An example of just how bonkers – and bipartisanly so – are many allegedly serious discussions by political types of trade is found in this short report on a recent hearing on Capitol Hill. In this hearing, Sen. John Thune (R-SD) complained about America’s trade deficit in agricultural goods. And U.S. Trade Representative Katherine Tai (also at this hearing) apparently treated this complaint as if it is economically meaningful.
But of course an “ag trade deficit” is no more economically meaningful than is a “yellow-things trade deficit” or a “things-bigger-than-a-breadbasket trade surplus.” There is absolutely no reason to expect that a country will export – during any year or over time – the same amount of agricultural products that it imports. Indeed, because of the principle of comparative advantage, each country will import things that it doesn’t produce at home and export different things. In short, countries are supposed to have so-called ‘trade deficits’ in some things and so-called ‘trade surpluses’ in other things.
Because “agricultural goods” is a portmanteau category – a category that includes many different agricultural goods (strawberries, wheat, pineapples, pork bellies, etc.) some of which we Americans produce at a comparative advantage and others of which we produce at a comparative disadvantage – America almost certainly runs ‘surpluses’ in some of these goods and ‘deficits’ in others. For example, America might be a net exporter of wheat, maple syrup, and rawhides, and a net importer of grapes, artichokes, and alfalfa. It’s therefore possible that in a calendar year American exports of “ag goods” would equal American imports of “ag goods.” But, again, there simply no reason to expect any such ‘equality’ and, thus, mentioning and treating the “ag trade deficit” as if it is an economically meaningful concept only shows how primitive trade-policy discussions (and trade-policy making) remain in 2024.
(HT to Ricky Wylde for sending the piece linked to above.)
