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Florian D, please reconsider the conditions upon which you base your argument.
All entities are required to function within their existing environment. I’m aware of no nation’s annual trade deficit that was not then and/or is not now to some extent of some net detriment to their economy.
(1) Do you contend that chronic annual trade deficits are not net detrimental to their nations’ economies; do you further contend they are beneficial to their nations?
(2) Possibly you're arguing that within our present environment we have no preferable alternative; (i.e. due to comparative advantage our preferable choice is to continue tolerating trade deficit’s drag upon our economy?
I have responded to the first question.
I’m a proponent of what is contended to be an alternative and superior national trade policy.
If USA adopted a policy of transferable Import certificates, nothing within your post I’m quoting would remain to be true.
Respectfully, Supposn
At the moment the U.S. seems to doing well by reducing the trade deficit (increased oil and gas production).
Of course I don't think that chronic annual trade deficits are a good thing on the long run. Especially not for the UK. Normally I would expect, that the value of the British Pound will crash. But probably it will not crash because of the mess in the Eurozone.
At the moment it seems to be that the U.S. and the UK benefit from the trade deficits. Both countries are able to consume much more than they are able to produce (especially the UK).
I would expect that both countries (U.S. and UK) will get in trouble in the future. I don't hope so, but sometimes I think it would be better if both countries get in trouble, because that would be expectable according to economy theories. I am worried about the chronic German trade surplus. I am afraid that we will never get the fair equivalent in return for all the exported goods. Maybe everything will change due to the aging German population (declining work force).
At the moment almost everything in Germany seems to be quite well. The public debt is falling quickly, the debt of private households and corporations are falling, too. The government don't know what to do with the surplusses. Labor participation is on record heights, unemployment on record lows. The constantly trade surplusses seem to lead to a very stable economy with very affordable prices. The last 10 years seem to be the best years Germany ever had. Even the last recession with GDP down 5.6% in 2009 was nearly intangible for the people. Of course there are still a lot of problems in Germany, but they seem less serious.
But I still don't understand what Germany gets in return for all the export surplusses? Financial stability? An annual export surplus of about €250bn means the sacrifice of annual consumption in the amount of €250bn, that would be the equivalent of the construction of 1,000,000 nice detached single family houses, every year
or about €3,000 per capita, every year.
Will the German export surplus change into an export deficit in the future, because of the shrinking work force?
I don't understand what you mean with:
Quote:
I’m a proponent of what is contended to be an alternative and superior national trade policy.
If USA adopted a policy of transferable Import certificates
The US isn't importing goods for production investments but rather consumption. This is a huge difference.
Yes, that's true, and that's worrisome, even more for the UK. That probably means that it's more difficult to pay off the debt that the both countries have towards foreign countries.
Annual trade deficits are ALWAYS an immediate detriment to their nations’ numbers of jobs. This in turn is to some extent detrimental to their nation’s median wage and thus to some extent it reduces the purchasing powers of the nation’s wages and salaries.
That is the justification of the proposed policy of transferable Import Certificates.
But the import surplus only reduce the number of jobs if you supposed, that it would possible to produce all the imported goods (at the amount of the import surplus) within the U.S. I wouldn't be surprised if the U.S. isn't able to produce all those products at competitive prices. If a country had to reduce the trade deficit to zero in just one year, that would cost many jobs in the transportation, wholesale and retail sector. At least for UK ist would be nearly impossible to achieve an even trade balance. Because the UK don't have the needed manufacturing base and it will surely never recover to an extent that would make an even trade balance possible.
Germany for example nearly don't produce any clothing. Germany has a deficit in the trade with clothing of about €13bn. That's less than the surplus Germany has in the trade with measuring and control instruments. How many hundred thousand people in Germany had to work in apparel factories to produce all the imported clothes? A few ten thousand employees in measuring instrument factories produce as much value as hundred thousand people in clothing factories. I don't know, maybe it isn't profitable to produce as many manufactured goods in the U.S. that would be needed to meet the domestic demand?
Major Barbara, bottom line is annual trade deficits immediate detriment to their nation’s numbers of jobs which in turn somewhat reduces the nation’s median wage. These consequences are not beneficial to their nation’s economy.
The headline number for GDP is GDP by disposition, a calculation in which imports are a negative to GDP. It's an accounting tautology that various preachers glom onto and then misrepresent. Over on the income side of the income and product accounts, both imports and exports contribute to economic activity, jobs, wages, income, and welfare.
As for the balance of payments accounts, they are a double-entry system. The accounts end up being in balance only because of a term called "Errors and Omissions".
Last edited by Major Barbara; 07-21-2015 at 09:10 PM..
... At the moment it seems to be that the U.S. and the UK benefit from the trade deficits. Both countries are able to consume much more than they are able to produce (especially the UK). ...
I don't understand what you mean with:
Florian D, we disagree on this point.
It’s contended that annual trade deficits are ALWAYS an IMMEDIATE detriment to their nation’s numbers of jobs and thus also of some detriment to their median wage.
In the USA and Great Britain, incomes directly and indirectly derived from wages and salaries are by far the most significant revenues supporting the nation’s middle income earners.
In both of our nations, the financial consequences upon our middle income earners rather than that upon the wealthier segments of our populations are the greater determiners of our nations’ economic well being. Our annual trade deficits are both immediate and longer term drags upon our national economies.
I’m among the proponents of a unilateral global trade policy based upon transferable Import Certificates.
Google Wikipedia’s article entitled “Import Certificates”
or refer to http://www.city-data.com/forum/econo...-median-5.html .
I am absolutely opposed to my nation’s annual trade deficits. I am certainly not opposed to global trade. I’m a proponent of transferable Import Certificate policy.
There are special circumstances by which annual trade deficit’s detriment to the nation’s economy could be mitigated, but even such mitigations are unusual.
Trade deficits due to the importation of products to increase the nation’s production would be such circumstances; (but that certainly is not the case any appreciable proportion of USA’s annual trade deficits).
Trade deficits cannot be detrimental to numbers of jobs if the nation experiences a general shortage of labor.
Imports crowding out of domestic production could reduce the numbers of people entering certain trades or professions or industries. To a great extent the annual trade deficits of specific types of goods in such cases are less a reaction to, and are more a cause of some specific species of labor scarcities.
Germany’s trade surpluses are to a great extent due to their more superior systems of vocational, technical and profession training and education. Significant improvement of a nation’s education and training systems are reflected with similar proportional improvement of their populations’ social and economic well being.
The headline number for GDP is GDP by disposition, a calculation in which imports are a negative to GDP. It's an accounting tautology that various preachers glom onto and then misrepresent. Over on the income side of the income and product accounts, both imports and exports contribute to economic activity, jobs, wages, income, and welfare. ...
Major Barbara, we agree that sales promotion, distribution, or otherwise handling of imported or domestically produced products within the USA does not economically differ.
Those “values added” activities upon products are attributable to where those activities occurred rather than where the products subject to those activities were produced. That’s why those activities you refer to ARE NOT and SHOULD NOT be considered as economic activities attributable to global trade. You have a mistaken perception of a nonexistent “accounting tautology”.
The economic differences between foreign and domestically produced products, their components, and their materials all occur within the producing nations. The economic benefits of production are ENTIRELY earned by the producing nations.
I frankly doubt that we agree on much of anything. Fifty years of education and experience as an international economist would be something that I have that you don't. I expect that this is the source of at least many of our differences.
Quote:
Originally Posted by Supposn
You have a mistaken perception of a nonexistent “accounting tautology”.
No, that's all it is -- an entirely mechanical balancing mechanism in the By disposition side of the accounts. It exists only to counter otherwise included double-counts arising from the fact that the three other component categories include expenditures on both foreign and domestic goods and services. To reach Gross DOMESTIC Product from there, net exports have to be added in, which is the same as saying that net imports have to be subtracted out. It's all a tautology mandated by the table definitions.
Quote:
Originally Posted by Supposn
The economic benefits of production are ENTIRELY earned by the producing nations.
The product of foreign-owned auto manufacturers operating in the US is all counted as part of US GDP. To claim however that none of the economic benefits accrue to foreigners would at best be just a tad myopic.
At the moment it seems to be that the U.S. and the UK benefit from the trade deficits. Both countries are able to consume much more than they are able to produce (especially the UK).
Actually when you look at the numbers, the trade deficit results in lower production, not higher consumption. Private and fiscal debt rises, and wages and domestic investment are depressed. There is no problem with the GDP values, but an economy based on debt escalation isn't sustainable.
Quote:
But I still don't understand what Germany gets in return for all the export surplusses? Financial stability? An annual export surplus of about €250bn means the sacrifice of annual consumption in the amount of €250bn
They get financial stability, good wages, low unemployment, and higher domestic investment.
The surplus results in higher production, not lower consumption. Investment in high value added production is the requirement for prosperity.
And instead of accumulating debt, Germany accumulates assets.
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