by Respectfully - Supposn

Created on: July 01, 2008

Participating nations derive some benefit from global trade but a trade deficit's detrimental to their economy. The benefit's due to "comparative advantage". A nation's trade deficit indicates their gross domestic product, (GDP) is less than otherwise. Anything detrimental to a nation's GDP is detrimental to their median wage.

A producer of any goods or service product generally requires the support of other producers; (i.e; designers, pens and pencils, materials, components, the purchase and maintenance of production tools and machinery, trucking to bring these products to the final product's assembly plant).

There's interdependence between producers. Additional auto repair shops spawn additional auto parts distributors and machine shops. They also induce increased production of and within beauty parlors and pizza shops. Some producers are very affected by the "economy of scale". Their decreased products' per unit cost increases often increase s demand. Sometimes it induces new uses for the products.

Demand for export products induces increases domestic production and their supporting products. Similarly but contrarily, imports induce reduction of the GDP. Anything that reduces GDP is adversely affects the median wage.

It has often been observed that producers introducing a radical change to a community's production also induce significant additional local production changes by others. This obvious phenomenon occurs regardless of the goods economic purpose, (i.e; for domestic or foreign consumption) or if the change is a net increase or decrease of production. The affect to the community's production then affects local wages.

This same phenomenon on a national scale is greatly dispersed and thus less obvious but no less real.

For over a half century USA's annual trade deficit has been continuously increasing. Our GDP and median wage has been less than otherwise due to our pursuit of pure unrestricted free trade. Trade deficit's net economic detriment is greatly under-estimated by those influential within and outside of our government; (because its affect upon the median wage is proportionately more burdensome to lower income families)?

Warren Buffett wrote of a proposal to significantly decrease USA's trade deficit of goods. It is market rather than government driven. It grants government no discretion of policy. Its self funding, not a tax and would increase the aggregate sum of USA's imports and exports of goods.

Buffett's proposal is a restriction upon pure free trade but it is also pure free enterprise. The USA can continue to enjoy cheap (but not the absolute cheapest) imports and annual median wages that are (after adjustment for inflation) still greater. I'm aware of no existing or proposed trade policy that could accomplish this with less government intervention or increased prices of imported goods.

For more information regarding Buffett's trade proposal, do a Helium search using the key words; trade deficit, buffett

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