Reduce the trade deficit; increase GDP, jobs and median wage

Reduce the trade deficit; increase GDP, jobs and median wage

Postby Supposn » Wed Apr 06, 2016 11:06 am

Reduce the trade deficit; increase GDP, jobs and median wage.

It is not our global trade but our chronic annual trade deficits that are a significant drag upon our economy.
Annual Trade deficits’ are ALWAYS a net drag upon their nation’s economy. They are net detrimental to their nation’s GDP, numbers of jobs and the purchasing power of their median wage.

I’m a proponent of a proposal to reduce USA’s trade deficit of goods as described within the Wikipedia article entitled “Import Certificates”. The proposal for transferable Import Certificates, (ICs) is unilateral and its entire net costs are entirely funded by USA purchasers of foreign goods.

If we consider importing and exporting as a single global trade industry, it is of some benefit to every USA enterprise that competes or aspires to compete with foreign goods anywhere in he world. It would increase prices to USA purchasers of imported goods and is an indirect but effective subsidy of USA’s exported goods. The price increases of imports to USA purchasers and reductions of USA export goods’ prices to foreign purchasers are substantially much more market rather than government determined.

Refer to Wikipedia’s article entitled “Import Certificates”
And
To the paragraphs entitled “Trade Balances' effects upon their nation’s GDP” within the Wikipedia article entitled “Balance of trade”.

Respectfully Supposn

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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby spacemonkey » Wed Apr 06, 2016 11:37 am

My two cents = a finite world, resources, and markets makes on and up forever impossible. Although they don't seem to be aware yet, the holy grail of the future will be what is sustainable.
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby John Galt » Wed Apr 06, 2016 11:55 am

having a large trade deficit as the united states has had for half a century is possible because dollars are being used to be invested in america by outside investors. when we buy stuff from china we need yuan, so we need to trade dollars for yuan, and then we take said yuan and buy mcdonald's toys or whatever with it. but we need someone to trade dollars for yuan with. and why would anyone want dollars if there's such a glut of them from trade deficit? well, investors want them, to invest in america. trade deficits would naturally close if there was a surplus or deficit of dollars to buy stuff. so basically what this proposes wrecks foreign investment in american companies

the mercantilist policy of trade surplus == good, trade deficit == bad was shown to be wrong in 1776, the year of adam smith's book. and america. **==

here's an article on why free trade is best

http://www.economist.com/node/605144
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby Kane » Thu Apr 07, 2016 12:33 am

Reduce the trade deficit...save the world...

Image
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby IndependentProfessor » Thu Apr 07, 2016 9:33 am

A trade deficit doesn't ALWAYS reduce GDP. In fact, specifically for America, a trade deficit has not reduced our GDP at all, since it's increased almost every year.

There is a common perception in the media and in the general public that trade deficits are bad news. The conventional wisdom is that these deficits are a drag on gross domestic product. Surely, it must bad for a country's economy to import more than it exports, right?
In reality, the trade deficit may be more pro-cyclical, moving in the same direction as local GDP. In this article we will examine the correlation between trade deficits and GDP to show that sometimes it doesn't pay to follow conventional wisdom.

What Are Trade Deficits?
Trade has evolved over the years and is now defined as the annual amount spent by individuals, companies and government agencies on foreign-made products, minus the amount spent by foreign entities on domestically made products. Countries rarely import exactly as much as they export so there is usually a trade imbalance. A deficit is created when there are more imports than exports. (To learn more, see What Is International Trade?)

The difference between a country's imports and exports (called the balance of trade) differs across business cycles and types of economies. For countries where growth is led by exports like oil, industrial goods and other natural resources, the balance of trade will move positively toward a surplus during an economic expansion. The reason for this is that the host country exports products that are in demand during growth periods at a greater rate than it imports goods.

In contrast, in countries where growth is led by demand, like the United States, the trade balance tends to worsen during growth stages of the business cycle. This is because these economies need to import even more goods than usual in order to grow. Combine this with a negative national annual personal savings rate and you've got an ever-increasing trade deficit.

Now that we know a bit about trade deficits, let's look at the correlation with GDP.

Trade Deficit Effects
There are two competing theories that have surfaced regarding the effects of a trade deficit on GDP:

Theory 1: Trade deficits drag down GDP and add to the threat of an economic crisis if foreigners dump the local currency in world currency markets.
Theory 2: Increasing trade deficits can be a sign of strong GDP. They will not create a drag on GDP, and any potential downward pressure on the local currency is actually a benefit to that country.
Who Wins?
Theory 1 suggests there will be a general underlying weakness in the economy of the local country during periods of substantial trade deficit. Intuitively, the theory makes sense. If you are buying more than you are selling, it seems logical that this would be bad for the economy - especially in countries where the products to be exported do not create enough jobs to offset the jobs lost by importing goods.

Theory 1 may seem to make logical sense, but unfortunately the numbers do not support it. Throughout the 1990s and beyond, import heavy countries have run consecutive deficits frequently. For example, the United States has a massive and growing trade deficit, and so if Theory 1 held true, we should see the its GDP growth hindered. The opposite is the case however (Figure 1).

Image

According to the U.S. Census Bureau, from the early 1990s to 2007, the U.S. continues on a general trend of increasing GDP year over year; the trade deficit is also increasing. If Theory 1 was true, there would be an inverse relationship between GDP and a trade deficit, but this does not seem to be the case. There are short periods of time in U.S. history where we see reduced GDP in conjunction with an increasing trade deficit, but most of those time periods can be excused as anomalies and the short-term weakness can be attributed as a symptom of other ailments and the trade deficit is just the nature of the host. As for the situation of dumping dollars in the world currency markets, this can happen in any environment but the probability of coordinating such an effort is low.

Theory 2 may hold much more weight as evidenced by the positive correlation between the U.S. GDP and the trade deficit. This can be easily explained by the fact that the U.S. is a demand-based consumer society with a negative savings rate. In addition, as the U.S. evolves into more of a service society, the products that individuals demand will no longer be made in the country. As more manufacturing and labor intensive products are created outside of the U.S., a trade imbalance may be inevitable.

In fact, the economic growth from 1980-2000 tended to grow in years in where the trade deficit grew compared to those years in which it declined. This provides even more evidence that an imbalance of trade in the form of a deficit did not drag the economy.

Fed Actions
Once you get past the idea that a trade deficit is a bad thing, it's easy to understand why the pattern we've seen in the U.S. makes sense. As the host economy expands, demand for imports and oil grows at a faster rate than the demand in other countries for the host's products grows.

Taking that point further we find that economic expansions in the U.S. tend to emerge during or at the tail end of the Federal Reserve's efforts to lower interest rates, which can affect currency exchange rates. (To learn more about the Federal Reserve, see The Whens and Whys of Fed Intervention and The Federal Reserve's Fight Against Inflation.)

The dollar trended lower over from 1997 to 2007. A weaker U.S. dollar can shrink the trade imbalance and increase GDP growth as local companies find more success in exporting their products and local customers tend to pass on foreign goods as their prices rise.

Conclusion
For the most part, the media and the general public have a perception that trade deficits as we know them are bad and can drag on GDP. In reality, the trade deficit may be more pro-cyclical, moving in the same direction as local GDP. In fact, the other factors contributing to the expanding GDP can accelerate its growth.


http://www.investopedia.com/articles/ec ... ffects.asp
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby Supposn » Mon Apr 18, 2016 7:48 am

Low wage rate nation’s advantages over USA’s (actual or potential) producers:

Independent Professor, balance of trade is not the only factor that determines the condition of a nation’s economy. Annual changes of a nation’s trade balance do not have a constant proportional effect upon their nation’s GDP because GDP’s component factors are interrelated. But certainly to some extent a nation’s trade deficit is a drag upon the nation’s GDP. It drags upon the nation’s number of jobs, and median-wage which would have been greater (if the nation had not experienced the annual trade deficit).

Arguments equating the extent of individual entities immediate benefits due to individual transactions to be weighed against those entities long term interests disregard the majority of individual entities cannot afford the luxury of sufficient time and resources at hand to enable their pursuing what’s to their longer-term best interests. They are impelled to choose a “bird in the hand”.
Those arguing the superior quality of imports from low-wage nations ignore the extent that that quality is often due to the producers being able to pay lesser rates for more hours and/or quality of labor integral to their products.

The benefits of cheaper imports do not compensate USA employees and their dependents for trade deficit’s economic detrimental effects upon USA’s GDP, numbers of jobs and median-wage.

We should not generally expect individuals to waive their immediate interests in favor of long in the future benefits that would occur (IF we all behaved altruistically). It is feasible to change entities motivations by modifying their environment; (by modifying the laws governing USA practices of global trade).

Refer to the paragraphs entitled “Trade balances affects upon their nations economies” within Wikipedia’s “Balance of Trade” article
and/or
to the Wikipedia article “Import Certificates”.

Respectfully, Supposn
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby Kane » Mon Apr 18, 2016 11:23 am

Supposn wrote:Low wage rate nation’s advantages over USA’s (actual or potential) producers:

Independent Professor, balance of trade is not the only factor that determines the condition of a nation’s economy. Annual changes of a nation’s trade balance do not have a constant proportional effect upon their nation’s GDP because GDP’s component factors are interrelated. But certainly to some extent a nation’s trade deficit is a drag upon the nation’s GDP. It drags upon the nation’s number of jobs, and median-wage which would have been greater (if the nation had not experienced the annual trade deficit).

Arguments equating the extent of individual entities immediate benefits due to individual transactions to be weighed against those entities long term interests disregard the majority of individual entities cannot afford the luxury of sufficient time and resources at hand to enable their pursuing what’s to their longer-term best interests. They are impelled to choose a “bird in the hand”.
Those arguing the superior quality of imports from low-wage nations ignore the extent that that quality is often due to the producers being able to pay lesser rates for more hours and/or quality of labor integral to their products.

The benefits of cheaper imports do not compensate USA employees and their dependents for trade deficit’s economic detrimental effects upon USA’s GDP, numbers of jobs and median-wage.

We should not generally expect individuals to waive their immediate interests in favor of long in the future benefits that would occur (IF we all behaved altruistically). It is feasible to change entities motivations by modifying their environment; (by modifying the laws governing USA practices of global trade).

Refer to the paragraphs entitled “Trade balances affects upon their nations economies” within Wikipedia’s “Balance of Trade” article
and/or
to the Wikipedia article “Import Certificates”.

Respectfully, Supposn


How do you explain job growth over the last eight years with the deficit?
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby spacemonkey » Mon Apr 18, 2016 11:34 am

The big error in our free trade is we not only sent the product, but included the factory with it. Carrier and Nabisco are the next on deck to go. All in the name of corporate profit. So all this " **== We are the pillar of human rights and dignity **== " is just pure bullshit hypocrisy.
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby Supposn » Mon Apr 18, 2016 2:23 pm

My allegiance to the USA takes precedence to that of an international entity.

John Galt, we can stipulate agreement to some concepts and facts:
All mutually agreed to transactions are (at very least to some extent) based upon the participants’ perceptions of their own comparative advantages.
USA enterprises’ immediate advantages derived from their outsourcing do (to some extent) differ from that of employees that are displaced primarily due to the outsourcing.
Enterprises would be at competitive disadvantage if they refrained while their competitors are enabled to continue reducing their net costs by outsourcing.
To any extent that the nation’s gross production, (i.e. GDP) is “dragged” due to outsourcing, the nations net numbers of jobs and/or labor hours and our median wage will also both reflect and contribute to the “dragging” of the GDP.
I not advocating our nation should eliminate USA enterprises’ outsourcing; that would be unfeasible and economically unsound. I do believe that the practice of outsourcing itself is economically beneficial; (i.e. outsourcing is not (itself) detrimental to a nation's GDP).
////////////////////////////////////////////////////////////////

But annual trade deficits are ALWAYS detrimental to their nation’s GDP.

[The U.S. Constitution that replaced the Articles of the Confederacy granted federal governments supreme jurisdiction over international AND interstate commerce. The convention delegates of some states certainly recognized their states’ advantages over other states. The negotiators waiving of those states’ advantages to favor the United States of America was the political risks of some delegates and the economic sacrifices of their states in favor of our entire nation’s economy.]

I’m much more of a chauvinistic USA patriot; my primary allegiance is not to the U.N. or international trade treaties enforced by international courts.
I’m opposed to the dragging upon USA’s GDP. Trade deficit’s drag upon our GDP, (i.e. drag upon our production) affects and is affected by our numbers of jobs and median wage rate. Trade deficits are a particular burden upon employees, their dependents and any other entities that are particularly sensitive to USA’s wage rates.
I’m opposed to our trade practices that leave USA wages with lesser purchasing powers and altruistically better favors nations unable or unwilling to sufficiently compensate their own workers.

Refer to the paragraphs entitled “Trade balances affects upon their nations economies” within Wikipedia’s “Balance of Trade” article
and/or
to the Wikipedia article “Import Certificates”.

Respectfully, Supposn
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Re: Reduce the trade deficit; increase GDP, jobs and median

Postby Supposn » Mon Apr 18, 2016 2:46 pm

Kane wrote:
Supposn wrote:Low wage rate nation’s advantages over USA’s (actual or potential) producers:

Independent Professor, balance of trade is not the only factor that determines the condition of a nation’s economy. Annual changes of a nation’s trade balance do not have a constant proportional effect upon their nation’s GDP because GDP’s component factors are interrelated. But certainly to some extent a nation’s trade deficit is a drag upon the nation’s GDP. It drags upon the nation’s number of jobs, and median-wage which would have been greater (if the nation had not experienced the annual trade deficit). ...


How do you explain job growth over the last eight years with the deficit?


Kane, I did explain it within the post you quoted. Regardless of the nation’s GDP or numbers of jobs or median wage, if it had not experienced an annual trade deficit, it would have then experienced greater GDP or numbers of jobs or median-wage.

Refer to the paragraphs entitled “Trade balances affects upon their nations economies” within Wikipedia’s “Balance of Trade” article
and/or
to the Wikipedia article “Import Certificates”.

Respectfully, Supposn
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