Martin Feldstein was Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research. He chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush's Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama's Economic Recovery Advisory Board. He was also on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.
CAMBRIDGE – Politicians and economists view trade imbalances very differently. Consider the United States’ trade deficit. Economists emphasize that the total US trade deficit with the rest of the world is the result of policies and actions at home. Simply put, if the US invests more than the country as a whole saves, it must import the difference from the rest of the world, creating the existing trade deficit.
But politicians (and the general public) tend to focus on bilateral trade deficits with individual countries, like the $300 billion imbalance between the US and China. They blame the bilateral deficit on Chinese policies that block imports of US products and subsidize Chinese exports to the US.
Economists explain that those policies affect the composition of the US trade imbalance, but not its size. If China changed its trade policies in ways that reduced the bilateral deficit, the US trade deficit with some other country would increase, or its surplus with some other country would shrink. The overall US trade deficit with the world, however, would not change.
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