U.S. Trade Deficit

Topics: International trade, Balance of trade, Export Pages: 4 (1381 words) Published: September 1, 2008
Introduction of a Deficit
The very word “deficit” carries with it a heavy, negative connotation. A deficit is an indication that something of perceived value is lacking. Merriam Webster defines a deficit several ways: (1) “a deficiency in amount or quality;” (2) “a lack or impairment in a functional capacity;” (3) “a disadvantage;” (4) “an excess of expenditure over revenue;” and (5) “a loss in business operations.” Given these definitions, it is no wonder that the topic of the U.S. trade deficit emanates a picture of doom and gloom for many U.S. officials. A U.S. trade deficit occurs when the cost of imports exceeds the earnings from exports; or in simpler terms, the United States as a whole is buying more than it is selling. However, in the realm of international trade, the key word is ‘trade’. While some may view the trade deficit as a series of irresponsible and lopsided monetary transactions, the ‘trade’ goes well beyond the simple exchange of goods and money. A trade deficit does not necessarily equate to a nation in the red, and more importantly, ‘import’ is not a dirty word. Why Trade?

Even though the United States possesses many natural resources and the means to use them in manufacturing, it still cannot provide its people with all that they need or want. This is the reason that the United States participates in international trade. Without international trade, goods would either cost more or simply would not be available. Additionally, the absence of international trade would require each country to be self-sufficient, consuming only what it could produce on its own. International trade allows each nation to specialize in the production of those goods it can produce most efficiently. Specialization, in turn, causes total production to be greater than it would be if each nation tried to be self-sufficient (Hall and Leiberman, 2008). Growth of the U.S. Trade Deficit

As recorded by the U.S. Department of State, 1975 was the last year that...
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