The China Deal: If You Can't Sell It, Buy It

Tom Lehman TLehman at lor.net
Sat May 20 18:59:30 PDT 2000


Doug---You raise the same question that John Boy raised a few weeks ago. "Your on unemployment or welfare, but hey, things are cheaper?"

The question is who long can this situation be sustained?

Tom

Doug Henwood wrote:


> Mark Weisbrot wrote in his latest column:
>
> > Let's get one thing straight: a widening trade deficit cannot
> >create growth or jobs. One can argue, under certain assumptions,
> >that exports create jobs. But by the exact same logic, imports take
> >them away. So when imports exceed exports-- as they do now by a
> >record amount-- it means that trade can only have a negative
> >impact on employment and growth.
>
> As with the EPI argument, I think this is way too simple; it assumes
> there are no gains from trade at all. Making this argument may cause
> people to brand me a covert right-winger, but hey, I've been there
> <http://english-www.hss.cmu.edu/bs/36/henwood.html>. Yes, a cheaper
> import may displace or replace domestic production. But imports have
> also kept a damper on domestic prices (the evidence of Nike shoe
> prices to the contrary). The CPI increased an average of 2.9% a year
> between the first four months of 1990 and the first four months of
> 2000; import prices, 0.7% over the same interval. For all imports
> excluding oil, they were up 0.3% a year. If imports keep domestic
> prices down, then people (those who don't lose their jobs to imports,
> of course) have more money to spend on other goods. We can argue
> about the relative importance of the two influences - lower prices
> vs. job loss - but to ignore the lower price angle is analytically
> incomplete.
>
> Doug



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