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Imports and exports are recorded as total value of goods/services that are imported or exported.
What happens to items that are imported?
Do they just sit on the docks collecting dust?
Did it not occur to you those imports which are raw goods are processed and then sold and those which are semi-finished goods are used to produce finished goods which are then sold and those which are finished goods go to wholesalers and distributors and then to retailers and are sold?
Where is the sale of those imported goods recorded in the equation you don't understand? ...[/quote]
Mircea, economic differences between similar foreign and domestic products occur entirely beyond USA's borders and jurisdictions. You contend otherwise but post no logical argument to support your position.
After an imported product has been unloaded onto a USA port of entry dock, or a USA produced vehicle reaches its factory's shipping dock, there's no economic differences between those products.
A $1 of imports (rather than a $1 of domestic products) do not generate an ADDITIONAL $3-$18 of GDP.
Why not? Is it because it totally refutes your entire premise?
Quote:
Originally Posted by Supposn
Mircea, economic differences between similar foreign and domestic products occur entirely beyond USA's borders and jurisdictions. You contend otherwise but post no logical argument to support your position.
I have never contended otherwise. Stop making things up.
Quote:
Originally Posted by Supposn
After an imported product has been unloaded onto a USA port of entry dock, or a USA produced vehicle reaches its factory's shipping dock, there's no economic differences between those products.
I never said their was. You said that.
Quote:
Originally Posted by Supposn
A $1 of imports (rather than a $1 of domestic products) do not generate an ADDITIONAL $3-$18 of GDP.
Yes, they do. You just don't get it. You don't even know what you're talking about.
The GAP Brand imports a carton of denim jeans from Mexico.
The price of that carton is $0.72.
Why? Because that carton contains 24 denim jeans literally priced at $0.03 per pair.
At what price does the GAP Brand sell those denim jeans in its Old Navy stores?
The GAP Brand also imports leather shoes from Italy. The GAP Brand pays $4.17 to $5.25 per pair depending on the factory where they were made and the particular style.
At what price does the GAP Brand sell those shoes in their Banana Republic stores?
Where, in the equation you don't understand, are those sales recorded?
The GAP Brand also imports leather shoes from Italy. The GAP Brand pays $4.17 to $5.25 per pair depending on the factory where they were made and the particular style.
At what price does the GAP Brand sell those shoes in their Banana Republic stores?
Where, in the equation you don't understand, are those sales recorded?
Mircea, if you intend to provide an example which demonstrates your argument, please choose something that approaches reality. If the sewing machine operators were working on the south bank of the Rio Grande River, I don't believe the manufacturing sub-contractor could deliver jeans to the USA side of the river at a price of 3 cents per unit.
Regardless of the prices per unit, when imported products reaches USA's jurisdiction and are then handled by USA labor, there then is no economic difference between domestic or imported products. But when the imported product passed through USA's border, the entire price paid by the importer is deducted from all USA expenditures, to arrive at USA's net GDP.
In your imported shoes example, the $4.17 investment to purchase the shoes from Italy plus any additional charges for foreign handling and transportation until the shipment is within USA's jurisdiction and being handled by USA labor, is the initial cost or importer's investment and at that point there has been zero additional increase of USA's GDP.
On the other hand, if the shoes were produced in the USA, (which I do not believe is commercially feasible), the entire cost of production up to the point the shoes reached the USA factory's shipping platform, has increased USA's GDP.
In those two examples, (beyond USA's border, or beyond the USA factory's shipping platform), the shoes' increased “value added” as they pass through all intermediate USA handlers to reach the USA consumers, are the same and both contribute to USA's GDP.
Economic differences between similar foreign and domestic products occur entirely beyond USA's borders and jurisdictions.
I have never contended otherwise. Stop making things up.
I never said their was. You said that.
Yes, they do. You just don't get it. You don't even know what you're talking about.
[Originally Posted 20OCT2023, by Supposn:
Mircea, economic differences between similar foreign and domestic products occur entirely beyond USA's borders and jurisdictions. You contend otherwise but post no logical argument to support your position.
After an imported product has been unloaded onto a USA port of entry dock, or a USA produced vehicle reaches its factory's shipping dock, there's no economic differences between those products.
A $1 of imports (rather than a $1 of domestic products) do not generate an ADDITIONAL $3-$18 of GDP.]
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[Originally Posted 21OCT2023, by Mircea:
I never said there was [any economic differences between similar foreign and domestic products occur entirely beyond USA's borders and jurisdictions]. You said that.
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[Originally Posted 18OCT2023, by Mircea:
“… $1 of imports generates $3-$18 of GDP. …”
///////
Micrea, regarding my recollection of your deleted post's example,
($4.17 shoes imported from Italy): The $4.17 cost plus any additional charges for foreign handling and transportation until the shipment is within USA's jurisdiction is an investment to purchase the shoes. At that point there has been no increased USA production of goods and services.
(At that point the cost of bringing the imported goods to USA's jurisdiction and thereafter to be processed and handled by USA labor, just covers the costs or prices paid by the importer of those goods: (increased USA investment for importing $) – (increased USA imports $) = Zero, (no increase of GDP).
On the other hand, if shoes are produced in the USA, (which I do not believe is commercially feasible), the entire cost of production up to the point the shoes reached the USA factory's shipping platform, will increase USA's GDP.
(USA investment for production $) = (Increase of GDP).
After both of these instances, (imports beyond USA's border, or domestic products beyond their USA factory's shipping platform), the products' increased “value added” as they pass through all intermediate USA handlers to reach the USA ' consumer, are the same for both imported or domestic produced products.
All of the net benefits of production, (all net increases of nations' GDPs) are attributed to the nations that actually produce the goods or services.
Economic differences between similar foreign and domestic products occur entirely beyond USA's borders and jurisdictions.
After an imported product has been unloaded onto a USA port of entry dock, or a USA produced vehicle reaches its factory's shipping dock, there's no economic differences between those products.
A $1 of imports (rather than a $1 of domestic products) do not generate an ADDITIONAL $3-$18 of GDP.
Imports can increase a nation's GDP.
Consider the equation that you've presented:
Y = C + I + G + (X - M)
Where
C is Consumption
I is Investment
G is Government Spending
X is Exports
M is Imports
A shipping container of widgets is imported, at $1 a widget. These widgets are then sold by the importer to one or more retailers, who in turn sell them to consumers. The cost on average of each widget to the consumer is $18. Plug the numbers into the GDP equation.
C = $18
I = $0
G = $0
X = $0
M = $1
Y = $18 + $0 + $0 + ($0 - $1) = $17
The resale of the widgets increases GDP. If the imported widgets were never resold, if they were bought directly by the consumers, then GDP would indeed be -$1. But that's not what happened in the example.
One could make the claim that no one would ever pay $18 for a $1 widget, but consumers do that all the time.
Imports can increase a nation's GDP.
Consider the equation that you've presented:
Y = C + I + G + (X - M) ...
... A shipping container of widgets is imported, at $1 a widget. These widgets are then sold by the importer to one or more retailers, who in turn sell them to consumers. The cost on average of each widget to the consumer is $18. Plug the numbers into the GDP equation.
The resale of the widgets increases GDP. If the imported widgets were never resold, if they were bought directly by the consumers, then GDP would indeed be -$1. But that's not what happened in the example. ...
Djmilf, No, that's not how GDP is calculated.
The importer's cost for bringing products into the USA, (i.e. the cost of acquiring and any foreign processing or handling the products prior to the goods reaching the USA) are treated as a negative export amounts. At that point, importers entire costs or investments are for the production of goods and services provided by foreign entities. There's been no increase of USA's gross domestic product, (i.e. USA has not produced any ADDITIONAL goods or services).
GDP is the net cost or price paid to produce (in the USA) any goods or services. The cost of a USA's facilities' entire production contributes to USA's GDP.
(Regardless if the product is imported or domestic goods or services), beyond the USA facilities' shipping rooms or docks, or beyond the USA's entry docks, any other additional USA handling or processing relative to the products are treated in exactly the same way.
For example: After an imported vehicle leaves the U.S. Entry dock, or a domestic vehicle leaves the USA factory, they each then contribute to USA's GDP in exactly the same way.
For any given amount of a nation's annual net expenditures, trade surplus nation's net balance of trade increased, and trade deficit nation net balances decreased their nation's GDPs.
Consumption (C) consists of private expenditures in the economy, different from government expeditures or investment. It's how much consumers spend on goods and services. The amount of consumption by the American consumer does not differentiate between purchased goods from domestic sources versus purchased goods from foreign sources.
The Exports and Imports are captured separately in the equation, and for obvious reasons. Exports cannot be purchased by American consumers, but still should count towards the national GDP. Imports take away that part of Consumer purchases that were not domestically produced.
Quote:
The importer's cost for bringing products into the USA, (i.e. the cost of acquiring and any foreign processing or handling the products prior to the goods reaching the USA) are treated as a negative export amounts. At that point, importers entire costs or investments are for the production of goods and services provided by foreign entities. There's been no increase of USA's gross domestic product, (i.e. USA has not produced any ADDITIONAL goods or services).
GDP is the net cost or price paid to produce (in the USA) any goods or services. The cost of a USA's facilities' entire production contributes to USA's GDP.
(Regardless if the product is imported or domestic goods or services), beyond the USA facilities' shipping rooms or docks, or beyond the USA's entry docks, any other additional USA handling or processing relative to the products are treated in exactly the same way.
For example: After an imported vehicle leaves the U.S. Entry dock, or a domestic vehicle leaves the USA factory, they each then contribute to USA's GDP in exactly the same way.
For any given amount of a nation's annual net expenditures, trade surplus nation's net balance of trade increased, and trade deficit nation net balances decreased their nation's GDPs.
I believe the flaw in your analysis is that you're citing a GDP equation that measures expenditures and investments and also adjusts for exports and imports, but you're arguing from a production basis, not an expenditure basis.
You're correct in that imported products do cause a decline in GDP as compared to domestically produced products, but you're ignoring that importing a product does result in a net increase of GDP.
Wrap your brain around this - if the US produced nothing and imported everything, then (ignoring government spending and private investment) the US GDP would be the difference between what the American consumers paid for the imported products and the cost paid by importers for bringing the products in from overseas. The only way this doesn't hold true is if the American consumers spent less on their goods and services than it cost to import the goods and services. That's exactly what the GDP expenditure computation that you've presented shows. If you argue otherwise, you are saying that the equation that you've been citing all along is erroneous.
Djmilf and Mircea, from the harvesting of raw materials to the production of products are “chains of commercial transactions”. Various chains finally create various car components;(e.g. alternators, transmissions, engines, ect, ect.) Thus increasing the producing nation’s gross domestic product, (GDP). The entire value*of imported cars prior to their reaching the points where they’re within USA’s jurisdiction and being handled or processed by USA labor, have increased foreign rather than USA’s annual GDPs.
Similarly, the entire values of USA produced cars, (to the extent that they were built from USA resources and labor), up to the point of having reached their manufacturers’ shipping platforms, have increased USA’s annual GDP.
Beyond those points, (when the imported car was unloaded on to a USA entry port dock, or a car has reached its USA manufacturer’s shipping platform), there's no economic differences between imported or domestic produced car. All the additional services and processing that are done until cars reach USA consumers or are exported from the USA, additionally increase USA’s GDP.
The entire value of a USA produced car when it’s delivered to a USA consumer, (to the extent it was built with USA resources and labor) contributed to USA’ annual GDP.
The entire costs of acquiring and importing a foreign cars are deducted from the values of the cars delivered to USA consumers. Those differences are the imported car's entire contributios to USA’s annual GDP.
Regarding Djmilf’s example of a nation that doesn’t Import, in that case, the entire values of all products delivered to that nation’s consumers will have contributed to that nation’s annual GDP.
What is it regarding this narration that you guys find fault with?
An annual trade deficit indicates the nation has consumed more, and an annual trade surplus indicates the nation has consumed less goods and service products than it produced.
Regarding Djmilf’s example of a nation that doesn’t Import, in that case, the entire values of all products delivered to that nation’s consumers will have contributed to that nation’s annual GDP.
That's actually not what I said. My example (obviously taken to extreme) was that a nation that only imports it's goods still has service activity reflected in the final sale price to the consumer. Service activity that accounts for that nation's entire GDP.
Do you agree that imported goods still cause internal economic activity, adding to the nation's GDP? I was under the impression that you were discarding that concept, but it appears that in your last post you acknowledge it.
Quote:
What is it regarding this narration that you guys find fault with?
An annual trade deficit indicates the nation has consumed more, and an annual trade surplus indicates the nation has consumed less goods and service products than it produced.
What I find fault with your narration is that it ignores the other moving parts of the economy.
Consumers purchase imported goods and services because they perceive them to be of better value than domestically produced goods and services. The flaw is that you assume that if all imports were halted, consumers would switch over completely to purchasing domestically produced goods and services. That isn't necessarily the case.
Before Henry Ford's Model T, automobiles were expensive and considered a rich man's toy. After the Model T, automobiles became an affordable product for the average man. Lesser prices on automobiles led to more automobiles being purchased, which in turn led to greater GDP.
Consider computers. When IBM Personal Computers and Apple II computers were produced domestically in the early 1980's, they cost about $5,000 or $6,000 in today's money. They would still probably cost as much (or more today) if they were still produced domestically. But today, computers are mostly built overseas and cost anywhere between $400 and $1,000. Because of the lower price point more people purchased computers than they would have at a higher price point. Again, lower prices lead to higher sales volumes, which in turn lead to higher GDP than would have happened under the higher price points.
What about expensive watches? A rich person would buy multiple expensive imported Swiss watches (Rolex starting at $7,500, Patek Phillipe at $25,000). The thing about expensive watches is that the domestic merchant profit margin is something like 50%. If such watches weren't imported, do you really believe that a rich person would purchase multiple Timex watches? Or that some domestic manufacturer would try to make their own expensive mechanical watches?
Speaking of 50% profit margins, modern smart phones are also very profitable. $1,000 iPhones cost only about $500 to manufacture, the components are sourced all over the world, and China's contribution to the expense of making an iPhone is actually pretty low, somewhere around $10 a phone. The computer chips come from Taiwan, the lenses come from Germany, and the software comes from the United States. That's because basic assembly is cheapest and most flexible in China, the computer chips are the most cost effective from Taiwan in terms of price and quality, the optical components from Germany are the best available, and the software from the United States can't be surpassed. Gorilla glass was invented in the US by Corning, but it's now manufactured in China; but there's better glass composites still being engineered by the US all the time.
Adam Smith said that mercantilism is economically inefficient, that a nation should focus on producing those goods that they do best, while purchasing from foreign suppliers those goods that are more efficiently produced elsewhere. You seem to disagree with this.
Last edited by djmilf; 10-26-2023 at 10:46 AM..
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