Trade, Trade Barriers, and Trade Deficits: Implications for U.S. Economic Welfare [Updated January 27, 2005]   [open pdf - 117KB]

"This report provides an overview of the economics of international trade that may be helpful for consideration of many recurring international economic policy issues. It is intended as a general explanation of mainstream economic principles that may be considered in gauging the economic significance of trade issues as well as the trade-offs inherent in many policy choices. A fundamental tenet of economics is that international trade is a means to a higher standard of living for all trading nations. The post-war era has seen a rapid expansion of trade and the United States has been a major participant in this process both as a trading nation and as a leader in the steady lowering of barriers to trade worldwide. The significant benefit of trade does not come without disruption and cost, however. Gaining the benefit of trade and also treating equitably those hurt by trade is often a difficult public policy issue. […] The trade deficit is not a necessary aspect of trade, nor is it caused by foreign trade barriers. A trade deficit is rooted in macroeconomic behavior at home and abroad. The deficit is a means for the nation to spend beyond current production, with a like sized inflow of borrowed foreign capital that funds the added spending. Spending beyond current production, particularly on investment, can confer significant benefits. But, borrowing will entail some level of cost as debts are repaid."

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CRS Report for Congress, RL32059
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