Darkhizer
It’s as if, for most people, encountering the term “trade deficit” castrates their brains’ ability to reason.
Mr. Ziad Haider
McKinsey & Co.Mr. Haider:
Interviewed recently by you, former U.S. Trade Representative Robert Lighthizer gave you several opportunities to ask pertinent questions – opportunities that Lighthizer is undoubtedly relieved that you missed (“Robert Lighthizer on the future of global trade,” December 4).
Consider Lighthizer’s assertion that “the problem for the United States is that our trade deficit with Europe keeps increasing. It’s been decades since we ran a trade surplus with Europe.” You should have, but didn’t, ask: “Can you explain why you think that, in our world of nearly 200 countries, something is amiss if one country or region has a so-called ‘trade deficit’ with another country or region? Given that Americans can buy from Europeans, and Europeans can buy from (say) Australians and Brazilians, and Australians and Brazilians can buy from Americans, please tell us exactly why Americans’ ‘trade deficit’ with Europeans is even economically relevant and much less a problem. Do you believe, for example, that the Lighthizer household is in economic distress because that household’s trade deficit with dentists keeps increasing?”
You ought to have have pressed Lighthizer to explain why even U.S. trade deficits with the rest of the world are a problem. He routinely asserts that these ‘deficits’ are a problem. But why? You should have asked him this: “Sir, given that U.S. trade deficits represent net inflows of global capital to the United States – and given also that investment funds tend to flow to places that are economically promising, and also given that capital is an important fuel for economic growth – shouldn’t Americans be delighted rather than distressed at all the global investment that has been attracted into the U.S. by the dynamism and relative security of the American market? What makes you think that America’s economy is harmed rather than helped by net inflows of capital?”
I’m certain that if you had put the above questions to Lighthizer, he’d have spewed economic incoherence. It’s a shame that you missed the opportunity to reveal this emperor’s nakedness.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
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