"bg" wrote in message
om...

It's true that cheap imports can be a benefit, but that assumes our
economy
can grow fast enough to replace a lot of well-paying jobs lost to
imports.
When the trade deficit gets as large as it is today ($418 billion
deficit,
goods and services total; goods alone are around $460 billion deficit),
it
probably can't. The job-growth rate and average new-job wages would have
to
reach heights we've never seen, and which there is no indication we ever
will.

So Ed, I keep hearing all the blame go to places like China. Our Trade
Deficit with them is growing at a fast clip. But the reality is that
China itself does not have any real total trade surplus to speak of.
They import as much as they export. This tells me that they are buying
goods, just not from the USA. Are we not producing the goods that
China wants or needs competitively? Obviously so. So this places the
onus on ourselves. How do we overcome that?

China runs a positive trade balance, overall, of around US$30 billion
(2002). Their positive trade balance with the US in 2002 was US$103 billion.
Obviously, the US is their great sink-hole for manufactured products. In the
rest of the world, they run a $73 billion *deficit*.

Your "obviously so" is not so obvious. China runs into trade barriers and
various quid-pro-quo requirements with most of their trading partners --
except for the US, of course, which hardly restricts their imports at all.

How to overcome it? I've grown skeptical of the ability to liberalize trade
through the WTO. The WTO is an organization of roughly 170 countries that
collectively sinks $418 billion of their exports into the US. They really
want to keep the status quo, at least with the US.

As I said, I'm floating the idea of offsets. I like the idea more all the
time. It seems to me that they're the best way to end the big arguments. Did
you see what Geoff just wrote about our "barriers" to NZ trade? That's from
a little country that runs a $468 million *positive* trade balance with the
US. How do you deal with countries that keep wanting more, and blaming us
for "protectionism," when they already enjoy a positive trade balance with
us of $468 million? You impose a balance of trade -- offsets. That ends all
arguments. I like it.


I think these are the real questions we need to ask ourselves. Placing
blame on China's currency valuation is a farce. I know you are still
looking for that "other" system to base trade on, but in the meantime,
we have to look inward to solve our problems. Not place blame.

What does China do with the foreign reserves they get? They buy US
Treasuries, our debt.

Yeah, that, plus they're sitting on a small mountain of foreign reserves as
cash deposits in their (government owned) banks.

But you're getting into current-account/capital-account issues that are over
the head of anything we can reasonably discuss here in the newsgroup. It's
enough to say, I think, that no country in the world wants to see the US
dollar drop much in value. We can make small adjustments, but a big one
could easily bring on a world-wide depression. Nothing much is likely to
happen in that area. So it's an issue for the specialists.

ed, what do you think we should be focusing on? what moves do you
think we should make in the USA?

Elect me, and we'll have 100% trade offsets. Well, maybe 70%. g

--
Ed Huntress
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