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Thread: Annual trade deficits are always net detrimental to their nation's GDP.

  1. #71
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    JohnfrmClevelan's Avatar
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    Re: Annual trade deficits are always net detrimental to their nation's GDP.

    Quote Originally Posted by I'm Supposn View Post
    JohnfrmClevelan, in the two examples you provide, the net effect of the nation's trade balance upon their GDP is exactly the same and all other factors being equal, the trillion dollar trade deficit would be net detrimental to both nation's GDPs and would drag upon their number of jobs; (i.e. trade deficits reduce, not increase numbers of jobs in both nations).

    Nation's benefit from their producing goods and service products; they benefit from global trade; but chronic annual trade deficits are net detrimental to a nation's economy. An annual trade deficit is always net detrimental to its nation's GDP. It indicates the nation has consumed more than it has produced.
    But all other factors are never equal. You take foreign trade as it comes. Not everybody can run a trade surplus. You make up the difference with money, which may or may not be spent on your production at some future date (usually, it's not).

    Were we to run a trade surplus, we end up with a pile of euros, yen, and yuan. What good does that do us?

    So to sum up, you think it's better to have a trade surplus and produce $4 trillion worth of goods than to have a trade deficit and produce $30 trillion worth of goods. You believe that you employ more workers producing $4 trillion than you employ producing $30 trillion.

    You sure you don't want to rethink that?
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  2. #72
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    Re: Annual trade deficits are always net detrimental to their nation's GDP.

    Originally Posted by JohnfrmClevelan:
    ... What if, instead of a small trade surplus ($4 trillion in exports - $3 trillion in imports), we had a trade deficit ($30 trillion in exports - $31 trillion in imports)? Which economy is creating more jobs?

    Originally Posted by Supposn:
    JohnfrmClevelan, in the two examples you provide, the net effect of the nation's trade balance upon their GDP is exactly the same and all other factors being equal, the trillion dollar trade deficit would be net detrimental to both nation's GDPs and would drag upon their number of jobs; (i.e. trade deficits reduce, not increase numbers of jobs in both nations).

    Nation's benefit from their producing goods and service products; they benefit from global trade; but chronic annual trade deficits are net detrimental to a nation's economy. An annual trade deficit is always net detrimental to its nation's GDP. It indicates the nation has consumed more than it has produced. ...
    Quote Originally Posted by JohnfrmClevelan View Post
    But all other factors are never equal. ... You sure you don't want to rethink that?
    JohnfrmClevelan, I would hedge my bets and further qualify your statement, other factors are [in my opinion rarely if] ever equal; but yes, I agree in essence with that statement you posted. But we have discussed trade deficits without any regard for “the other factors”.

    As you solicitously suggested, I reconsidered my prior post. I'm satisfied that my prior post is factually and logically correct.
    Respectfully, Supposn

  3. #73
    Student Mircea's Avatar
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    Re: Annual trade deficits are always net detrimental to their nation's GDP.

    Quote Originally Posted by I'm Supposn View Post
    Annual trade deficits are always net detrimental to their nation's GDP and drag upon their numbers of jobs. They indicate national use and consumption exceeded the nation's production.
    Your lame theory doesn't account for GDP generated by trade.

    If you import $600 Billion, but export $400 Billion, then you have a trade deficit of $200 Billion, but if that $600 Billion in imports generated $2.4 TRILLION in GDP, are you better off, or worse off?

    If you had $0 in imports, you can neither guarantee nor assume you'd be able to generate that $2.4 TRILLION in GDP domestically.

    And if you limited imports to $400 Billion to match your $400 Billion in exports, you might only create $1.6 TRILLION instead of $2.4 TRILLION, in which case your GDP is less, not more.

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    Re: Annual trade deficits are always net detrimental to their nation's GDP.

    Quote Originally Posted by Mircea View Post
    Your lame theory doesn't account for GDP generated by trade.

    If you import $600 Billion, but export $400 Billion, then you have a trade deficit of $200 Billion, but if that $600 Billion in imports generated $2.4 TRILLION in GDP, are you better off, or worse off?

    If you had $0 in imports, you can neither guarantee nor assume you'd be able to generate that $2.4 TRILLION in GDP domestically.

    And if you limited imports to $400 Billion to match your $400 Billion in exports, you might only create $1.6 TRILLION instead of $2.4 TRILLION, in which case your GDP is less, not more.
    Mircea, annual trade deficits are ALWAYS net detrimental to their nation's GDP because they always reduce their nation's domestic production more than otherwise.

    I suppose you're referring to imports of tools, or materials or components used to support domestic production of a finished product.
    I'm among the proponent of the improved trade policy described within Wikipedia's “Import Certificates” article. For examples:
    . General Motors exporting body part blanks to be finished by cheaper Mexican labor would use the certificates they acquired when they export the steel blanks, and they'd need additional Certificates to import the fenders and other finished body parts of increased value, back into the USA.
    . If Toyota or Ford imports tools or components would have to acquire certificates to cover the value of whatever they import.
    But those importing completely finished products, would have to acquire certificates to cover the complete value of the entire products they're importing.

    Respectfully, Supposn

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    Re: Annual trade deficits are always net detrimental to their nation's GDP.

    Quote Originally Posted by Mircea View Post
    Your lame theory doesn't account for GDP generated by trade.

    If you import $600 Billion, but export $400 Billion, then you have a trade deficit of $200 Billion, but if that $600 Billion in imports generated $2.4 TRILLION in GDP, are you better off, or worse off?

    If you had $0 in imports, you can neither guarantee nor assume you'd be able to generate that $2.4 TRILLION in GDP domestically.

    And if you limited imports to $400 Billion to match your $400 Billion in exports, you might only create $1.6 TRILLION instead of $2.4 TRILLION, in which case your GDP is less, not more.
    Mircea, USA's adoption of Import Certificate trade policy would grant advantages to products entirely. and lesser advantages to products partially USA produced. But it would be of some advantage to any USA producer that competes or aspires to compete with foreign products anywhere in the world.

    Remember, USA's chronic annual trade deficits are not due to production supporting imports, but rather primarily due to imported finished products. The economic differences between domestic and imported products cease when the goods are under USA jurisdiction and handled by USA labor. After a Fiats leave the docks of a USA entry ports, or a Ford leave their shipping platforms, similar products are of similar economic benefit to the USA.

    Respectfully, Supposn

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    Re: Annual trade deficits are always net detrimental to their nation's GDP.

    Annual trade deficits are always net detrimental to their nation's GDP and drag upon their numbers of jobs. They indicate national use and consumption exceeded the nation's production.
    Quote Originally Posted by Nap View Post
    More regulation is not the answer, we need to educate the population on the importance of buying American and supporting local workers/businesses. We got people that talk big about supporting labor and the poor but rather than buying American made products they have a house full of cheap Chinese crap and drive a Prius.
    Nap, you want to convince people they should act contrary to their own best interests because their individual best interests are contrary to that of our nation. We've often tried and have almost always failed to accomplish that.
    It's difficult to convince individuals to sacrifice while they're aware that the great plurality of our majority will not do so. You're asking that they sacrifice with while knowing that their sacrifice will be of no perceivable extent of benefit to their nation.

    I'm among the proponents of the improved trade policy described within Wikipedia's “Import Certificates” article. It would significantly reduce, (if not eliminate) USA's great chronic trade deficits of goods which are detrimental to our numbers of jobs and the amounts of our payrolls. Its entire net costs are passed on to USA purchasers of imported goods in a manner that behaves as a subsidy of USA exported goods' prices.

    Refer to: Import certificates - Wikipedia

    Respectfully, Supposn
    Last edited by I'm Supposn; 08-12-19 at 07:37 AM.

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