The International Trade Deficit: A Research Proposal

The International Trade Deficit: A Research Proposal

This paper describes a proposed research project. Included in this proposal are (1) a statement of the problem, (2) the research hypothesis, (3) significance of the study, and (4) the research methodology.

STATEMENT OF THE PROBLEM

The American international trade deficit (the largest in the world), and the Japanese international trade surplus (also the largest in the world) invite comparisons of the economic performance of these two countries, and between the United States and other countries as well (The Conference Board, 1989, p. 1). One of the factors often emphasized in comparisons of the economic performance between the United States and other countries is productivity (Thurow, 1985, p. 14).

The available data do not indicate that productivity in Japan or any other country is higher than that in the United States. What the available data do indicate is that Japanese productivity in particular, as well as that of some other countries is improving far more rapidly than is American productivity. Should existing trends continue unchanged, the Japanese labor productivity in absolute terms would equal that of the United States in approximately the year 2000.

There is little question that productivity problems have contributed to the development of the massive American international trade deficit. The productivity situation has also caused problems for American manufacturers in the domestic markets of the United States, where they must compete with foreign manufacturers.

Output per man-hour is increasing in many countries at a rate faster than that in the United States. Additionally, manhour costs in most foreign countries are lower than those in the United States. The combination of these two factors not only makes it difficult for many American firms to compete effectively in international markets, it also makes it difficult for many American firms to sell their prod…

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