Understanding trade

[snousle]

You know, XM radio's "Road Dog Trucking" channel might not be the best source of information about the economy. But one announcers heated rant about a truck parts manufacturer moving their operations to Mexico did inspire me to read a little more about US international trade.

There are a couple of things that protectionists completely fail to appreciate:

That the US is one of the largest exporters in the world, with 1.2 trillion in exports every year, just shy of 10 percent of the whole economy, and...

That you can't have exports unless you have imports!!! If foreigners don't sell things for US dollars, they won't have US dollars to buy American products!!!

This last point is critical. For all this talk of "sending jobs overseas" there is no recognition whatsoever of the jobs being sent OUR way, which protectionism would destroy. Why is this? Why are American export industries left out of the populist agitation equation? Do they somehow matter less? This is not a small oversight. Restricting trade could destroy whole sectors of the American economy, and... you guessed it, send it overseas. For reasons that are hard to understand, protectionists are quite ready to throw the baby out with the bathwater.

Yes, the US is experiencing a huge trade deficit right now, but addressing that with reflexive protectionism is a "buy now, pay later" strategy. Tariffs may be part of the solution, but it is quite disturbing that the people making the most noise over trade show the least understanding of what is being traded. The next person that tells me that the US "doesn't export anything anymore" is going to get a dirty sock jammed in his mouth followed by a three hour lecture on Ricardian trade theory.

An interesting summary of American trade can be found here:

http://import-export.suite101.com/article.cfm/americas_top_imports_exports_2008

Also worth reading is the Wikipedia article on balance of trade:

http://en.wikipedia.org/wiki/Balance_of_trade

Comments

[snousle.livejournal.com]

Heh, wouldn't that be fun. No, it's mostly talk shows featuring vulgar jokes and standard blue-collar grumbling, but without much invective. And, as I discovered, a surprising sensitivity towards transsexuals.