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

I'm Supposn

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


Trade deficits indicate the nation has purchased greater values of products than it has produced and foreign products have “crowded” their nation's domestic products from their marketplaces.


If a greater proportions of what the nation spent for products had been for domestic rather than imported products, the nation's GDPs would have been greater.


Aggregate numbers of a nation's jobs and their amounts of wages, sales volumes of their domestic marketplaces all correlate with their nation's production of goods and services, (i.e. their GDP).


If the proportions of what the nation spent had rather been greater for domestic, and lesser for foreign products, nation's' annual GDPs would have then been greater (than otherwise).


These valid statements remain true during both individual nation's richer or poorer tears. Even among proponents of pure free trade, few if any credible economists refute any of these statements.


Although few if any credible economists refute any of these statements, but a majority of them contend that USA's trade deficits are small in proportion to USA's annual GDP's and are not of any economic significance. They do not argue that trade deficits per se, are net beneficial to USA's annual GDPs.


I concur with the minority of credible economists contending that USA's great chronic annual trade deficits are of economic significance and net detrimental to our nation's GDP.


I'm among those for valid reasons contending nations' trade balances contributions to trade surplus, and detriments to trade deficit nation's annual GDPs understate their effects upon their nation's GDP.


I'm a proponent of the improved policy described within Wikipedia's “Import Certificates” article.


Respectfully, Supposn
 
We have not talked about this yet... :roll:
 
Annual trade deficits are always net detrimental to their nation's GDP.

I see you're still peddling this nonsense.

Your claims fail, because you falsely assume that $1 in Imports = $1 in GDP, when that has never been the case.

$1 of Imports yields $8-$20 in GDP or more.

Imports also raise the Standard of Living.

If you exported nothing, but imported goods, you're 100% better off than not importing anything at all.

If you exported nothing, and imported $50 Billion in coconuts, you'd generate at least $400 Billion in GDP.

You wanna subtract the cost of the imports? Fine, go ahead. You're still $350 Billion to the good.

There is simply no way to lose importing anything.
 
I see you're still peddling this nonsense.

Your claims fail, because you falsely assume that $1 in Imports = $1 in GDP, when that has never been the case.

$1 of Imports yields $8-$20 in GDP or more.

Imports also raise the Standard of Living.

If you exported nothing, but imported goods, you're 100% better off than not importing anything at all.

If you exported nothing, and imported $50 Billion in coconuts, you'd generate at least $400 Billion in GDP.

You wanna subtract the cost of the imports? Fine, go ahead. You're still $350 Billion to the good.

There is simply no way to lose importing anything.
Mircea, the conventional formula for calculating nation's GDP, (i.e. the expenditure formula) is the calculation of their governments, and consumers, and investment net spending, for goods and service products, plus or minus their nation's balance of international trade.

When a nation's spending for products, increased or decreased, their spending for imported products generally also increased or decreased to some extent. Nation's spending for imported products are reflected by their nation's balance of trade.

USA's negative net imports, (our chronic great annual trade deficits) indicate our nation purchased more products than we produced. Had a greater portion of our annual purchases been spent for domestic rather than foreign produced products, our annual GDPs would have been greater.

Annual trade deficits are always net detrimental to their nation's annual GDPs.

Respectfully, Supposn
 
I see you're still peddling this nonsense.

Your claims fail, because you falsely assume that $1 in Imports = $1 in GDP, when that has never been the case.

$1 of Imports yields $8-$20 in GDP or more.

Imports also raise the Standard of Living.

If you exported nothing, but imported goods, you're 100% better off than not importing anything at all.

If you exported nothing, and imported $50 Billion in coconuts, you'd generate at least $400 Billion in GDP.

You wanna subtract the cost of the imports? Fine, go ahead. You're still $350 Billion to the good.

There is simply no way to lose importing anything.

That's not true at all. Just look at Venezuela. Once the value of their imports greatly outweighed the value of their exports, the value of their currency went way down. One way or another, you pay for your imports with your exports, and/or the value of your currency. Normally, currency valuation helps to correct imbalances; you run trade deficits, so there's a lot of your currency floating around, and the value drops, making your exports cheaper and more attractive, and the pendulum swings the other way.

If you are somewhat balanced, imports (and exports) increase commerce, you (theoretically) get more for your money, and all is good. But the benefits of a trade deficit do not get distributed evenly. 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.

It's not quite as simple as Supposn makes it out to be, but it's true that a dollar of income that goes to China to buy imports is a dollar that won't be spent on American goods, and it's not coming back, either. It takes increased debt to make up for that lost demand.
 
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.

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.

but it's true that a dollar of income that goes to China to buy imports is a dollar that won't be spent on American goods

Trade isn't a zero sum game.

it's not coming back, either.

Maybe, maybe not. Foreign direct investment is a real thing.

It takes increased debt to make up for that lost demand.

There was not lost demand. In the output identity, buying chinese goods increases consumption, but it must be reduced from the national account by imports (negative). This accounts to a net-zero. Aggregate consumption has increased. We cannot say foreign consumption crowds out domestic consumption.
 
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.

Maybe, maybe not. Foreign direct investment is a real thing.

There was not lost demand. In the output identity, buying Chinese goods increases consumption, but it must be reduced from the national account by imports (negative). This accounts to a net-zero. Aggregate consumption has increased. We cannot say foreign consumption crowds out domestic consumption.
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].

Investor decisions are influenced by their determinations of expected risks and rates of returns. That's why investors choose to invest in China or in the USA. Loans are not quite the same as investments. The lender is expected to repay the loan without regard for the lender's enterprise's success or failure.

To the extent of a nation's annual trade deficit, the nation's products were crowded out by foreign products within the marketplaces. The nation's production's and global sales were exceeded by foreign products sales within the nation's domestic marketplaces.

Your last paragraph is confusing if not meaningless. I'm not sure what you meant to communicate.

Respectfully, Supposn
 
Kushinator, who blames the nation's wage inequality on trade?

Read the statement i've quoted.

To the extent of a nation's annual trade deficit, the nation's products were crowded out by foreign products within the marketplaces.

This is false. Products, whether foreign or domestic, are chosen primarily on the basis of both quality and price.

The nation's production's and global sales were exceeded by foreign products sales within the nation's domestic marketplaces.

Incorrect.

Foreign product sales are and have always been but a fraction of total sales.

Your last paragraph is confusing if not meaningless. I'm not sure what you meant to communicate.

Says the guy who posts the same topic (obsessively) across every english speaking economic/finance open forum on the web. Your entire existence here is to spam your rejected notions of trade.
 
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.

A trade deficit shows consumption above our actual production. We certainly have the capacity to produce more, were the demand there. And we lose a lot of our income (potential demand) to trade deficits.

I understand that you can (and probably will) have a larger economy when you do business with the rest of the world, as opposed to autarky. Balanced trade is an obvious win-win. But just as trade surpluses are good for labor, trade deficits are bad for labor.

Trade isn't a zero sum game.

No, it's not. But over any time period, we only have a certain amount of income we can spend. If 25% of that goes overseas, you only have enough to purchase 75% of your domestic production, without increasing debt (private or national).

Maybe, maybe not. Foreign direct investment is a real thing.

FDI inflow is small compared to the outflow of dollars.

There was not lost demand. In the output identity, buying chinese goods increases consumption, but it must be reduced from the national account by imports (negative). This accounts to a net-zero. Aggregate consumption has increased. We cannot say foreign consumption crowds out domestic consumption.

But trade deficits still cost us a chunk of our income (that's where I'm getting demand from), and that must be made up for with increased debt. That's the only way domestic production can be completely consumed (or grow).
 
Originally Posted by Supposn: To the extent of a nation's annual trade deficit, the nation's products were crowded out by foreign products within the marketplaces.
This is false. Products, whether foreign or domestic, are chosen primarily on the basis of both quality and price.

Originally Posted by Supposn: The nation's production's and global sales were exceeded by foreign products sales within the nation's domestic marketplaces.
Incorrect. Foreign product sales are and have always been but a fraction of total sales. ...
Kushinator, perhaps you're not familiar with English, (or particularly USA's) colloquialisms? Of course, purchasers determine values “primarily on the basis of both quality and price”, which are “two sides of the same coin”. Reducing prices often consequentially reduces the quality, and increasing quality often requires increasing the prices of the products being sold. When competing products drive each other from the marketplaces, this is often referred to as products “crowding each other out from the market”.

I used the word “global” as referring to the entire world.

[To the extent of a nation's annual trade deficit, the nation's products were crowded out by foreign products within the marketplaces. The nation's production's and global sales were exceeded by foreign products sales within the nation's domestic marketplaces]

I believe my post should be interpreted to mean, [To the extent of a nation's annual trade deficit, foreign products drove the nation's products out of the markets. The nation's entire productions and global sales were exceeded by foreign products sales within the nation's domestic marketplaces].

Respectfully, Supposn
 
... 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. ...
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. ...
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].
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
 
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.
 
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
 
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.
 
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
 
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.
 
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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