Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Trade deficits are ALWAYS detrimental to their nations’ GDP.
(Trade deficits, GDP, Median wage and job numbers).

Balance of trade is a factor of gross domestic product’s calculation.
Trade surpluses ALWAYS contribute and trade deficits are ALWAYS detrimental to their nation’s GDPs;
[i.e. due to a trade surplus, the nation’s GDP is greater and due to a trade deficit the nation’s GDP is less than otherwise.]

Balance of trade has a leveraged affect upon GDP.
The extent of GDP increase is significantly greater or the extent of the GDP reduction is significantly less than the extent of the nation’s trade balance.

GDP has a positive effect upon the median wage.

Refer to the topic “Reduce the trade deficit; increase GDP & median wage”
or the world wide site of “.USA-Trade-Deficit.Blogspot.com”
( www.USA-Trade-Deficit.Blogspot.com )
or Google “wikipedia, import certificates “.

Respectfully, Supposn

 

This is just repetition of an error that you've already provided. You're abusing the standard national income accounting (C+I+G+X-Z), but failing to realise that cannot be used to understand trade effects: given (C+I+G) are all affected by trade. You'd actually have to refer to the transformation curve, given specialisation according to comparative advantage (which the idiotic policy you religiously follow will harm) will allow consumption along the superior trade possibility frontier

 

According to the balance of payments, if there is a deficit in the current account (trade deficit) there will be a surplus in the capital account. Hence why the US actually insources more jobs than it outsources, and why there is so much investment into the country. Sadly, much of the investment is in the government.

Do trade deficits lower GDP? Of course, for that is how basic GDP accounting works. But basic GDP accounting is not always accurate at understanding the real world. For example, if more money is invested back into the US, such investments will facilitate greater production than could have occurred without them.

If a country has a large current account deficits which reflects a large capital inflow to finance sound investments, then current account deficits are a very good thing. If the capital inflow is used to finance excessive consumption and/or malinvestments then it is an unhealthy thing. Sure, depending on the reaosn a trade deficit can be a bad thing. But that is not always the case.

 

Basic error. There is no way of using GDP accounting to derive that conclusion. All aspects of the identity are affected by trade.

 

Liberalis, balance of payments deal with transfers of wealth between nations. They do not increase any nation’s production, (i.e. GDP).
No additional production of USA goods or services has occurred when we import goods and export stocks and bonds. Such transactions are net increases of our nation’s trade deficit; (i.e. a negative effect upon our balance of global trade). Trade deficits’ are an immediate detriment to the nation’s GDP and reflects a net decrease of jobs and wages.

If global transfers of wealth resulted in the purchase tools or materials devoted to our domestic enterprises, it was reflected within our GDP as increased investment into the USA (but within the USA’s GDP those investments were not recognized and attributed as due to our global trade.

Transfer of wealth brought into the USA and used to purchase foreign produced tools or materials devoted to USA’s domestic enterprises, actually and immediately increased USA’s trade deficit and investments; (both of them reflected within USA’s GDP).

Any portion of USA wealth transferred beyond our borders that’s used to fund exports from the USA, reduces USA’s trade deficits.
Unfortunately a great proportion of portion of USA wealth transferred beyond our borders due to our trade deficit only earn the recipients additional future USA wealth to be directly or indirectly transferred from the USA.

Almost all USA’s global transfers of wealth that have eventually been spent for USA products were eventually spent for consumer goods and service products rather invested into USA’s domestic enterprises. They were as water poured onto sand, of no future benefit to those that poured it and of extremely little benefit to their nation.

Trade deficits are ALWAYS an immediate detriment to their nations’ GDPs. USA has suffered a trade deficit of goods for more than a half century. In USA’s case, our trade deficit of goods is both an immediate and a long term detriment to our GDP.

Respectfully, Supposn

 

This was a cretinous comment the first time you made it. It continues to be a cretinous comment. We dismissed mercantilism yonks ago so it beggars belief that you're coming out with the same drivel

 

Reiver, trade deficits detriment to their nations’ GDPs are directly baked into the expenditure formula for calculating GDP. They are indirectly factored into all other formulas that have been accepted and used by communities of economists and statisticians throughout the world. That’s a fact rather than my opinion.

You’re arguing against the formulas that support and define GDP?

Trade deficits are immediately detrimental to their GDPs.
Medium term trade deficits are detrimental to their GDPs over the medium term.
Long term trade deficits are detrimental to their GDPs over the long term.

Respectfully, Supposn

 

Current account deficits (trade deficits) are balanced by capital account surpluses. If the capital account was not in surplus, there would be less resources to finance production.

Imports don’t lower GDP. The accounting identity subtracts imports because C, I, and G include domestic expenditures on foreign goods, and GDP is supposed to be the value of domestic production.

If american consumers buy $30 billion worth of goods from China, both C and imports rise by $30 billion, and GDP doesn’t change.

If GDP is 10 trillion, and there are an additional 1 trillion goods imported, GDP does not become 9 trillion. The additional 1 trillion goods is added to the C + I + G part of the equation, resulting in 11 trillion. The imports are then subtracted because GDP is not supposed to measure foreign production, only domestic production. So the final formula is 11 trillion minus 1 trillion, which is 10 trillion. There is no decrease.

Furthermore, a trade deficit results in a capital account surplus. Rather than buy our exports with their acquired dollars, foreign companies will invest in us. One type of investment is Foreign Direct Investment, which occurs when a foreign company creates a plant or establishes a business within the US borders. This plant will contribute to GDP (such plants include toyota plants, Nesle, etc.) I remember reading in the New York times a few years ago (I think 2009) that foreign companies employed 5.5 million Americans. Such employment would be absent if the trade deficit were in surplus.

 

Liberalis, the capital account and current account are mutually independent statistics. One does not govern or directly affect the other. The two totals are added together and their sum is the balance of payments. The two parts determine the sum. The sum does not determine the parts.

A positive capital account indicates the nation is borrowing money or selling off its assets.
A negative capital account indicates the nation is lending or purchasing assets.

Increase or decrease of the trade deficit do not directly provide or cause increases or decreases of investments into USA’s domestic enterprises. Trade deficits are NOT balanced by capital account increases. Trade deficits are detrimental to their nations’ GDPs.

You correctly wrote imports do not (in themselves) decrease their nations’ GDPs.
Additionally exports do not (in themselves) increase their nations’ GDPs.
You inadvertently omitted the term “(X – M)”, (i.e. balance of global trade) within the formula you provided.

When the nation’s balance of global trade is negative, it’s a reduction from the nation’s GDP. The values of global trade goods are not overstated but to some extent are understated. Any production support not fully paid for by global products producers are not reflected within those products prices. It is not unusual for non-profit entities such as governments or universities to provide such support freely or at greatly reduced prices. The true value of these production supports are reflected within the producing nations’ GDPs but they are not identified or attributed to global trade.

[Excerpted from http://en.wikipedia.org/wiki/Gdp ;
GDP = private consumption + gross investment
+ government spending + (exports − imports),
or
GDP = C + I + G + (X – M) ].

Respectfully, Supposn

 

You've already been educated over this (several times). The identity is just used to calculate GDP (giving us 3 ways of actually measuring GDP). It cannot be used to make any assessment over trade effects. Every component of the identity is affected by trade. Crikey, the comparative advantage approach to trade effects focuses on the impact on consumer surplus (and how consumption exceeds what is possible through a production possibility frontier in autarky). There is no debate in it. You've made an extremely silly error (which the other fellow hasn't picked up on as he doesn't even understand supply and demand)

 

Reiver, refer to Message #7.

 

Your position is based on the premise that trade has no effect on consumption, investment or government expenditure. That is so ludicrous that I'm not surprised you're struggling to reply!

 

You are not correct. The balance of payments always nets out to zero. That is how it works.

You are ignoring foreign direct investment.

You do not understand the balance of payments. The capital and current accounts will always roughly balance out to 0. In 2004, the US had a trade deficit of 617 billion dollars, but a capital account surplus of 668 billion dollars. You cannot ignore all the goods produced with that capital account surplus.

There was no need to include the term, obviously I know the GDP formula.

When the nation has a trade deficit of $30 billion, C also increases by $30 billion. There is no loss to GDP. You wrongly assume that without imports production would be just as efficient if not more so to meet the demand of that $30 billion. But that defies logic, for the whole reason people import is because goods cannot be produced as efficiently and in the same quantities at home without foregoing too many other resources.

The easiest way to debunk your argument is to look at reality. Countries with high trade deficits can have massive economic growth, and countries with high surpluses can have very low growth.

 

This is utter nonsense! If that was the case the formula would ignore the trade deficit and just use C. You clearly do not know the GDP formula

 

Reiver and liberlis, nations’ net global trade of goods and service products, (i.e. nations’ trade surpluses or deficits) are factor of nations’ GDPs.
(There are no transfers of wealth within nations’ trade balances).
Nations’ trade balances are components of and not equal to their current accounts.
[Additionally the current accounts include some transfers of wealth such as their governments’ net international incomes, gifts or governments’ foreign aid. Current accounts themselves are not factored into nations’ GDPs].

Nations’ trade balances are NOT equal to their capital accounts.
Nations’ capital accounts are composed of net asset or wealth transfers or exchanges that are not included within current accounts.
Nations’ trade balances are NOT equal to their capital accounts. Capital accounts are not factored into nations’ GDPs.

Trade deficits are ALWAYS immediate detriments to their nation’s GDPs.

Respectfully, Supposn

 

This is just repetition of error (although to be fair the other fellow has also given some very silly statements). We have no means of using national income accounting to evaluate trade effects on economic well-being. All inputs are affected by trade.

Now there are very specific cases where we can refer to deficits with 'worry'. Britain's recent trade performance, for example, is a concern (with growth projections certainly suffering). However, this is only a worry because it shows that- whilst domestic demand is stagnant- British firms aren't able to utilise overseas activity to somehow make up the shortfall. We can therefore use the trade figures to highlight the 'double dip recession', exacerbated by austerity, is an on-going problem.

But when can we make more general utilisation of the national income accounting? You've already been told several times. It can only be used to understand the determinants of a trade imbalance; i.e. we can re-arrange the expression to show that, rather than risking the instabilities from dollar devaluation, long term repeated trade deficits reflect low savings rates.

 

Reiver, within this discussion topic I argue trade deficits are ALWAYS immediately detrimental to their nation’s GDPs. I contend that’s a fact.
You’re contending trade deficits affects upon other factors of GDP, (i.e. investment and/or government and non government expenditures) indirectly increase GDP more than otherwise and there’s a net economic advantage due to the nation’s trade deficit?

Those are opinions worthy of discussion and argument. Is that the case?

Respectfully, Supposn

 

You may have convinced yourself that its a fact. It is, however, just a silly error.

I'm stating the obvious: you're abusing the national income accounting. I also gave you detail to show just how silly your claims really are: using specialisation according to comparative advantage as a means to show how consumption is itself a variable (i.e. trade allows it to increase such that consumption can be outside the production possibility frontier)

There aren't 'opinions' here. There is simply validity and error. You stick diligently to the latter

 

You keep repeating the same argument...but its not a response to the counterarguments.

Here is the formula for GDP:

GDP = C + I + G + (X - M)

If imports increase by $100 billion, GDP is not decreased by $100 billion. GDP stays the same. How can this be? It is true that $100 billion of imports will subtract $100 billion from the final GDP. But GDP is at the same time increased by $100 billion because there is now $100 billion more in consumption (C increases by $100 billion). The two cancel each other out, and you get 0.

The only way you can say GDP will be decreased is if you assume importing goods makes an economy less efficient in its production. This is absurd, because imports allow for more resources to enter sectors an economy is more productive in.

Respectfully, you just don't seem to grasp this.

 

This is utter drivel! Its purely an accounting identity. There is no way of using it to understand the impact of any level of imports. We certainly cannot say "the two cancel each other out". Its a correction to expenditures, allowing us to appreciate that not all contribute to domestic product.

 

I concur with your reasoning. A prime example of how trade affects consumption would be the consequences of United States-China trade policy. China exports overwhelming amounts of goods to the United States. These fuel domestic consumption spending, which is over 70 percent of the Real Gross Domestic Product (RGDP) of the United States.

 

We do have to be careful with bilateral trade policy. That will often include aspects of strategic trade policy (i.e. differences in bargaining strengths such that one party can secure a greater share of available economic profit). Its perhaps the only time that we have something close to supporting the OP (not quite though, as such policies ultimately are 'beggar thy neighbour' and encourage deeply damaging trade wars)

 

Reiver, on the surface you’re correct. Trade balance is factored into GDP to reconcile USA’s purchasing imports or not purchasing USA’s exports.

If the imports were not purchased the money would have spent for domestic goods or service products or within wealth transfer transactions. Eventually some principle and/or income due from wealth transfer transactions are withdrawn and spent for foreign or domestic products.

To the extent we can reduce our trade deficit and not reduce our GDP more than otherwise, we increase potential purchases of domestic products and our GDP (more than otherwise).

Refer to the topic “Reduce the trade deficit; increase GDP & median wage”

Respectfully, Supposn

 

Reiver, prices of individual goods do not in aggregate reflect the ENTIRE costs of their production supporting goods and services.
All production contributes to the producing nations’ GDPs, but to the extent global trade products prices are understated, their nation’s trade balances effects, (surpluses or deficits) upon their GDPs are understated.
Thus trade surpluses contribution or trade deficits’ reductions to their GDPs are understated.

Trade deficits are detrimental to their nations’ GDPs.
I’m unaware of any reasonable cause for prices of a nation’s aggregate global trade products to be overstated.

Respectfully, Supposn

s

 

The Diplomat, after foreign goods are unloaded to the entry port’s receiving dock or domestic goods reach the domestic producer’s shipping platform, there’s no economic difference between the two otherwise similar products. Everything that occurs within the purchasing nation is similar for both domestic and imported goods.

All economic differences occur prior to the goods entering the importing nations’ markets.

New Zealand lambs were nurtured, butchered, packed and shipped from New Zealand. USA’s purchasers helped pay New Zealand taxes, their roads, their schools, their veterinarian colleges, their medical facilities, their enterprises’ expenses, their veterinarian research and development, and we contributed to their knowledge and experience because they, (not us) were doing all of those tasks.

I am not arguing if we should or shouldn’t import New Zealand lamb, or German automobiles, or Chinese solar panels and wind turbines. I’m arguing that we do ourselves a great disservice when we import more goods than we export.
Trade deficits are detrimental to their nations’ GDPs but what’s most important is JOBS. .

Today we don’t produce goods; tomorrow we’ll be unable to produce them?

We have a dire need for technicians and craftsmen that our educational system is not addressing. There’s a relationship between producing goods, and knowledge and experience gained by handling tools and materials.

Respectfully, Supposn