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Another US Tech Trade Deficit
eldavojohn writes "The United States is suffering again from a massive trade deficit — $38.3 billion in 2006. And it's been going on since 2002. From the press release: 'In 2006, Asia supplied 60 percent of all US imports of advanced technology products. Europe supplied more than 20 percent, and North America more than 15 percent.'"
Technological advances aside, how to we compete with close to free labor?
We figured out a long time ago that it's easier to elect seven judges than to elect 132 legislators.
Holy crap, I just realized that I have a *HUGE* trade deficit with the local grocery store. I purchase almost 100% of my food supplies from them and they purchase *NOTHING* from me! And my employer is in equally dire straights. They purchase a ton of service from me, and I only a tiny fraction of service from them. Dear heavens, the world may end!
</sarcasm>
Seriously, this is a non issue. If trade deficits were an issue, then the above trade deficits would also be an issue for you personally. But it so happens that having the above trade deficits makes you, the grocery store, and your employer wealthier by allowing you all to specialize.
Nothing to see here. Move along.
Key to financial independence: Spend less than you earn. Save and invest the difference. Do it for a long time.
I vote in EVERY election in my precint. I vote against ALL incumbants and against any additional spending. I am doing my part. I think when the dollar finally collapses people will get a clue that deindustrializing along with de-educating our kids was a really bad idea. I am not sure if our Government fully appreciates the impact of a bunch of pissed-off gun-owning "peasants." Shrub never read the history around Viet Nam and wonderfully repeated it. I bet he knows even less about European history...regarding uprisings, inserection and revolutions, etc.
It's really that simple, is that, USA pays its people too much relative to the rest of the world, and the easiest way to fix that is to devalue the dollar.
Even at its relately "low" versus the EU of $1.30 - $1.50 vs 1EU, there's no way that a worker in detroit who does not get paid the same benefits (incl natl health care), as his german counterpart, and current economics says it does.
Beyond that, we need to invest what dollars we have in education. Stop throwing so many people into prison and build more schools. Infrastructure needs money too, and honestly, some form of national health care is obviously useful. If National Health Care is such an economic drag, how the hell does the EU actually able to export its goods to the USA and not the other way around? Why is a BMW so frigging cheap?
Currency yes, needs to be fixed, but we need to take care of business at home too.
This is my sig.
The US declared bankruptcy on the 15th of August 1971.
Nobody noticed or seemed to care. Which I have to admit I find a touch odd. But... at the same time, in 1972 and 1973 they managed to persuade the House of Saudi to denominate oil in US dollars so everyone had to buy dollars to buy oil. Perhaps you'll start to understand the close relationship between the US and Saudi now.
This genius has allowed the US to export it's inflation to the rest of the world for decades. It may have been desperation or genius, but whoever it was that thought it up should be given the highest medal by the US government and people. It's given the US a truly massive advantage over all of the other countries.
Of course, 40 years later, everyone is starting to wake up to the importance of currency, and the oil producers are starting to switch away from the US dollar as it's value dwindles.
"A nation-state taxes its own citizens, while an empire taxes other nation-states."
And inflation is just another form of taxation.
Brilliant.
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I've actually had discussions on this sort of topic and I didn't realize the implications until later. It's almost impossible to get an electronic system manufactured in the U.S. now because we've shipped all of our capabilities overseas - mainly to China. I was having a discussion with a friend about a product which he was talking about producing - a one time thing, for himself. I mentioned that it was a pretty cool idea and that he should consider making such a product commercially and selling it. He said that it wasn't worth the effort. You need to produce the product, that means using a Chinese manufacturer. They will copy it and undercut you to hell and back, whether you have a patent or not. So really there is no reason to think up new products because in the end China will end up screwing you.
There is an amazing amount of gadgetry out there now days, but I wonder how many products never come to life because people (in the U.S.) understand that there is no way to really make any money on it.
What do you mean with that, I thought the only way to have a trade deficit was to buy more from abroad than locally. So if we have a trade deficit it doesn't seem like we are having a problem affording stuff.
Short term vs long term viewpoint. If we have a trade deficit today- and it's large enough- it means that comparative advantage rules have broken down, and that the nation that no longer produces ANYTHING will start losing high-paying manufacturing jobs (gee, kind of like what we've been doing for 40 years now?). As those high-paying jobs fall off, more and more Americans are living on what are basically substinence level wages (albeit, substinence level in America is 40x what it is in China, especially after the housing market boom). If we're earning substinence level wages, that means no money for toys. Which explains why my previous 2 year upgrade cycle has been broken for the past 4 years.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
Wages are even higher in Europe, yet according to the story you import more electronics from Europe than you produce yourself.
The US has a trade deficit with (say) Japan of $80 billion, if I am not mistaken. Now, assuming 1 PC per Japanese citizen (sure, not all have one, but some have more than one), that is over 100 million PCs. Say each PC pays Microsoft $200 (for Windows + Office, plus additional stuff like SharePoint for some of them). That comes out to $20 billion paid to Microsoft, in rough estimate.
Is this $20 billion included in the $80 billion trade deficit? That is, would it be $100 billion without Microsoft?
I ask this, because if this is so, then it might explain why US policymakers seem to let Microsoft so easily off the hook for monopolistic practices - they are offsetting around 20% of the trade deficit right there.
On the other hand, is perhaps this money not arriving to the US, but rather received only by "Microsoft Japan" (I assume there is such a thing)? If so, then from a trade deficit point of view, software sucks: you can pay all your salaries to programmers in the US, then make one copy and move it to Japan, and sell it for $20 billion, all of which stays in Japan and never reaches the original location that produced the code. You can't do this with cars and TVs.
All of this seems odd, I am sure I am missing something. Economists, please explain
As it is, the US is draining its bank account (international reserves, citizen's bank accounts through taxes, corporate bank accounts and just plain citizen's money).
It might be interesting to put this in perspective. Does anyone know the total amount of international reserves/circulating money/assets in the US? Is $38.6 Billion a large chunk or just noise? It would make a lot of difference in the predictions of doom and gloom in this discussion.
Any macroeconomists in the house?
Eventually, they will spend those dollars on U.S. goods, as that is the only thing they are good for, or sell them to someone else who will spend those dollars on U.S. goods.
International trade no longer takes place in gold... the countries we are trading with have no choice to buy U.S. goods eventually.
If we only bought american goods, then we'd inflate our local prices,
Thus increasing the wages of American Workers, which would in turn allow us to afford those higher local prices, and encourage production of goods here at home to keep us safe from foreign wars and governments.
and foreign companies would kick the crap out of us abroad,
Only if you're stupid enough to tie your business to a foreign market instead of creating goods for your own nation's people ONLY. We've got 300 million people who, to maintain their standard of living, need the same amount of goods as 1.2 billion third worlders. What kind of loser needs to sell to the third worlders with a market like that here at home?
and we wouldn't have anyone able to compete.
This makes no sense. Why compete for small third world markets when cooperation to use the larger first world market can bring larger rewards?
Then instead of losing SOME money to them, we'd have whole companies go out of business.
Only the non-patriotic treasonous ones- which should go out of business anyway.
You weren't paying attention in economics class where you. It might sound nice to say 'buy american' but if we really did that, and boycott foreign stuff, you'd drive the price on american shit up so much there would be no way in hell anyone but americans would buy american, and foreign business is what keeps a LOT of companies afloat.
Those companies, I call them free traitors, deserve to go out of business if they're too stupid to be able to stay in business with this big of a market. And yes- we're at the point where we've got such an incredibly high standard of living in comparison to everybody else that we either need to produce it all ourselves for ourselves while waiting for the rest of the world to catch up, or we need to go through a depression to reduce our standard of living. A BUY AMERICAN campaign will achieve both.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
The U.S. actually maintains a trade surplus in tech good with Europe, to the tune of $13 billion... Europeans buy far more U.S. tech products than the U.S. buys European tech products. http://www.aeanet.org/PressRoom/prac_TCS_2007.asp
China, and their cheap consumer electronics is where the overwelming majority of the U.S. deficit is coming from. Europe is in an even worse state in that regard.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
so you're saying that if someone loses their high paying manufacturing job, then they can't go do something else ever?
No, I'm saying that the options to high paying manufacturing jobs pay less than a living wage.
not even 20 years from now?
Unless something comes along that pays a living wage, not even 20 years from now. The race for cheap labor is a race to the bottom, not to the top.
It's a local hiccup to lose a local industry to foreign competition, it doesn't make the next generation (next 4 year class of college students even) of workers immune to finding jobs.
It just means that the next generation only has burger flipping available- because nobody can afford anything else.
It's those high paying jobs anyway that make American companies unable to compete with foreign companies who don't pay them as much.
And we want to compete with them exactly why? Why not just lock them out of our market so that we don't have to compete with them?
So you're basically saying that we should somehow tell the other countries that they have to be fair and pay them as much as we'd like to make, because.. it's only fair that way... right?
No, I'm saying that if they want to sell goods here, then they have to pay equal to American wages. If they don't want to pay equal to American wages, then I see NO reason why we should allow their imports AT ALL.
I don't think they'll buy it. And you will be left behind whining about how life isn't fair, while the people who adapt will be moving on buying more plasma screen tv's they shouldn't be able to afford.
At least until China realizes that all they're getting for those plasma screens are IOUs that will never be paid off. I don't see any reason why we can't just sink the Chinese ships trying to cross our borders, and make the plasma screens here. But hey- if you like selling out your nationality for cheap labor, so be it. There's a name for that: treason. And someday, patriots like me will be handing out the proper punishment for that crime.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
So we fork over $49.95 for a CD player. ... ...
That is the essence of trade.
So where is the "deficit"? We have fewer pieces of green paper, but that's okay, we got something better in exchange.
Where did your piece of green paper come from?
Did the government just print it out of thin air for you? If so, then it has no value, and no one will accept it in the future. Your currency will crash and you will have massive inflation. Soon, your $50 will not even buy you a stick of gum from an overseas producer. Why would they accept it when it means nothing?
Did you take a loan to get it? If so, then you are going deeper and deeper into debt, and sooner or later, you wont be able to borrow any more. Who will lend to you when you have no ability to pay them back?
The deficit is that you didn't sell $50 worth of materials to create that $50 that you used to buy materials.
Thanks for showing your open hate at the end there, MH42. Nice to know that marxists are still empty violent rebel types.
Your economic theory is interesting but baseless. If you get out a map you can draw arbitrary lines on it and make any silly economic point that you please. Suppose you draw a line around downtown San Francisco, and you notice that goods and services come in while only trash goes out. You haven't made an economic point about downtown San Francisco; you've just found where some rich people live.
National borders are of similar, diminishing relevance. I know that you believe that an American is somehow "worth" more than someone in China, but it's not really true; all men are created equal, and most of them manage to stay that way. Goods and services move into the US rather than out because the people in the US have more money.
Sure, it won't always be that way; taking money away from the rich has always been the favorite pastime of the poor. But your predicions of collapse and calamity are far from likely. The US economy still produces a huge amount of product, despite what John Edwards would have you believe. Enough to pay off those debts easily enough should China come looking for their money.
I have seen the future, and it is inconvenient.
Hmm, an interesting new market philosophy :)
One for an overpopulated world. We don't have the resources to be spending them on exports, we need them right here at home to feed our own 300 million people.
Ask Boeing, Microsoft and Cisco, just to name a few.
Then maybe they should have their headquarters where their customers are, if it's that big of a problem for them to be patriotic.
And what interests are actually better off with the policies of the last 7 years, Halliburton or Exxon maybe but they live of imports.
The culture of importing and exporting would be impossible without Middle Eastern Oil. And it's not just the last 7 years- this problem started with the discovery of oil under the Middle Eastern Sand in the 1920s.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.