The U.S. Trade Deficit: A Dangerous Obsession
By Joseph Quinlan And Marc Chandler
Foreign Affairs, May/June 2001
Joseph Quinlan is Senior Global Economist at Morgan Stanley Dean Witter and author of Global Engagement: How American Companies Really Compete in the Global Economy.
Marc Chandler is Chief Currency Strategist at Mellon Financial Corporation.
Whatever the proper explanation, a simple and important fact is absent from the debate: the trade balance is no longer a valid scorecard for America's global sales and competitiveness.
Overblown concern about the swollen trade deficit, combined with a slowing economy and the expectation of rising unemployment, could ignite a new round of trade protectionism in Washington, which could spark similar responses around the globe. The greatest danger on America's trade front, therefore, is not the size of the deficit but the nation's obsession with it.
The United States' obsession with its trade deficit belies the fact that corporate America has never been better positioned to compete in the global marketplace. It is time to say goodbye to Adam Smith's outdated framework of global competition and to embrace instead a more complex understanding of America's economic engagement with the world.