Record Trade Deficit
The week the Census Bureau reports that for the fifth consecutive year the United States ran a record trade deficit. The 2006 trade deficit reached a new high last year of $763,300,000,000 which is a 6.5% increase from 2005. Although the deficit is increasing, so too are exports. The Bush Administration argues that because exports are (also) increasing, the trade deficit is acceptable. Democrats in Congress are calling for opening more international markets for U.S. goods while protecting markets in the United States. French Prime Minister Chirac has called on the U.S. to stop subsidizing cotton growers so that African cotton growers can compete with U.S. companies. What do you think is the correct balance of trade protections and open international markets? What are the implications for the U.S. economy? Security? Industry and job?
Labels: budget, deficit, economy, policy, politics, security, trade
posted by Richard Stanislaw at
12:50 PM
17 Comments:
This reminds me alot of the late 1970s and early 1980s with oil. If a conflict starts beyond our control, Iran-Iraq war, Iranian Revoultion etc. If we lose our means of producing our own requirements as we are, it will only hurt our economy.
Michael Stevens
With the end of WWII the US had the economic power to trade with protectionist sates abroad while keeping open trade access at home. Comparatively the US economy is not as strong today. While I don’t believe that a protectionist trade policy will fair well for the US economy, I am more fearful of the damage to the economy and our national security that is caused form a dependence on foreign goods. Also the implications of the strength of the dollar and it potentially being dropped as the backer of foreign currency or the currency of trade in oil may be of great determent to our economy. It is a tight rope that must be walked to keep the balance of trade in check while keeping American enterprise secure. Recently I think we have slipped a little. –Matt De Pompei
For about 90% of what goes on through trade, I believe there is not such no problem but very little if any. I believe the 2 areas of this that hurt us is, cost of labor in competing countries and our dependence of goods from hostile nations, primarily oil from the middle east. Because there are few labor laws in many Asian countries, cost of labor in most of those countries is extremely low. That is why those countries are able to make a product in the global market that is much cheaper. It's my opinion that products such as steel from China have killed our steel industry. I believe that to help defend our economy from this a few things could be done. One is for businesses to perhaps given some sort of tax break for using the more expensive american good or service so that more money flows into our economy. I think also higher taxes on imports will help even out the imbalance caused by lack of labor laws in foreign countries. Also there should be incentives for those companies, perhaps not as much as using American, that do business with those countries that use fair trade practices.
For dependence on products such as foreign oil. Anything that can be done to get away from those products produced from hostile nations should be considered. Scientists have talked about how we haven't a great global scientific subject occupying us since the 60's space travel. I think alternative fuels needs to be this new scientific priority. I'm not even talking about environmental factors, just knowing that we can switch to a product that we don't need to go to war over could be wonders for out country, and also give dangerous countries in the Middle East less leverage.
-Dave Grager
I think it is important at this point with all the outsourcing of jobs to support American businesses in any way we can. If this calls for subsidizing cotton then so be it. I think we should make sure the economy here is stable before we worry about the world economy. If we allow for international free markets it will most likely hurt our American businesses and thus our economy.
~Danielle Hurley
It’s becoming clear that the American way includes being in such a high level of debt that millions of Americans also follow this poor habit. Our society has a need and urge to spend every dime we earn while we fall into debt- which is certainly a controllable issue. This trend needs to be reversed, especially during a time of borrowing billions of dollars from China (at very high interest rates) to help pay for the failure in Iraq.
A major dark spot within the U.S. trade policy has historically involved double standards. American corporations will operate sweatshops in Vietnam, Pakistan and China at the expense of exploited workers; at the same time we forbid companies to conduct business in the United States if those companies are doing business in nations such as Cuba, Iran and North Korea. This is clearly not fair and balanced trade and the U.S. must stop dictating which nations can and cannot do business with each other- especially when we gladly accept billions of dollars from China- a nation widely know for basic human rights violations.
When more foreign corporations discover America’s trade tactics involving banning certain foreign citizens from entering the U.S. to conduct business, the U.S. economy suffers as a result from the potential of lost investment and tax revenue.
The correct balance of trade protections and open international markets should involve fair and equal tariffs, the ability to increase exports, and the protection of the American worker. We can protect American jobs by offering better tax incentives to U.S. companies to stay in America and not move to cheaper locals such as India. We’re improving the economy of Southeast Asia faster that our own economy.
The bottom line is that American companies cannot compete with much lower labor costs in other parts of the world including Central America. However, from a moral perspective and for the sake of the average American worker, we must be active in fair and equal trade and commerce while meeting the fundamentals of liberty and decent treatment of the working person.
I think that if international trade will help our ecomony, then it should be allowed. After 9/11, our ecomony hasn't been the greatest.
Since most other countries either have no minimum wage or a lower one than we have, they have the advantage of putting out the same product at a much cheaper price.
Since paying American workers 20 cents a day isn't really an option, the only thing we can do to compete with those other products is to make our products better. If there is a significant difference between American products and the cheaper products from other countries, people will pay a little more for the good one.
American companies need to be putting more money into research and development, possibly with grants from the government (Industrial Policy, anyone??)
I also definitely agree that our dependance on Middle Eastern oil is something that we need to end as soon as possible...let's hope that happens sooner, rather than later.
-Tom Banyas
I think it is dangerous to have such a dependence on foreign business and goods. However, as we move towards a more centralized international goverment it is impossible for us to not rely on international goods. I think we should be protective of American jobs to prevent an increase in poverty however I believe it is beneficial for the world if lesser developed countries benefit from the deficit if it doesn't hurt us too severely.
I think that with the all the free trading agreements (NAFTA,)and the overreliance of exported goods that America is experiencing is the unforseen price of the desired free trade agreements. I don't think it would hurt if the U.S. was a little more restricted in certain areas because it just may have the adverse effect of bolstering more reliance upon domestic goods.
The United States has been running on deficit spending for a long enough time without any serious impacts upon our economy. As far the claims of the French Prime Minister, it would be stupid for us to listen to him. It would loose money that comes into our economy weakening our status in the market.
-Chris Pataky
Market protection is an unnatural practice. Things are not allowed to flow freely, instead failing markets are inflated artificially and new markets struggle to make any ground. People are not willing to folow the natural ebbs and flows of the economy, because it creates an unstable situation. Protectionism brings security, but at cost. Things lose their competiveness and although protectionism helps against foriegn markets it hurt domestic markets. Why has no alternative to oil been found for enrgy consumption, possibly due to the fact that oil is subsidised thus making it cheaper than many possible alternatives.
-Craig Myers
I've often wondered where all this "money" comes from. If we are constantly in a deficit, when are we going to run out of "money?" I just don't get it. How can we be spending billions of dollars that we don't have?
-Vince Slomsky
We can sustain such a deficet because the United States can make the minimum payments on the interest. Untill the country can no longer make the minimum payment on the debt we owe, it is benificial for people to loan money to us. Our national debt is largely owed to foriegn countries, and in the case of a country like China, it is in thier best interest to loan us money because they get the highest return when we make our minimum payment, and we are running up our debt so we can buy the goods they ship over here to China-mart... With our free trade agreement with China, it is very profitable for China to keep our country consuming their goods...
- Kevin Hogan
The United States has been working with a defecit for several years and has still been able to maintain a stable economy. This is why the defecit does not worry me to quite an extent. What does worry me, however, is the fact that an over-abundance of jobs are being outsourced to other countries with cheaper labor, and we are shifting more and more to a serivce industry economy. Not that the service industry is a bad thing, but if we had more people working in manufacturing and other fields of that nature we would be able to rely more upon ourselves for manufactured items. I believe that we should protect our jobs here at home so that our own companies aren't going overseas for cheaper products and labor.
The fact that the United States has that large of a trade deficit is embarrassing. We are the richest country in the world and yet we have a trade deficit in the 100s of trillions? It doesn't make sense. The ever expanding trade deficit only puts our country in an even more vulnerable position. Bush should start pleasing his Republican base (I can't believe I'm actually encouraging that) and control his spending.
OUR State Department will not attempt to really OPEN UP THE CHINA MARKET!
But we must!
We have leveredge over China now - we just say we will only accept imports equal to say imports they buy from us. Starting NOW.
And nuclear reactors and Cray Computers will not be exported!
China does not want millions of their industrial workers unemployed - like our workers were.
Let China agree to OUR demands, and our trade balance would shrink overnight. But it would take guts.
Tommy Shannon
I think the US government shout stop subsidizing US cotton growers. It is uneffective as well as ineffecient. i believe that every country should specialize in what they produce best. Free Trade beniefs all. Importing African cotton isn't staining our economy.
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