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Annual trade deficits are always net detrimental to their nation's GDP.
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.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.
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.
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
it's not coming back, either.
It takes increased debt to make up for that lost demand.
Kushinator, who blames the nation's wage inequality on 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.
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?
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.
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, 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”.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. ...
... 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].
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.Read the statement i've quoted.
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.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
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?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
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.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.
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