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

[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.

It's true

[solevita]

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

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

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.

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.