http://www.aei.org/publication/are-bad-trade-deals-really-the-cause-of-big-us-trade-deficits/Are bad trade deals really the cause of big US trade deficits?James Pethokoukis
June 17, 2016
An excellent point on trade from economist Timothy Taylor. He notes that the US runs a large and growing trade surplus in services:
In the 1990s and early 2000s, the US monthly trade surplus in services (that is, the amount the red line is above the blue line) was typically in the range of $8 billion per month: in the last few years, it’s been more like $18 billion per month. … the share of services in total goods-and-services exports is now above 33% and rising.
Which leads to the interesting observation/question: If bad trade deals are what cause our trade deficits in goods with other nations, then are good trade deals responsible for our trade surpluses in services with other nations?
Do the same incompetent/corrupt leaders who makes the bad trade deals in goods suddenly get smart/honest when it comes to services?
Of course, the answer is that deficits/surpluses are not mainly caused by savvy negotiators on either side. Taylor:
A fair number of Americans and politicians argue that a trade deficit is in large part a result of unfair trade practices by other countries. Essentially all actual economists disagree with that claim. Economists instead see trade deficits are arising from broad patterns of national production, consumption, and saving. A low-saving economy like the US consumes more than it produces–which it can do by running a trade deficit and importing more than it exports. A high-saving economy produces more than it consumes–which it can do by running a trade surplus and exporting more than it imports. Unfair trade practices can certainly restrict overall flows of trade, but they aren’t a main cause of trade deficits and surpluses.
