What Are Some Obstacles to Successful International Economic Policy Coordination?
Does Bigger Mean Better? Does Power Mean Better?
Does bigger mean better? Does power mean better?
The answer --- NO!
And this is why!
The trade deficit is not geographical balanced. "The U.S. trade and current account deficits are approaching $600 billion and have risen by almost one full percent of GDP in five of the last six years. The net foreign debt of the United States now approaches $3 trillion and is growing by 20-25 percent per year." (Bergsten, 2003) The reason for the deficit is the high oil prices and imports from China. The America public demands that we continue to have cheaper products produced by foreign countries, yet are the first to complain when typical American jobs are moved or outsourced to other countries.
"Imports of high-tech goods from China were responsible for $36 billion of the $37 billion U.S. deficit in ATPs in 2004" (Scott, 2005) China's refusal to increase it's currency is expanding the bilateral gap. (Scott, 2005)
What does this mean for the United States?
The United States must borrow from abroad to finance it's deficit. Due to the deficit the "All American" dollar is not so powerful. Foreign lenders are going to be less willing to supply credit. (Scott, 2005) Forecasters predict this will get worse before it gets better.
To reduce the deficit, we must see a huge increase the amount of manufactured goods. We will need policy coordination among the major countries to deliver positive results. (Bergsten, 2003)
REFERENCES:
Bergsten, C. Fred, November 24, 2003, Institute for International Economics, "Should G7 Policy Coordination Be Revived?" Originally published in The International Economy, Fall 2003, November 24, 2003, [Electronic Version] retrieved from Institute for International Economics on November 4, 2005 from http://www.iie.com/publications/papers/paper.cfm?ResearchID=275
Scott, Robert E, Research assistance from David Ratner, February 2005, "Trade Picture", The Economic Policy Institute, [Electronic Version] retrieved on November 4, 2005 from http://www.epinet.org/content.cfm/webfeatures_econindicators_tradepict20050210
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As a Single Parent, I've become a master of multi-tasking. I've worked in Managment for over 10 years and graduted with a BS of 3.92 GPA. I'm proof it can be done. View profile
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2 Comments
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Interesting view point! Great info! Thanks!