Why Trade Deficits Don't Matter

This paper takes the position that trade deficits are irrelevant from a policy perspective and that any attempt to reduce them is counterproductive and violative of individual rights. Hardly a day goes by that the media do not mention some international trade problem such as the trade deficit. The general tenor of the story is usually that trade deficits are bad for the U.S. national economy, with the implied or express conclusion that something should be done to reduce them. The choice of terms used to describe trade -- voluntary exchange -- makes it sound like trading with foreigners results in disaster: we are being "invaded" with foreign goods; foreign goods are "flooding" the market; foreigners are "dumping" their products. Senator Donald Reigle has been quoted as saying: "The continuing Japanese attack on our basic industries is another Pearl Harbor. The time has come to close America's door to the flood of Japanese imported products."(Ekelund and Tollison, 875)