US may not be trade wimp, Trump makes it out to be

Kuwait Times - - BUSINESS -

WASH­ING­TON: Is the United States the 98pound weak­ling of global trade? Pres­i­dent Don­ald Trump and his eco­nomic ad­vis­ers think so. They point to 41 straight years of US trade deficits as ev­i­dence that Amer­ica has been out-com­peted, out-ne­go­ti­ated and flat out cheated by trad­ing part­ners like China, Mex­ico and Ger­many - coun­tries that con­sis­tently sell more to the United States than they buy.

Fri­day, the Com­merce Depart­ment re­ported that the United States once again reg­is­tered a trade deficit - $43.6 bil­lion in June. So far this year, the trade gap is $276.6 bil­lion, up nearly 11 per­cent from Jan­uary-June 2016. Trump and his team view trade deficits as an eco­nomic evil that stran­gles growth and kills Amer­i­can jobs. They’ve promised to bring the deficits down - by im­pos­ing tar­iffs and other bar­ri­ers to im­ports if they have to.

Many econ­o­mists don’t see things quite that way. They re­ject the idea that trade is a zero-sum game in which the prize goes to coun­tries that ex­port more than they im­port. They ar­gue that Amer­i­cans ben­e­fit from the wider choices and lower prices that im­ports of­fer.

“I don’t see it as a ques­tion of eco­nomic weak­ness,” says Dean Baker, co-founder of the Cen­ter for Eco­nomic and Pol­icy Re­search think tank. “You could say con­sumers gain. We get cheaper prices. Im­porters gain.” But there are losers, too, when cheap im­ports en­ter the coun­try, Baker says, es­pe­cially among fac­tory work­ers fac­ing for­eign com­pe­ti­tion. “In the Mid­west, Ohio, Penn­syl­va­nia, we lost mil­lions of jobs,” he says. “It hurt whole com­mu­ni­ties.”

Some­times, though, a big trade deficit can be a sign of pros­per­ity: When times are good, Amer­i­cans can af­ford to buy more im­ports. The United States, for in­stance, recorded a record trade deficit - $762 bil­lion - in 2006 when eco­nomic growth was a healthy 2.7 per­cent. Three years later, in the depths of the Great Re­ces­sion, the deficit shrank to $384 bil­lion be­cause wor­ried Amer­i­can con­sumers were cut­ting back on im­ports - and ev­ery­thing else.

Like­wise, says econ­o­mist Tim­o­thy Tay­lor, ed­i­tor of the Jour­nal of Eco­nomic Per­spec­tives, “Ja­pan has had big sur­pluses for most of the past 25 years, and they’ve been a pa­thetic bas­ket case.”

Trade deficits do re­duce gross do­mes­tic prod­uct, the broad­est mea­sure of a coun­try’s eco­nomic out­put. But that’s mainly a mat­ter of math­e­mat­ics. —AFP

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