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The Trade Deficit

By: Steve Johnson

2/5/2008 - 70 Comments

The growing US trade deficit is unsustainable and everyone in the world knows it. Yet, the problem has only grown worse over the last 10 years. 

In 2007, the GPD was 13.5 trillion (an increase of 700 billion) while the trade deficit was 800 billion.  The net result is that the nation lost 100 billion dollars last year.

The US needs a 5-6% GDP just to break even. However, with the coming recession, economists are now projecting a 1-2% GDP for 2008.  If you consider the trade deficit, the nation has already been in a recession for over a year – but nobody wants to say this because we are in an election year and the politicians want to focus on their policies – not the economy.

China

China represents 27% of our trade deficit, our largest trading deficit nation. But, China is not the only problem. We have a trade deficit with many nations throughout the world - most of them have oil.

Should the Government Help?

Should the government help out to protect companies from the global marketplace?  Everyone seems to have a different answer to that question.  For example, Arnold P. Goetzke, in his book “Eating the Hand that Feeds U.S.” says that the government should not have allowed Daimlar to buy Chrysler in 1999 because the merger has devastated the US automobile manufacturing sector of our economy.  On the other hand, if the government were to block this merger, the same thing would have likely happen by way of other competing foreign automobiles entering the US market.  And if the governments were to start to limit the impact of the global market, we would need to create a new government branch which would only add to the problem of the government spending too much money.  Nowever, the government needs to do something before we have a financial crisis.

The Global Market is not Free or Fair

The Federal government has rules for monopolies, cartels, free trade amongst states, limits on interstate banking practices, labor laws and environmental laws.  Competing in the global market - means competing with governments who do not share any of our civil or moral beliefs.  Competing with communist nations that do not believe in America - is encouraging and rewording these governments. We are allowing the enemies of America to bankrupt America in the name of ‘Free Trade’.

The Federal government also collects tax from America businesses to pay for our transportation system, police force, educational system, legal system and national defense. Foreign companies are taking advantage of our investment in these services within paying for them.  How can we expect local companies to pay for our infrastructure while competing with companies that don’t?

Foreign governments are not competing with the same rules because many are ‘cheating’ by subsidizing the losses of their companies in order to gain market share by selling cheaper product in America.  They use these methods to drive our companies out of business. Once they gain part of the market, they slowly decrease their subsidizing.  If this strategy is part of the ‘Free Trade’ rules, then why can’t the Federal government engage in these tactics? Yet, the international community is always crying about how unfair it is if the Federal government adds any price controls.

Reference Article: Free trade fears on the rise

Stop the Bleeding

The Global market has steered our manufacturing sector into a tailspin – and the government is letting it happen. We need to proactively develop a plan to make sure the situation does not get any worse. Then, we need to rebuild the manufacturing sector of our economy.  America needs to understand that the Global Market is not a Free Market. We the people need to demand that our government reverse the situation. 

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