America's Biggest Exporters Can't Reverse Our Massive Trade Imbalances

American Economic Alert ^ | Monday, May 22, 2006 | Alan Tonelson

[A. Pole]

The devil that emerges from the details of the monthly trade report points unmistakably to continual weakening in most of the nation’s productive and innovative sectors.

[conservative physics]

until we repeal the minimum wage the trade deficit will only continue to grow.

[N3WBI3]

And repeal workers rights laws, environmental protection...

If you honestly think that paying people 4$ and hour in the US will help when they are making 4$ a day in China and have no rights to boot your fooling yourself.

[FormerACLUmember]

Export a million US lawyers, we have a vast surplus.

No wait, there are already plenty of crooked thugs running much of the third world already....

[the invisib1e hand]

get back to us when it's $0.75 to 1.00 EU.

[ex-Texan]

What’s So Wrong With A Trade Deficit?

Current policies have resulted in massive US trade deficits with the rest of the world. These trillions of dollars lost to other countries have come back to purchase our assets, major companies, and even whole industries. These are empirical facts. Yet there does not appear to be a consensus as to the magnitude or consequence of the damage of these trends.

The reasons for this range from the philosophical to the practical. * * * “Free market at all costs” ideologues cannot fathom that we are disadvantaged when other countries don’t play by agreed upon rules. Furthermore, the success of status quo investment depends on continued liquidating of assets to support present consumption.

It would be helpful to somehow measure the damage being cause by the amount of trade deficits – to distinguish between “bad” and “horrendous” trade deficits. For example, during the past 10 years, the net change in our GDP was an increase of $5.0 trillion, 70% of which was consumer spending which would be ok if this was spent on American made products (which it was not) - yet our trade deficits during that time amount to $3.6 trillion – 72% of the net increase in GDP. During the previous 10 years, that percentage was only 27%.

Currently, we are running trade deficits at a rate that is nearly equal to our gains in GDP. In other words, for every dollar we “grow our economy,” we are sending almost all of that dollar abroad in exchange for mostly perishable consumer goods.

Based on these facts, there should be no argument about whether this issue demands immediate careful attention and planning for resolution. From our present policy * * * we cannot hope to restore our economic and national position as a true independent world leader - nor we will we be even able to support ourselves without foreign imports and foreign lending.

Source

[conservative physics]

if we can't match the low salaries paid elsewhere... we will lose those industries.

If we can't unburden our industries with intrusive regulations that foreign companies don't have to deal with... we will lose those industries.

It's simple really.

[JasonC]

Um, total foreign ownership of US assets is $6 trillion. US ownership of foreign assets is $3 trillion. US ownership of US assets is $52.5 trillion net - more like $63 trillion gross, ~$10 trillion in debt (mostly mortgages). Net foreign ownership is in the single digit percent. And the pie is growing at low double digit rates.

[N3WBI3]

If we decide that industry has a right to free trade despite the fact the constitution clearly gives the right to levy tariffs we will lose industry

If we worship free trade rather than a healthy economy we will lose industry

If we allow petty third world dictators to allow slave labor and trade freely with them we will lose industry

[Iscool]

You seem to think lowering blue collar wages will salvage the looming disaster...What about white collar salaries...I've read that plant managers in China make 10-13 thousand a year...

If we're going to try to be competitive, that's the way we'll have to go...

[N3WBI3]

No to mention Lawyers, Doctors (such as those who read X-Ray's), Accountants, ....

[ClaireSolt]

I am more intereted in my own current account balance than I am in the arbitrary calculations of the wealth of nations.

[keithtoo]

Wrong! "Trade" is specifically what is implied in the word. If I trade $20.000 to Japan for a $20K car, I have not lost a thing. When I put $1.00 into a vending machine for a Coke, I have not lost a dollar, I have gained something of substance worth a dollar, and traded a dollar for it.

Of course, my car will lose value over time, but I will gain value in using it every day.

Trade is good, lack of trade is bad.

[KevinDavis]

Same crap I heard when Reagan was President..

[Last Dakotan]

Free trade just isn't going to work when we are only one practicing it. Especially when we are only 30% of the world's economy.

All of our trading partners are trying to protect their high value added manufacturing sectors to some degree or another.

We need a congressional inquiry on why US firms can't compete.

[conservative physics]

that's how competition works.

If your competitors are willing to sell their equivalent products for less... they are going to put you out of business.

right now there are BILLIONS of people around the world willing to work for less than Americans are willing to work for... Nothing is going to change that, which means the US is going to continue to loose jobs and industries to countries that are willing to let the free market rule instead of regulating artificially high wages that accomplish nothing but put companies out of business.

This country was built up from nothing on the basis of a completely free market... Then the socialists took over and we've been doing nothing but living off the great things our grandfathers and great grandfathers did all this time... but the end of the road is in site.

[texson66]

site = sight

[Nascar Dad]

You say $10 trillion in debt (mostly mortgages).

Coming from a non-economist-- That's the national debt, now who do we owe that to? Foreign govt's? B/c they buy US T-bonds? You mention mortgages.. I'm a little lost. Could you just give a 3 line explanation. Thanks

[Toddsterpatriot]

That's the national debt, now who do we owe that to?

Page 110 of 124

I think he's referring to household debt. See the above Fed PDF file.