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The Art of the Surplus

Germany’s persistently high – and, lately, rising – current-account surplus may not be on the official agenda of this week’s G20 summit in Hamburg, yet it is bound to provoke tensions among the assembled leaders. That's why some potentially damaging misconceptions about the external imbalance need to be addressed.

BERLIN – Germany’s persistently high current-account surplus may not be on the official agenda of this week’s G20 summit in Hamburg, but it is bound to provoke tensions among the assembled leaders. After all, that surplus, which has long been a bone of contention for many of Germany’s trade partners, hit a new high of 8.3% of nominal GDP last year, with the surplus vis-à-vis the United States accounting for the largest share.

To be sure, Germany’s economy could benefit from policy changes that would also reduce the current-account surplus. But such adjustments make sense only if guided by sober reasoning – and by leaders who accept the mutually beneficial nature of international trade, allow economic adjustment to occur over time, and reject the illusion that an economy is akin to a large company.

International trade is not a zero-sum game. A current-account deficit is not a straightforward indication of “a bad deal,” and a surplus is not necessarily a cause for celebration. Instead, they are the outcomes of myriad private deals, from which the parties involved expect to reap benefits.

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