s more, eliminating the trade deficit would not, on its own, make America great again, as Mr. Trump promises. And in isolation, the fact that the United States has a trade deficit does not prove that trade agreements are bad for Americans, a staple of Bernie Sanders’s campaign in the Democratic presidential primary. In fact, trying to eliminate the trade deficit could mean giving up some of the key levers of power that allow the United States to get its way in international politics.

That difference is the trade deficit: BananaLand has a $1 million trade deficit; CarNation has a $1 million trade surplus.

But this does not mean that BananaLand is “losing” to CarNation. Cars are really useful, and BananaLandites got a lot of them in exchange for their money.

Similarly, it’s true that the United States has a $58 billion trade deficit with Mexico, for example. But it’s not as if Americans were just flinging money across the Rio Grande out of charity. Americans get a lot of good stuff for that: avocados, for example, and Cancún vacations.

If you want to think of it in terms of winners and losers, in fact, you could justifiably reverse Mr. Trump’s preferred framing: “Those losers in Mexico gave us $58 billion more stuff than we gave them last year. Ha, ha, ha. We’re winners.”

The choice is stark: A country running a trade surplus must either let its currency rise or let money flow back to its trading partners.

This isn’t just an abstraction. It’s what has happened between the United States and China for the last couple of decades. China has had consistent trade surpluses, but it did not want its currency to rise in a way that would undermine its exporters. So money has flowed from China into the United States — both from the Chinese government’s purchases of United States Treasury bonds and more recently in the form of direct investment from Chinese companies into the United States.


The dollar is a global reserve currency, meaning that it is used around the world in transactions that have nothing to do with the United States. When a Malaysian company does business with a German company, in many cases it will do business in dollars; when wealthy people in Dubai or Singapore’s government investment fund want to sock away money, they do so in large part in dollar assets.

That creates upward pressure on the dollar for reasons unrelated to trade flows between the United States and its partners. That, in turn, makes the dollar stronger, and American exporters less competitive, than they would be in a world where nobody used the dollar for anything except commerce involving the United States.

The roughly $500 billion trade deficit that the United States runs each year isn’t just about poorly negotiated trade deals and currency manipulation by this or that country. It’s also, to some degree, a byproduct of the central role the United States plays in the global financial system.

 

[S.J.]

So, less jobs in the United States is a good thing? I don't think so.

 

[eagle1462010]

 

[Dovahkiin]

So, less jobs in the United States is a good thing? I don't think so.

Hardly anything to do with the foreign sector. Automation and new technology, and a movement to service.
Here is the output of the domestic manufacturing sector:

 

[eagle1462010]

 

[eagle1462010]

 

[Dovahkiin]

LOL. It's a constant decrease going back to 1940! Nothing to do with our trade deficit in any major way!

 

[S.J.]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

 

[Dovahkiin]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

Why the hell do you want to reduce the trade deficit? Other countries are literally sending us millions of cars, and other products for cheap prices, and all we're doing is marking up some accounts. We aren't sacrificing anything!

 

[S.J.]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

Why the hell do you want to reduce the trade deficit? Other countries are literally sending us millions of cars, and other products for cheap prices, and all we're doing is marking up some accounts. We aren't sacrificing anything!

Except jobs and quality in the products they're sending us. And how do you feel about sweat shops and forced labor in other countries producing these cheap products? It's not just cars.

 

[Dovahkiin]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

Why the hell do you want to reduce the trade deficit? Other countries are literally sending us millions of cars, and other products for cheap prices, and all we're doing is marking up some accounts. We aren't sacrificing anything!

Except jobs and quality in the products they're sending us. And how do you feel about sweat shops and forced labor in other countries producing these cheap products? It's not just cars.

Jobs? Really? Look at the history of U6 and U3 and get back to me. Manufacturing is never coming back, ever. Developing countries are always a better option for firms. Japanese cars tend to be of really good quality. Sweat shops? It's better then those same people starving to death. Forced labor? Not as bad of a problem as it's made out to be, and governments tend to be responsible for this, not firms.

 

[MisterBeale]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

Why the hell do you want to reduce the trade deficit? Other countries are literally sending us millions of cars, and other products for cheap prices, and all we're doing is marking up some accounts. We aren't sacrificing anything!

You globalists just want to keep sucking dry all the labor and resources from the poor nations of the world. Fucking robber barons.

Wouldn't it be better the the US to start taking care of itself and start producing what it needs for itself?

 

[Dovahkiin]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

Why the hell do you want to reduce the trade deficit? Other countries are literally sending us millions of cars, and other products for cheap prices, and all we're doing is marking up some accounts. We aren't sacrificing anything!

You globalists just want to keep sucking dry all the labor and resources from the poor nations of the world. Fucking robber barons.

Wouldn't it be better the the US to start taking care of itself and start producing what it needs for itself?

Us globalists are supporters of the greatest system on earth, capitalism.

 

[MisterBeale]

I don't think anyone, including Donald Trump is claiming that reducing the trade deficit alone will fix everything. It's just one of a number of things that needs to be corrected. The argument from the left is always to attack and idea or proposal as ineffective because it doesn't solve all related problems. We see that argument all the time here.

Why the hell do you want to reduce the trade deficit? Other countries are literally sending us millions of cars, and other products for cheap prices, and all we're doing is marking up some accounts. We aren't sacrificing anything!

You globalists just want to keep sucking dry all the labor and resources from the poor nations of the world. Fucking robber barons.

Wouldn't it be better the the US to start taking care of itself and start producing what it needs for itself?

Us globalists are supporters of the greatest system on earth, capitalism.

Bullshit.

You wouldn't know capitalism if it fell out of the air, landed on your face and wiggled around.

Globalists are only interested in government manipulated corporatism.

 

[Supposn]

This is a great piece on the NYTIMES. The 'trade deficit' is not something to worry about (as long as we have a government deficit), in fact, the only reason the dollar is the worlds reserve currency is that we're running a trade deficit.

Comparison between
http://www.nytimes.com/2016/03/28/u...ng-it-wont-make-america-great-again.html?_r=0
and
“Trade balances affects upon their nations economies” within Wikipedia’s article entitled “Trade balances”.

Dovahkiin, I’m among the proponents of a trade policy species described in Wikipedia’s article entitled “Import Certificates”.
The unilateral trade policy’s purpose is to significantly reduce, if not entirely eliminate USA chronic annual trade deficits of globally traded goods. It is substantially market rather than government driven and it is an indirect effective subsidy of USA exports. Its federal net expenditures would be entirely funded by USA purchasers of foreign goods.

Annual trade deficits are ALWAYS immediately detrimental (more than otherwise) to their nation’s economy.
Refer to the paragraphs entitled “Trade balances affects upon their nations economies” within Wikipedia’s article entitled “Trade balances” is dedicated to this topic and justifies the proposed trade policy.

The Wikipedia and the NY Times articles agree upon many, possibly the majority of their discussion points but those reading and comparing the two articles will arrive at differing conclusions.

I have to go now but I will return to this thread.
Respectfully, Supposn

 

[Supposn]

Comparison between NY Times article of March 28, 2016,

“The trade deficit isn’t a score card”

and

“Trade balances affects upon their nations economies” within Wikipedia’s article entitled “Trade balances”.


Dovahkiin, both the NY times and the Wikipedia articles agree that an annual trade deficit indicates the nation’s (lesser than otherwise) production of goods and services and lesser numbers of jobs; (otherwise being if the nation had not experienced a trade deficit that particular year). Both articles make no mention of lesser gross production of goods, (GDP) per capita and lesser jobs are generally also accompanied with lesser median wage.


There’s no doubt that enterprises enter into global trade transactions because they perceive it’s to their advantage; they’re generally correct. But although the better interests of USA’s commercial enterprises and the nation’s economy are often similar, with regard to our annual trade deficits they certainly do diverge.


USA employees can reduce their expenditures by importing goods from lower wage-rate nations and they can further reduce their expenditures for production and production supporting labor.

Those enterprises financial advantages are to our nation’s economic detriment to some extent. The greatest portion of that economic detriment is shifted upon USA employees and their dependents but additionally greater public assistance rolls and under-employment reflect the increased poverty. Unemployment is only the most extreme case of under-employment.

The benefits of cheaper foreign goods do not compensate USA employees and their families for our chronic annual trade deficits of goods detriment to our GDP, numbers of jobs and median wage.

Those with earning approximate or less than USA’s median-wage account for more than half of USA's entire work force. They and all of their dependents' purchasing powers are critical to USA’s economy.


The author of the NY times article correctly states cutting USA’s trade deficit will not make us great; but the entire improvement of an economy is rarely if ever due to only one act. Adopting the unilateral trade proposal described in Wikipedia’s “Import Certificates” article would significantly improve our economy.


Respectfully, Supposn

 

[Supposn]

Comparison between NY Times article of March 28, 2016, “The trade deficit isn’t a score card”
and
“Trade balances affects upon their nations economies” within Wikipedia’s article entitled “Trade balances”.

Dovahkiin, the logic of the NY times article is that although USA’s chronic annual trade deficits are detrimental to our GDP, numbers of jobs and median wage, that economic detriment is somewhat mitigated due to the money being eventually invested in USA enterprises.

[I did not overlook such money returning to purchase USA goods and services:
Regardless of the owners’ nationalities, enterprises producing goods and services in the USA are USA enterprises. Wealth of others spent on behalf of USA enterprises are investments into the USA enterprises.

Monet spent for products exported from the USA are increases of our net trade balance and thus reduce any USA trade deficit we may have].

I do not perceive foreign invested dollars, rather than investments made by USA enterprises to be of greater advantage to USA’s economy; do you see it differently?

Investment in our nation is beneficial, but if the investments are enabled by our annual trade deficits, they're net detrimental to our economy.

Respectfully, Supposn

 

[EdwardBaiamonte]

Wouldn't it be better the the US to start taking care of itself and start producing what it needs for itself?

no, if every individual or state or country had to make what it consumed we'd have to, for example, grow our own bananas at $20/lb instead of importing them at 10 cents/lb. Now you know the basics.

 

[Supposn]

...
Wouldn't it be better the the US to start taking care of itself and start producing what it needs for itself?

MisterBeale, referring to the 12:36 PM, April 4, 20216 post:

. The proposed trade policy described within Wikipedia’s article entitled “Import Certificates” is substantially market rather than government driven and although the market would still determine what goods we will or won’t import, USA will significantly reduce if not entirely eliminate our chronic annual trade deficits’ drag upon our economy.

Respectfully, Supposn

 

[CrusaderFrank]

So, according to Carlos Slim's newpaper, it's better for us to export our money than our products and services.

hmmmkay