Below is a letter that I sent today to the Wall Street Journal:
Here’s advice for your readers: ignore anyone who complains that trade is “imbalanced.” I have never encountered any such complaint that makes even a whiff of economic sense.
Exhibit A is today’s letter from United Auto Workers’ President Ron Gettelfinger. Mr. Gettelfinger grumbles that “the U.S. and South Korea have a huge imbalance in auto trade.” Well, duh – that’s an inevitable consequence of specialization. Although we cook in our household, my family still has a huge “imbalance” in the prepared-food trade with McDonald’s. But we would make ourselves only poorer if my family and I refused to buy from restaurants that do not buy equal amounts of prepared meals from us. In this case, what is true for each household is true for the collection of households that we call the United States.
It’s also worth pointing out that General Motors, Ford, and Chrysler each have huge trade imbalances — to be precise, huge and growing trade deficits — with their workers: these companies buy far more from their workers than their workers buy from them. Perhaps auto makers should hire workers only on the condition that the trade in each case is “balanced”: each and every worker must agree to spend his or her entire salary on products made by the auto maker. For example, a G.M. worker whose total compensation in 2007 is $60,000 must spend $60,000 on G.M. products in 2007. Any worker who fails to do so will be fired because of the resulting imbalance.