The Meaning Of Net Exports

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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The phrase ‘net exports’ is an accounting term. It is the difference between how much a country exports and imports, generally in dollar terms because most world trade is conducted in dollars.

If that difference is negative for the United States, it means that the total value of the goods and services produced within the country or its gross domestic product (GDP) is lesser by that negative number. If it is positive, it is more by that positive number. But for its negative net exports, the U.S GDP can be larger that it is.

The difference between how much we export and import as a country is not a large number. It is about the size of our government budget deficits, annually. If it is not a large number, why bother? Would it not be better if it is zero or positive, rather than subtracting from the national income?

American net exports when they were both positive, as large as China’s today for the day and age before the world wars of the last century, and when they are now negative have always been about foreign policy more than economics. America had exported its natural wealth, both in processed and unprocessed forms, to Europe for most of the last century. It was initially to be for Europe what Chinese cheap labor and Saudi oil is for the United States today and later to rebuild Europe after the war.

Since the ‘80s the country began importing more than it exported. The purpose was once again foreign policy. It was to open China to balance the former Soviet Union. It was about balance of power. The gradual opening of China had served its purpose by 1989 with the end of the Cold War. After that the concentration of China trade was excessive. America should have turned its eye elsewhere, to Russia, central Europe, Africa and Latin America. India never required, since the beginning of civilization, a geopolitical need to open the market. It had always modulated its openness to the rest of the world itself.

The United States, however, is still having great difficulty letting go of its Chinese addiction of borrowing U.S investment and consumption dollars rather than having the Chinese return some of those dollars as their U.S imports. The tease of a prospectively more open China is hindering American clarity on its trade policy because the country is afraid that it could lose decades of geopolitical investment to competitors. So, China is conducting trade with the United States on its terms. U.S trade policy must return to the balance of power doctrine if it is to rebalance global trade.

China needs political change to learn to play fair and this change is long overdue since 1989. Its exports to the United States have become more expensive. It is a competitor for resources. And its behavior does not comply with American values. To continue the Great Moderation and to allocate value equitably between American workers and foreign workers, America must go elsewhere, going forward. And there is no dearth of places around the world to invest to buy cheap goods and services as long as that investment is also resulting in local development at the same time.

The Treasury must review U.S trade relations with every country on the planet, from Afghanistan to Zimbabwe, through the lens of American foreign policy and provide government trade incentives in the annual budgets to motivate the allocation of U.S trade dollars, both exports and imports, in a manner that is consistent with achieving political, not economic, objectives. Then the exchange rates of foreign currencies relative to the dollar will take care of themselves.

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About Chandrashekar (Chandra) Tamirisa

http://www.thecommonera.com/Common_Era/Me.html
This entry was posted in Economics, Politics, Transformations LLC and tagged , , . Bookmark the permalink.

4 Responses to The Meaning Of Net Exports

  1. The Chinese Way One of the greatest diffculties for newcomers involved in importing from China is coming to terms with the fact that doing business in China is very different to doing business elsewhere.

  2. Together contribute a high proportion of China’s GDP. This trade entails importing foreign components that are then reassembled and then exported.

  3. Importing from China is not an easy job. It is very complicated and involves numerous, highly detailed-oriented tasks. It requires strong communication and earnest co-operation from all participating parties.

  4. Cyrus Mcvoy says:

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