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Thread: Annual trade deficits understate their net detriments to their nation's GDP.

  1. #11
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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    Quote Originally Posted by JohnfrmClevelan View Post
    ... Labor that competes with cheap overseas labor loses out, and wages (at least in that sector) suffer. We get cheaper cars, but workers at GM get laid off, or are forced to work for less. Americans that used to work in manufacturing now work at Walmart for far less, selling cheaper Chinese goods. ...
    Quote Originally Posted by Kushinator View Post
    This is not accurate. You can't blame wage inequality on trade. What we do know is a trade deficit shows consumption above our productive capacity.
    Trade isn't a zero sum game. ...
    Quote Originally Posted by I'm Supposn View Post
    Kushinator, who blames the nation's wage inequality on trade?
    Trade deficits indicate nothing specific with regard to their nation's productivity capacity, but you're correct, it's not a zero-sum game. Trade deficits account for the difference between their purchases and the values of what they produced; [i.e. they indicate how much their nation's purchases exceeded what their nation produced].
    Quote Originally Posted by Kushinator View Post
    Read the statement i've quoted.
    Kushinator, John's obviously referring to unemployment and other losses of earnings due to job displacements when USA continues to purchase the products but they're produced beyond our borders. Wage differential's within the nation are unrelated to foreign trade.

    Respectfully, Supposn

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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    These threads have such a habit of destroying discussing the economics of international trade...

    Just about all modern economies have their markets opened up to international competition. Just as a nation's produced products and services compete on the international market, the same is true of a nation's labor costs. No matter if a nation is a net exporter or a net importer, one a nation's market is opened up these causes and effects of competition remain. No level of tariffs or "import certificates" removes these economic principles.

    JohnfrmClevelan is spot on when it comes to labor.

    If a nation is producing a product or a service and international competition finds another nation producing the same (or similar) product or service with a much lower labor cost, then the natural impact is high labor cost nation seeing job losses. Buyers will migrate to the lower cost nations to produce these products and services, and tariffs end up complicating the mater.

    We have seen this demonstrated over and over again. The automotive industry (several times over,) industrial equipment, raw materials production, agricultural outputs, electronics, household appliances, computers & parts, cellphones and wide area networks products, energy production and distribution products, everything from wire to plastics, etc.

    At the end of the day a trade deficit shows to total domestic consumption of products and services *above* a nation's actual total production of products and services. Capacity to produce products and services ends up skewed, and rarely is the reason itself for a trade deficit in modern economies. Competition is usually the reason. For example... in alternate conditions we can produce more cars domestically, there are a multitude of reasons why we do not and competition is at the core. Same story for household appliances, and NAFTA greatly accelerated what happened to that industry.
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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    Quote Originally Posted by OrphanSlug View Post
    These threads have such a habit of destroying discussing the economics of international trade...

    Just about all modern economies have their markets opened up to international competition. Just as a nation's produced products and services compete on the international market, the same is true of a nation's labor costs. No matter if a nation is a net exporter or a net importer, one a nation's market is opened up these causes and effects of competition remain. No level of tariffs or "import certificates" removes these economic principles.

    JohnfrmClevelan is spot on when it comes to labor.

    If a nation is producing a product or a service and international competition finds another nation producing the same (or similar) product or service with a much lower labor cost, then the natural impact is high labor cost nation seeing job losses. Buyers will migrate to the lower cost nations to produce these products and services, and tariffs end up complicating the mater.

    We have seen this demonstrated over and over again. The automotive industry (several times over,) industrial equipment, raw materials production, agricultural outputs, electronics, household appliances, computers & parts, cellphones and wide area networks products, energy production and distribution products, everything from wire to plastics, etc.

    At the end of the day a trade deficit shows to total domestic consumption of products and services *above* a nation's actual total production of products and services. Capacity to produce products and services ends up skewed, and rarely is the reason itself for a trade deficit in modern economies. Competition is usually the reason. For example... in alternate conditions we can produce more cars domestically, there are a multitude of reasons why we do not and competition is at the core. Same story for household appliances, and NAFTA greatly accelerated what happened to that industry.
    OrphanSlug, summarizing your post: USA's great annual chronic trade deficits of goods indicate we purchased more than we produced and that's due to foreign competition.
    Respectfully, Supposn

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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    Quote Originally Posted by I'm Supposn View Post
    OrphanSlug, summarizing your post: USA's great annual chronic trade deficits of goods indicate we purchased more than we produced and that's due to foreign competition.
    Respectfully, Supposn
    That is not quite what I said.

    Any trade deficit shows total domestic consumption of products and services *above* a nation's actual total production of products and services.

    What that is due to can be any number of reasons, but in our case the majority reason is labor rate competition.
    "Democracy without respect for individual rights sucks. It's just ganging up against the weird kid, and I'm always the weird kid." - Penn Jillette.

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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    Quote Originally Posted by OrphanSlug View Post
    That is not quite what I said.

    Any trade deficit shows total domestic consumption of products and services *above* a nation's actual total production of products and services.

    What that is due to can be any number of reasons, but in our case the majority reason is labor rate competition.
    OK; I don't disagree. Do you have any suggestions that would not reduce our GDP, or numbers of jobs, or their median wage's purchasing power more than otherwise?

    I'm a proponent of USA adopting the improved trade policy described within Wikipedia's “Import Certificates” article.
    Respectfully, Supposn

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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    Quote Originally Posted by I'm Supposn View Post
    OK; I don't disagree. Do you have any suggestions that would not reduce our GDP, or numbers of jobs, or their median wage's purchasing power more than otherwise?

    I'm a proponent of USA adopting the improved trade policy described within Wikipedia's “Import Certificates” article.
    Respectfully, Supposn
    There is no simple solution, and an 'Import Certificate' just makes matters worse.

    Once these markets are opened up to the same or similar products and services, the only response is isolationist which would harm GDP.

    We either compete on the merits of what we produce in competition with other nations, or produce something else.
    "Democracy without respect for individual rights sucks. It's just ganging up against the weird kid, and I'm always the weird kid." - Penn Jillette.

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    Re: Annual trade deficits understate their net detriments to their nation's GDP.

    Quote Originally Posted by OrphanSlug View Post
    There is no simple solution, and an 'Import Certificate' just makes matters worse.

    Once these markets are opened up to the same or similar products and services, the only response is isolationist which would harm GDP.

    We either compete on the merits of what we produce in competition with other nations or produce something else.
    OrphanSlug, improving the quality of a product often requires increasing the labor expenses integral to the product. Even when it only requires more expensive materials or components, there's often increased labor costs embedded within those expenditures.

    We do agree that a substantial portion of USA's trade deficits are due to our comparatively greater labor costs.

    Again I inquire, how do you suggest we better “compete on the merits of what we produce” or what are the products we're failing to produce? What's the reason we're failing to produce these yet unspecified products? What's the resolution of those difficulties?

    You seem to be implying that “Import Certificates are an isolationist proposal and you stated it would just make matters worse, but you don't go further into details.

    As described by Wikipedia, the policy's federal fees would by law be set and annually adjusted to only to defray federal direct expenses due to the policy. It is not a source of net tax revenue.
    To any extent that prices to USA importers of goods would reflect increases greater than the federal fees, those market-determined price increases serve as an indirect but effective price subsidy of USA's exported goods. That's not an “isolationist policy”.

    Respectfully, Supposn

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