Trade Policy Reforms and Development

Trade Policy Reforms and Development

Essays in Honour of Peter Lloyd, Volume II

Edited by Sisira Jayasuriya

Trade Policy Reforms and Development, comprises 11 essays offering new contributions on the following topics: globalisation and political economy of trade; trade, labour standards and economic crisis; the changing role of the WTO; competition policy and the WTO; choice of formulas for market access negotiations; regionalism and bilateralism in ASEAN; ANZUS free trade agreement; new criteria for optimum currency areas; trade policy and poverty in Asia; impact of agricultural trade reforms on poverty; and recent behaviour of US imports.

Chapter 11: The surge in US imports, 1995 - 2001

Mordechai E. Kreinin

Subjects: economics and finance, international economics

Extract

11. The surge in US imports, 1995–2001 Mordechai E. Kreinin 1. INTRODUCTION In 1987, after six straight years of large current account deficits, the USA became a net debtor country. In year 2001, the trade deficit was $426 billion and the current account deficit reached $417 billion (over 4 per cent of GDP). It was financed by a capital account surplus of over $400 billion and a small rise in foreign official reserves.1 (Imports declined somewhat from 2000 to 2001, reflecting the slowdown in the economy.) By year 2000 the US net foreign debt position reached $1.8 trillion – about 18 per cent of GDP. The sustainability of these large current account deficits and their potential consequences have been a matter of discussion in the literature. But their root cause has been attributed to the large trade deficits propelled by differential growth rates in the USA and abroad.2 In particular the massive growth in US imports, to $1223 billion in 2000, is said to be the result of an income effect; to wit, the rapid growth of the economy between 1995 and 2000, with real GDP rising at over 4 per cent per year. By comparison, US exports were hampered by stagnation and crisis elsewhere in the late 1990s. In short, the surge in US imports is explained by the usual independent variables in the importdemand function. Indeed, all the evidence points to the growth effect on US consumers and...

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