Essay on The US Trade Deficit

The performance of the U.S. economy since the 1930s has been universally hailed as stellar. Economic growth has been strong, unemployment has reached its lowest rate in over a generation, and inflation has remained relatively low. Consumer confidence has been high, helping to maintain strong growth in consumption expenditures, and investment spending has experienced a sustained growth rate that is unparalleled during the second half of the twentieth century. Many have gone so far as to declare that current conditions and prospects for the future represent a “new economy” or “new paradigm” in which these favorable trends might continue indefinitely (Allen, 1997).

One economic indicator that often is viewed with alarm, however, is the nation’s growing trade deficit. In 1998, the U.S. trade deficit reached a record level, and when final data for 1999 is available, it is projected to be even higher. Each new release of trade data prompts the financial press to trumpet headlines announcing new record deficits. In both the media and popular opinion, trade deficits often are portrayed negatively, being blamed on the unfair trading practices of our trading partners or on a lack of U.S. competitiveness in world markets. Trade deficits often are attributed with reducing economic growth or resulting in lost jobs, and they almost always are discussed using terms with negative connotation. (For example, a widening deficit is frequently described as “deterioration.”) (Aghion, Howitt, 1998)

A big surprise in the trade numbers was the shellacking taken by America's service sector, which supposedly represents the future of the American economy. It has always been looney to think that exporting services could make up for the trade-induced growth, job, and wage losses suffered by American goods producers, and especially manufacturers. Most service industries and companies, after all, aren't tradable beyond borders or even city lines.....................

ESSAY ON THE AMERICAS