*sigh*
Only one left to do now:
Posted on 10/20/2004 2:40:59 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
If you think Pedro Martinez' numbers against the New York Yankees look bad (and they do), they're nothing compared with the government's latest monthly trade figures. Dismal as the Boston Red Sox ace's performance against the Bronx Bombers has been, he looks like a champion next to the trade numbers, which are one important measure of the U.S. economy's performance against the rest of the world.
Not that the trade surplus and deficit figures tell us everything we need to know about America's competitiveness. In particular, they compare apples and oranges – how U.S. products fare in overseas markets versus how foreign products do in U.S. markets. And even studying the trade figures industry by industry can be misleading. By definition, they can't shed light on which U.S. industries depend how heavily on exports and/or face major foreign competitors, and which U.S. industries sell mainly to the humongous U.S. market and/or face little import competition.
Still, according to mainstream economic theory, these trade balance figures say a great deal about the relative strength of America's economy, whether it is waxing or waning, and what its future composition will be. The reason? What a country trades most successfully – where it wracks up its biggest surpluses - eventually becomes what it makes most successfully and prolifically. And what it trades least successfully – where it wracks up its biggest deficits - eventually becomes what it makes least successfully and prolifically. That, in plain English, is what comparative advantage in all its forms is all about.
The deficits also show that the United States is a country that consumes far more than it produces. Although the economic price for this profligacy has appeared minor so far, anyone expecting the situation to last forever and is blasé about its worsening must believe there really are free lunches after all.
The August, 2004 trade figures released Oct. 14 by the Census Bureau show an overall U.S. deficit in goods and services of $54.04 billion, second all-time only to June´s $55.2 billion. This year´s January-August deficit level, as a result, is more than 19 percent larger than last year´s, meaning that the annual deficit figure is on its way to smashing last year´s $421 billion record total.
Even worse, the U.S. deficits keep soaring despite the soft patch recently encountered in domestic growth, and the gradual continued weakening of the dollar. The first is supposed to keep imports down and the second is supposed to buoy exports, but little of these macroeconomic effects are being felt.
Further, the closer one examines the deficit figures, the worse they look. Remember the rule that what a country trades most successfully it will wind up making most successfully? Well, by this logic, the United States doesn´t have much of a long-term future as a manufacturer. August´s manufacturing deficit was the second highest on record, and this year´s cumulative manufacturing deficit so far is more than 21 percent higher than last year´s January to August record total of $307.45 billion.
And don´t think that the problem is concentrated in so-called dinosaur, smokestack industries – which, incidentally, create most of America´s best-paying jobs on average. The $4.5 billion August deficit in advanced technology products set a new record, too.
Of course, many supporters of current U.S. trade policies see no special value in maintaining a world-class domestic manufacturing at all. But the August trade figures should scare them, too. America´s longstanding surplus in tradable services shrank by 19 percent, to $3.2 billion – the lowest surplus since the Census Bureau began tracking this trade in 1992. Since 2001, moreover, the January-August service surplus has declined a stunning 27 percent, to $33.07 billion. Still think that we can export our way out of our enormous national trade deficits and resulting debts by speeding up our shift to a service economy? Please!
Even more worrisome, much evidence indicates that the United States is also seeing its competitive edge erode in information technology and professional services – the supposed industries of the future, for which displaced manufacturing workers are supposed to reeducate and retrain themselves, and which America´s youth should target during their schooling.
The U.S. surplus in the “other private services” category, which captures trends in these sectors, did rise from $31.44 billion in the January-August, 2001 period to $33.15 billion in January-August, 2002. Since then, however, the surplus has fallen by 4.4 percent, including a fractional decrease in August, 2004, to $3.96 billion. In August, 2003, the surplus was $4.08 billion – 2.94 percent higher.
When America began losing older industries such as textile and apparel and steel, free trade cheerleaders predicted that the forces of comparative advantage would push the nation up the technology ladder to automobiles and ships and machine tools and consumer electronics. When these industries began faltering, Americans were told not to worry, for they would be freed up to concentrate on high tech goods like computers and semiconductors and aircraft and advanced telecoms equipment. When many of these industries began migrating en masse to high-income Japan and then low-income countries like China, professional services like law, engineering, and finance, and info-tech services like software writing were then declared the new economic future.
The latest trade figures show that these sectors won´t be saviors for the vast majority of America´s workforce, either – leaving two obvious alternatives. Americans´ comparative advantage will be in sales – hawking to each other the wares of other nations. Or maybe we´ll just all go back to the farm. But the only problem with that scenario is that farming is also under intensive attack from foreign competition.
You are exactly right about Ohio, which is a socially conservative state in which the GOP holds every statewide elected office and controls both houses of the state legislature. Free trade has destroyed the economy in large parts of the state; that's the only reason Kerry even has a chance here.
*sigh*
Only one left to do now:
Note: It is traditional to use 3 exclamation points (!) following "Go Pat Go" in your tagline.
whatever dude...
As an automotive supplier, the Germans and the Japanese are better to work with than Generous Morons....and more profitable.
Are you an auto supplier?
yes
Ok, funny just dang funny....
Toyota is spending large amount of that profit here in North America. They also export parts from here back to the Asia, but then you don't read about that everywhere.
If you spend more money than you earn each month then you have a trade deficit. To swing this this you can:
-deplete your savings
- borrow on credit cards
- mortgage your house
"FAT, DUMB AND STUPID IS NO WAY TO GO THROUGH LIFE"
Are you free to mention what you supply to Toyota? And your firm is American owned, not a joint partnership with Japanese or other foreigners?
The state has a robust economy that is brought down by the huge cities, and the collective pathetic city management (like Detroit) and employee unions. Thank the dems and their 'Great Society' that has really made a perpetual mess of urban areas.
To suggest that job issues here are a direct result of free trade policies is at best myopic. To be sure a few jobs could be affected but it is miniscule by comparison - but open trade brings in more factories (like the Japanese auto companies) than a protectionist mindset would produce.
And don't forget productivity. It is way up along with technology and simply fewer people are needed in many applications. I have considered (and still am) moving my own business to a friendlier state and taking the jobs with it, and it doesn't have a darned thing to do with free trade.
Are you free to mention what you supply to Toyota? And your firm is American owned, not a joint partnership with Japanese or other foreigners?
One of us is using political theory
So all those U.S. companies that set-up overseas flood their profits back here? Cool.
Yup, Canada being our largest trading partner, NAFTA just killed Michigan. LOL
Take your Ritalin crudeboy.
Nice. I never knew you were in favor of off-shoring.
Here's a graph of both our net external debt and our trade deficit, graphed against our GDP, which you can safely treat as equivalent to GNP:
Our debt is clearly "skyrocketing", and it is a growing problem; the question is really how serious is it? There are economists that do indeed go with the panglossian school, such as Federal Reserve Governor Bernanke and Larry Kudlow; some who are concerned, such as Federal Reserve Governor Gramlich (the source of this graph); some who are quite concerned, such as Paul Craig Roberts.
Going by objective criteria such as those published by the World Bank, I believe that we are in the worrisome stage where we are likely to start seeing serious talk about cutting our AAA credit rating, much as was done to Japan because of their very large fiscal debt -- and Japan is our primary lender. My profile has more about this subject.
I would very like to see us adopt trade policies that do not indebt ourselves to pay for manufactured goods and for services. Indebting ourselves to acquire assets, that can indeed be good business; indebting yourself to consume a Mexican lettuce or fire a Chinese firecracker is clearly not.
Actually, due to our tax laws, our companies do not tend to repatriate profits. I've seen an estimate that perhaps $500 billion would return if the "Homeland Investment Act" (aka "Invest in the USA Act") were passed to substantially lower those taxes.
However, I don't believe that we charge any sort of repatriation tax to companies that take money out of the U.S., which is a practice that some countries do engage in to try to keep money in their countries. (I believe that the consensus opinion that it is instead an effective way to keep initial investments out of these countries.)
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