Problems of the U.S. trade structure

Kikawa, Mototada

The trade deficit, which together with the budget deficit constitutes one side of America's "twin deficits," is still an enormous sum. Since Japan accounts for one third of the trade deficit, one has to pay close attention to it in the sense that the deficit trend forecasts the future of U.S.-Japan economic friction. The trade deficit's continuation became a headache for Washington's policy makers as well as something beyond the predictions of economists and academics. In general they saw this phenomenon as something running counter to "theory," or as nothing more than a sign that the dollar's fall had been insufficient. Such macroeconomic approaches as the bilateral comparison of the balance of savings and consumption provide a large framework for explaining America's trade deficit. However, paying attention to the kinds of changes which occurred in American industry in the period in which were adopted exceptional policies to stimulate a consumption which left behind huge budget deficits should provide one with a clue. Although these changes were in some sense irreversible, they were not noticed as such at the time.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 19
Published Here
February 7, 2011