“The Context for Record Trade Deficits.” The Washington Times. Oct. 27, 1998: (A16) 1-2.
Trade has always been a driving force between nations. The exchange of goods and services allows for a specific country to manufacture and produce those goods it can create the most efficiently and inexpensively. Because a country does not have to be locked to its own resources through trade, it can consume more than it is able to produce from its own resources. Trade between nations also creates larger markets for goods and services than just the domestic one. In today’s world, the high degree of international trade has made countries interdependent on one another where their own domestic economies are concerned. The U.S. is in no different in this aspect. This fall the trade deficit was listed at its highest since new methods of calculating it were introduced by the Commerce Department in 1992, “Consensus forecasts projected the goods-and-services trade deficit would rise from an unrevised $13.9 billion in July to $15 billion in August. In fact, the August deficit was $16.8 billion” (Context 1).
The problem for the American economy where the trade deficit is concerned is that it means Americans are consuming many more imported goods and services than they are exporting. There is a twofold explanation for this situation. The first key to the situation is the fact that many markets that are heavy buyers of American goods and services are in economic difficulty and can no longer continue to import goods from American markets. On the other side of the coin, the fact that these foreign markets, like Japan, are experiencing economic trouble at home makes them even more desirous of exporting goods and services to the lucrative American market. The biggest problem with a trade deficit for America is that as exports continue to decline so does economic growth. A trade deficit equates to a brake on U.S. economic growth, wh...