July 21, 2005
Trade Balance vs Trade Volume
In a generally well-written piece criticizing the Bush administration's fondness for bilateral trade agreements, Bruce Bartlett writes:
A 2003 study by the Congressional Budget Office found the economic potential of bilateral agreements very limited. It noted NAFTA, one of the largest such agreements, had virtually no effect on the U.S. trade balance with Mexico even after eight years. However, the study also noted there might be important noneconomic reasons to support free trade agreements. [WaTi]
The balance of trade is not a measure of economic well-being (though it can signal problems in the economy). It's an accounting figure that must balance vis-a-vis the capital account (or in the case of capital immobility, balance to zero itself). A more appropriate measure of the economic potential of bilateral agreements is the trade volume, though it too is not a measure of welfare.
To illustrate via the most extreme example possible, imagine a world of two countries with immobile capital. Under both autarky and free trade, each nation's trade balance would be zero. Clearly there would be welfare differences between these two policy-worlds. Volume, though not a welfare measure, is a more relevant statistic than balance.
Posted by Dingel at 08:49 AM | Comments (0) | TrackBack
The Diversion Begins...
Welcome to my new blogging home.
I took a month-long mid-summer break from the blogosphere. Although I missed the opportunity to blog about topics such as CAFTA's congressional battles, the Live8 concert, and the abolition of US cotton subsidies, I think the hiatus was beneficial. Taking a break promoted thinking about the topics that I cover from a perspective uninfluenced by a temptation to blog about them. Now I'm back and ready to offer fresh commentary.
Why the new location? I'm still the same author and the content will be similar in focus. The new blog merely better reflects what I do; the old blog title implied that I'd be discussing sweatshops and labor conditions in developing countries, but, as I blogged, my interest shifted away from debunking anti-globalization arguments. This new blog title reflects my interest in agricultural subsidies, preferential market access and other issues that are not nearly as black-and-white as whether the low wage jobs MNCs provide in poor countries are preferable to a job market with US-level labor standards.
Plus, everyone loves a bad pun. Thanks for reading.
Posted by Dingel at 08:44 AM | Comments (0) | TrackBack