Still, trade imbalance seems like to have very little effect on a countries economic state... btw we have a much more higher trade imbalance with China and Japan....
But it's true. People usually see international trade as a job issue, when this is not entirely correct! Short term unemployement rate is based on aggregate demand, which has little to do with international trade.
Which economy is better? The US economy? Or the aggregate economy of the E.U.?
The obvious answer is that the US economy is stronger. Just compare the average GDP vs purchasing power index (PPI) and you'll see the US economy is way better.
Ok, so let's see which economy is more diverse? You'd be surprised to find that the EU economy is more diverse! Germany, which is about the size of Wisconsin with the population of New England has around 180 different industries. Mean while, the US northeast has only about 20.
This means that the US economy is more specialized! Specialization = efficiency = better economy!
Please remember that trade is not a zero sum game! US doesn't loose when India wins. Trades happen not because the WTO point a gun at US's head and force them to trade. Trade makes everyone better off!
>Will the U.S. now be making cheap consumables to send to the IP producing countries >in Asia?
The number one miss conception about international trade is that a country like US must make cheap consumables to compete with manufacturing countries.
Nations trade because trade gives it an opportunity to import things on the international market; export is not the main focus of international trade. In fact most gains a country make from trade is the fact that cheaper items will be available to them at things they are relatively bad at producing. The US is relatively good at producing things like commercial airliners, movies, and medicine, and India is good at producing labor intensive things like programming optimization and tech supporting. The gain is enormous for both nations. Over all, we consumers gains most from trade because we can buy things at lower prices!
>And why would India not simply start manufacturing the products it needs itself?
I'm sure India can produce commercial medicine by itself. But what are the costs? Costs not in nominal terms but in terms of real good. They may have to give up producing things they are relatively good in to produce in something they are relatively bad in. Now that's very illogical! They would gain much more from trade by buying them from the United States.
Jobs are more macroeconomics and trade often don't have much effect on it. In the short run, they depend more on aggregate demand, and in the long run the nation's natural unemployment rate. We have seen that tariffs and protectionism have little effect on employment rates.
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Still, trade imbalance seems like to have very little effect on a countries economic state... btw we have a much more higher trade imbalance with China and Japan....
But it's true. People usually see international trade as a job issue, when this is not entirely correct! Short term unemployement rate is based on aggregate demand, which has little to do with international trade.
Which economy is better? The US economy? Or the aggregate economy of the E.U.?
The obvious answer is that the US economy is stronger. Just compare the average GDP vs purchasing power index (PPI) and you'll see the US economy is way better.
Ok, so let's see which economy is more diverse? You'd be surprised to find that the EU economy is more diverse! Germany, which is about the size of Wisconsin with the population of New England has around 180 different industries. Mean while, the US northeast has only about 20.
This means that the US economy is more specialized! Specialization = efficiency = better economy!
Please remember that trade is not a zero sum game! US doesn't loose when India wins. Trades happen not because the WTO point a gun at US's head and force them to trade. Trade makes everyone better off! >Will the U.S. now be making cheap consumables to send to the IP producing countries >in Asia? The number one miss conception about international trade is that a country like US must make cheap consumables to compete with manufacturing countries. Nations trade because trade gives it an opportunity to import things on the international market; export is not the main focus of international trade. In fact most gains a country make from trade is the fact that cheaper items will be available to them at things they are relatively bad at producing. The US is relatively good at producing things like commercial airliners, movies, and medicine, and India is good at producing labor intensive things like programming optimization and tech supporting. The gain is enormous for both nations. Over all, we consumers gains most from trade because we can buy things at lower prices! >And why would India not simply start manufacturing the products it needs itself? I'm sure India can produce commercial medicine by itself. But what are the costs? Costs not in nominal terms but in terms of real good. They may have to give up producing things they are relatively good in to produce in something they are relatively bad in. Now that's very illogical! They would gain much more from trade by buying them from the United States. Jobs are more macroeconomics and trade often don't have much effect on it. In the short run, they depend more on aggregate demand, and in the long run the nation's natural unemployment rate. We have seen that tariffs and protectionism have little effect on employment rates.