Silly Stats

by Don Boudreaux on February 14, 2008

in Balance of Payments, Trade

One of my professors from my undergraduate days at Nicholls State University, Oscar Varela (who now teaches at U.T. – El Paso) recently published this fine letter in the El Paso Times:

your opinion in “Trade deficit: China keeps beating up on U.S.”
(12.24.2007), the U.S. trade deficit with China reflects the voluntary
preferences by U.S. residents for Chinese goods. Efforts to punish China for the U.S. trade deficit would in the end punish these U.S. residents.   I (and others in El Paso) have a growing trade deficit with you, as every day I buy your paper but never sell you a thing. You are not beating me up, as my purchases are freely made without coercion. Would
you support any efforts to punish you for my deficit through some
government action that would restrict my pleasure in buying and reading
the El Paso Times?  

Oscar Varela

And relatedly, I sent the following letter today to the New York Times:

Every month you report
Commerce Department figures on the U.S. trade deficit with individual
countries.  For example, we learn today that last year "[t]he trade
deficit with China continued to rise, jumping by 10.2 percent to $256.3
billion" ("U.S. Trade Deficit Drops in 2007," February 14).

again reporting such figures, your reporters (and the Commerce
Department) should ask a fundamental question: In this world of
extensive multilateral trade and investment, of what conceivable
relevance is a measure of the volume of good and services trade between
any two countries?  America’s "trade deficit" with China is as relevant
as is your "trade deficit" with, say, your columnist Maureen Dowd.  I’m
sure that every year you buy more from her than she buys from you.  I’m
also sure that you’re not bothered by this "deficit" – and for good
reason: in a world of multilateral trade, no two entities are likely to
have so-called "balanced" trade with each other.

Donald J. Boudreaux


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