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.'"

Comments

How long

[downix]

When a country exports all of it's facilities, manufacturing, and infastructure overseas, how long before that countries trading partners realize that they can cut the country out of the loop entirely?

Re:How long

[MontyApollo]

The US is a huge consumer. They can't cut us out all the way.

Re:How long

[BrianRoach]

You see this all the time now with Chinese produced goods. They copy whatever it is they were manufacturing for American company X, then produce it for themselves and ship it into the US. Basically, all they need is someone in the US to handle sales and distribution (Walmart, for example).

- Roach

Re:How long

[downix]

And with what money shall the US consume if it does not manufacture anything to sell for profit? Technology was the last real growth manufacturing field. Without turning one thing into another, to sell for profit, there is no more real consumption as rather than generating money, you are just recycling money. And then, when you buy foreign made goods, that recycled money leaves the country, leaving you with less to purchase with. It is an entropic cycle, and will eventually fail.

Re:How long

[Ohreally_factor]

they need better brands and more of a retail channel. They'll be looking to acquire that. coughcoughLenovocough

The main problem for the U.S. is that wages are relatively high, while they are low in these rapidly developing countries. And we're apparently on a generally downward spiral while they're on a generally upward spiral. The competition you mention is going to keep wages in these countries from rising quickly, so the "floor" is going to be lower, and workers in the U.S. are going to be in for some long term pain.

There are a lot of other factors involved, such as the lack of effective regulation (for product safety, working conditions, environmental issues, etc.) that play into this in complicated ways. But the bottom line is that we're in for some belt tightening here in the U.S., barring some major technological breakthrough.

Re:How long

[russ1337]

>>> with what money shall the US consume if it does not manufacture anything to sell for profit?

What are you talking about? You do what the rest of us do and put it on your credit card

Re:How long

[archen]

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.

Re:How long

[Carewolf]

Wages are even higher in Europe, yet according to the story you import more electronics from Europe than you produce yourself.

Re:How long

[Bluesman]

They can't if they care about their economy.

But what if they don't care? The Chinese don't have a history of being enamored of the global free market. They might be willing to cut of their nose to spite their face, especially if their new middle class gets too uppity for the party's taste.

Our massive debt that the Chinese control means that they could sink their economy and ours with a single move. It's like a financial nuclear bomb, only the Chinese have the only trigger.

I'm all for globalism, but the massive amount of debt the U.S. government is creating isn't going to go away, and there will be consequences eventually.

Re:How long

[joggle]

Is this $20 billion included in the $80 billion trade deficit? That is, would it be $100 billion without Microsoft?

Yes, this is included in the trade deficit calculation so yes, if your numbers were correct then the deficit would be $100 billion without Microsoft. Washington state is one of the very few states with an international trade surplus in large part due to Microsoft and Boeing. Other companies with a trade surplus are restaurant chains that sell franchises overseas (such as Starbucks, McDonalds, and KFC).

On the other hand, is perhaps this money not arriving to the US, but rather received only by "Microsoft Japan"

The money is funneled through Microsoft Japan. Microsoft in Redmond still gets a slice of every license sold there (or at least for the great majority of licenses). In the case of restaurant chains usually the franchises are locally owned and operated so the American company only profits from the initial franchise sale and (sometimes) from the ingredients sold.

It's true

[solevita]

Too many of the US' imports are coming from abroad.

We do it to ourselves

[DukeLinux]

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.

Re:Lots of trade defecits!

[Magnus Pym]

If you abstract out enough, all you need is to eat, shit and sleep.

In practice, things are not that simple.

Have you any idea how much the dollar is falling w.r.t. international currencies? The pound is more than 2 dollars now. Do you know what the implications of this are?

Hint: In the short term, a weak dollar might help local manufacturers, but it will devastate the middle class because inflation will follow shortly.

Magnus

Well, yeah....

[FooAtWFU]

It shouldn't be the least bit surprising to anyone that we import our electronics from overseas. It's also not surprising or even necessarily bad that we have a trade deficit. We're the rich country, and we're spending money on buying stuff. And it's not like global trade is a zero-sum game; we remain pretty darned capable of generating wealth ourselves, and indeed can do so far more effectively than manufacturing a bunch of cheap electronic parts.

Yay, so the markets are hiccuping because people didn't understand the risk associated with the debt securities they were buying. let's get scared about the trade deficit by posting scary-looking numbers when most people don't understand any of the concepts behind them, oooooooooooooooooh. scary! :P

Why?

[FatSean]

Why is it in their best interest to send money through the USA when we don't make much of what they want to buy, and we can't afford to buy what they sell?

Re:Why?

[Marxist Hacker 42]

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.

It isn't luck, it was *absolute genius*

[Colin Smith]

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.

Re:No such thing as a Trade Deficit

[spicate]

Also, trade only occurs because that which is received is valued more than that which is given away in exchange. Thus, both parties *profit* from every instance of trade, at the moment of trade. By your logic, no one ever is on the losing end of a trade. Reality is full of counter examples. You're making the implicit assumption that people (or businesses) are perfectly rational actors with complete knowledge. They aren't - see the last 50 years or research in the social sciences.

There is no deficit whatsoever that occurs from any single instance of trade, even if that trade involves promises to repay at a future time. Just to give you one example of how this is wrong... Material goods may depreciate at a different (faster?) rate than currency does. So if I give you cash for a car, that car will be worth at lot less in 5 years than the value I paid for it. You can't assume that somehow the use of that car balances out the difference, because the car depreciates EVEN IF YOU DON'T USE IT. New, better cars are on the market, and people buy those cars instead of your older model. Thus, people lose money in the trade... it happens all the time. If you borrowed to make your purchase in the first place, then you are doubly screwed.

economics on Slashdot

[syrinx]

I can tell that this will be a useful discussion. Once I'm finished reading the insightful and intelligent posts here, I think I'll go to the blog of The Economist or the Wall Street Journal and ask them about the latest Ubuntu release!

Re:No such thing as a Trade Deficit

[TubeSteak]

By definition of trade, something is given away and something is received in exchange. There is no deficit whatsoever that occurs from any single instance of trade, even if that trade involves promises to repay at a future time.
...
Talk of "trade deficits" is political manipulation designed to bamboozle the uninformed. Anyone who believes "deficits" result from trade is as gullible as the Emperor's New Clothes. Do you even understand what's being discussed here? TFA is saying that in the electronics sector, we are buying more than we are selling. It has nothing to do with 1-to-1 business transactions.

My country buys 10 billion [currency] worth of widgets from your country
Your country buys 5 billion [currency] worth of widgets from mine
My country has a trade deficit of 5 billion [currency] in the widget sector.

It's imports vs exports.
When imports do not = exports, you have an imbalance.

For your nonsensical post to be correct, we would have to be buying and selling widgets in equal quantities. Hint: we aren't.

I really can't understand how anyone moderated you up.
This stuff isn't that hard.

Re:Lots of trade defecits!

[Ajehals]

Minor problem with that theory.

Firstly the Us sends them dollars, they need dollars to buy oil, so they sell the US things in exchange for dollars which they exchange for oil. The oil producers then have lots of Dollars and are happy, they buy things from all over the world in dollars (because everyone needs dollars for oil).

The problem arises when the dollar becomes less stable and loses value, at that point the oil producers either take a hit and make less profits, increase the price of oil (which means people want dollars even more badly and may increase the dollars value thus solving the problem in the short term, but pushes up process of anything that needs transporting or oil in some other way...) or they can switch to a more stable currency.

If they switch to a more stable currency then the dollar sinks, the global economy takes a huge hit, but when the dust settles, the US is in a bad way because no one wants dollars anymore, as are all these countries that peg their currency to the dollar and whoever replaced the dollar as the currency of choice is sitting pretty.

People don't swap goods for useless paper, they swap goods for paper that they feel will get them the things that they need, the moment that stops that paper really does become worthless and no one will want it, bad news if you need to buy things from abroad because you don't have a manufacturing base anymore and no one wants to buy your services.

Re:What are you talking about?

[RexRhino]

Okay, so our dollars can be spent on other country's goods, too. No, I didn't say that, you just made that up completly off the top of your head. U.S. dollars are the official currency of the U.S., and are only good for trading for U.S. goods (or trading the currency with other people who want to purchase U.S. goods).

Now we can't buy foreign goods with our dollars? But didn't you just say we are sending them our dollars? We purchase their goods with U.S. dollars, which goes into an account at a U.S. bank, which they can then spend on U.S. goods... or trade that currency for other currencies in countries where they want to purchase something.

But they can't use that U.S. currency to purchase things in France, or to purchase things in the UK, or to purchase things in Japan, unless they find a bank that will be willing to trade them a corresponding amount of those currencies... and to do that, there have to be people in France, or the UK, or Japan, who want to buy U.S. goods and so are willing to trade their own currency for U.S. dollars.

There is no gold standard... The dollar isn't backed by any commodity. The only value that the U.S. dollar has is that it can be used to purchase U.S. goods. For every dollar the U.S. spends on foreign goods, those foreign traders need to spend a dollar on U.S. goods (or on U.S. stocks or bonds or property).

I don't think you have any idea how international trade actually works. This from someone who thinks the U.S. is still on the gold standard and wants to emulate the trade policies of Cuba.