Friday, September 07, 2007
"Balance" in trade balance is overrated
I bought a donut from Dunkin. In trade terms, I ran a deficit, Dunkin a surplus. Does Dunkin need to buy some good from me? Of course not. They're fine with my money, I'm OK with my donut. Trade balance (or, imbalance, for that matter) is a positive concept. Meaning, it is useful to describe what is going on between two parties -- or countries. It is not a matter of good or bad. So, this kind of news that we still have a trade imbalance with Russia (and implying that progress should be made to balance the account) is misleading.