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Home Publications Blogs Beat the Press Does the Commerce Secretary Really Not Understand How a Trade Deficit Works?

Does the Commerce Secretary Really Not Understand How a Trade Deficit Works?

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Thursday, 16 December 2010 05:15

It seems that he doesn't from the quote buried at the end of a NYT piece on U.S. trade with China. In reference to the trade deficit, Gary Locke, the Commerce Secretary said:

"The reality is that if we are to close the trade deficit, Americans need to export more and the Chinese need to purchase more."

Actually exports are only half of the story in trade. A trade deficit means that the United States imports more than it exports. Adjusting to more balanced trade almost always means both reducing imports and increasing exports. It is virtually impossible to envision a scenario in which the country moves to anything close to balanced trade without adjustments on both sides.

It is also worth noting that this piece very casually refers to "piracy" in reference to China's lack of respect for U.S. intellectual property claims. In many cases, the unauthorized copies of U.S. products may not violate current Chinese law. In such cases there is no piracy involved. 

It also would have been wort mentioning that enforcement of U.S. intellectual property claims will impose substantial costs on Chinese consumers and is likely to sharply slow growth by reducing their purchasing power.

Comments (3)Add Comment
...
written by izzatzo, December 16, 2010 6:49
Gary Locke, the Commerce Secretary said:

"The reality is that if we are to close the trade deficit, Americans need to export more and the Chinese need to purchase more."


Mr Locke also demonstrated his proficiency in economics by observing that the reality is, if we are to close the unemployment output gap, Americans need to work more and consumers need to buy more.

When asked how and why, Mr Locke explained that he only does leadership tautologies, not management.
IPR
written by callawar, December 16, 2010 7:13
"In many cases, the unauthorized copies of U.S. products may not violate current Chinese law. In such cases there is no piracy involved."

Well, not exactly. Patent protection has been an ongoing issue with China for some time, conditions to which they agreed to and written into Chinese law. Please read the following link.

http://www.amchamchina.org/download?path=/cmsfile/2010/04/19/1d5b9db6332057f061bd77de90b1cd54.pdf
Oil imports
written by bakho, December 16, 2010 5:36
If we cut our oil imports in half, that would be a HUGE effect on our trade deficit

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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