American Foreign Trade Problem

The purpose of this research is to examine the American foreign trade problem. In this examination, emphasis is placed on the role played in the problem by international trade in automobiles, and on the implications of the trade deficit for the American economy.

The balance of international trade for a country is “the difference between its exports and its imports” (Lederer, 1982, 55). In a narrow definition, exports and imports are considered to be only tangible goods. A broader definition, however, also covers all intangible services. This broader definition must be further expanded to include remittances, pensions, and other unilateral grants, in order to provide a balance on a country’s current account.

The overall balance of trade for the United States has been on the decline since 1981 (Council of Economic Advisers, 1990). The merchandise balance of trade, however, has not been in surplus since 1975, and the deficit has been increasing since 1980. In spite of the merchandise trade deficit, the overall balance of trade remained positive, until 1983, when

2the services surplus was no longer able to overcome the merchandise deficit.

It is apparent that the merchandise trade deficit is the major problem area, although the services surplus has also trended generally downward since 1981. A clearer perspective on what actually has been happening may be gained through looking at the data stated in real, as opposed to current, dollars.

Merchandise exports, when measured in real terms, have been increasing since 1985. Further, the growth in merchandise imports, when measured in real terms, have slowed significantly since 1986. Thus, when data are viewed in real terms, improvements in the merchandise …

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