> The saving gap framework helps clarify what trade policies can and can’t do. For example, a free-trade agreement encourages exports, and an industrial policy can foster a re-shoring of production to replace imports. Such policies influence the size and composition of cross-border trade, but the difference between imports and exports is only affected if these policies also change the gap between domestic saving and investment spending.
Is there research on the link between the availability of cheap foreign goods and domestic saving and investment? E.g. would people invest more domestically if they could obtain returns making domestically manufactured goods? Doesn’t the availability of cheap Chinese goods arguably suppress domestic investment? E.g. Apple investing tens of billions into its Chinese supply chain.
I’d also be curious why the EU doesn’t consistently run trade deficits.
More precisely it’s because the EU has no fiscal unified fiscal policy. Every member is a currency user of a foreign currency it must acquire from the ECB.
Wynne Godley explained this all nicely in Maastricht and All That.
> I’d also be curious why the EU doesn’t consistently run trade deficits.
Some EU countries probably do, but because they are smaller economies it seems less critical. Combining the EU economies can hide a Spanish deficit within the German surplus fairly easily. e.g. the German surplus are 10 times higher than the Spanish deficit (if I recall correctly).
The EU viewed as a whole, I don't know, maybe due to a very diverse economy, lower overall consumption, lower EU salaries?
But I also think that EU producers are more competitive. The US has a strong tendency towards local monopolies which are bad for export competitiveness.
The original comment was "if you can conquer US market. you can pretty much do that elsewhere".
US Fast Food has not conquered street vendors.
A quick look at a French theater [1] shows 2 American movies, 2 Spanish movies, and 1 French movie. French culture might be dominated by foreigners but 2/5 isn't domination. Movies also have a similar network effect to software where it's preferable to see the same movies as other people to have a talking point.
Social media (WhatsApp included in here) is probably accurate but that's software which I already gave an out to.
> There's something to that, I think.
There's definitely something to making a compelling product that takes over a local market being desirable by a foreign market. I just don't think there's something special about winning say the US car market over winning the Chinese car market (There is something special about winning the US/Chinese market over winning the Irish market though -- Size).
However, for many goods that aren't protected by a monopoly a local supplier is going to be able to undercut your distribution costs. That's why Finish McDonald's uses Italian beef [2].
You will find MC and BK nearly everywhere. Both selling hamburgers which are invented in Germany. Maybe subway is also kinda wide spread. The other chains aren't as common as you might think. Also all these chains are considered bad for your health and bad to environment, not something we are generally thankful for.
Local charts are not dominated by US music.
Also thanks to Netflix (an US company) we have a lot more European movies today. Nobody likes the same ending where America saves the day, so these movies convert well. US movies have constantly sinking box rates and sales for a while now. The era where everybody watched the new Hollywood movie is long over.
I haven't lost any blood for social media yet. But also here there is a strong and growing sentiment about not trusting the US. Media reports every other week how meta refuses to play with European privacy rules. People aren't using social networks as they used before. And if anything china dominates the market by far.
US fast food slowly spreading like a cancer to cater to lowest social layers ain't something to be proud of. Their products are of much lower quality and taste. Basically spreading obesity, diabetes and cancer further by attacking lowest reward cycles in minds that have lowest control mechanisms.
Its like being proud in pushing PFOAs or BPAs on whole world. Nobody goes around and celebrates Thomas Midgley Jr. or inventor of fentanyl, do we.
Also, this year any US product is much more avoided on purpose, that goes also for pop culture. I specifically avoid them unless they are top of the market by big margin for given money. orange man achieved what many couldn't do in their whole careers - wake up Europe from its cozy naive and stupid sleep.
As you say - in software a US monopoly is usually a ticket to export success. Not so much in other markets. There is a reason the US telcos haven't found much success abroad as opposed to European or Arabian telcos, but prefer to milk off their less competitive home market.
Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.
The future the USA could have had, sigh: "A brief history of Steve Jobs’ automated factory at NeXT"
https://www.cultofmac.com/news/a-brief-history-of-steve-jobs...
"Put simply, there was never any necessity for NeXT to have an automated factory. Jobs might have been right that the future of just-in-time manufacturing would involve a heavy dose of automation, but it made no financial sense whatsoever to have a plant staffed with the latest robots for such a low volume business. The problem with NeXT came down to one thing: no-one (relatively speaking) was buying the computers."
the assumption being that the automated assembly is going to be price competitive with the manual assembly. If this is the case, why doesn't it happen with the chinese supply chain? After all, there's no reason not to make it cheaper.
The only conclusion you can draw is that the automated assembly will still be more expensive compared to the current manual one.
-because of tariffs (or geopolitics) cheap asian labour unavailable
-investment in automation research
-first Gen automation is expensive
-further research
-2nd Gen automation is price-competitive with american labour
-iterate n times
-Nth Gen automation is price-competitive with asian labour
> why doesn't it happen with the chinese supply chain
The idea is that because asian labour is so cheap, there is no real incentive to invest in automation research, because everyone knows it won't be price-competitive for long.
No idea if that is actually true, but that is the argument.
Americans will not accept the quality-of-life sacrifice of their labor being competitive with Asia. It's never happening. The only way US manufacturing will be competitive with China's is if it is 100% automated from the mines to the store shelves.
Imports from China were under $20 billion in 1990. At that time, the majority of clothing was still made in the U.S.! My wife’s dad worked as a forklift operator at a Heinz factory in the early 1990s. His job disappeared shortly after NAFTA. The extreme reliance on foreign-made goods happened within the lifetime of millennials. It’s not some inexorable fact about America.
A lot has happened in 30 years. Developing countries spent 30 years developing and are now capable of doing all this work. And shareholders have required 30 years of profit growth, much of it coming from labor costs. Textile and factory workers in China make, what, ¥15-¥30 per hour, which is around $2-$4/hr. No American is going to take these jobs here, even for 3X the pay.
So we can either 1. artificially increase the price of offshore-created goods, causing higher prices for consumers and a whole bunch of factories and mills being needlessly built here, assuming it somehow becomes cheaper to build them here than there (The current administration's plan), or 2. give up on the romanticism of factory work and accept it's going to be done where it's cheapest.
That’s a different argument. The point above was that americans would not accept the quality of life sacrifice involved in manufacturing domestically. But they did quite recently, in a time period that is broadly viewed as a very good one.
Now you can argue that the cheaper prices we have today is even better and worth the lost factory work. But that’s a different argument than saying domestic manufacturing isn’t feasible, because it clearly is and we did it until recently.
> But they did quite recently [accept the quality of life sacrifice]
It wasn't a "sacrifice". It was literally the only life they knew at the time. But going back to it now would be an actual sacrifice for a lot of people.
Running a household on an income of $70k isn't a sacrifice if that's what you make right now. It would be a sacrifice if you make $500k right now and had to immediately start making do with $70k.
I'm saying that Americans will not accept the quality-of-life sacrifice of their labor being competitive with the current price of similar labor in Asia. It doesn't matter what the past competitive landscape looked like, as we're never going back to it without market-distorting tariffs, which bring with them their own problems.
Americans will not work for $2-$4/hr which would be required in order for American-made goods to be as cheap as foreign-made goods.
Americans will not pay 3-4X for all their goods to be made in America by people earning American wages.
I guess, to be complete the only other thing that could happen to cause goods to be manufacturable in America would be 3. for the cost of labor in China (and other places with similar textile and industrial capability) to rise to match that of America.
> ...But they did quite recently, in a time period that is broadly viewed as a very good one.
i dont think the above time period was considered a sacrifice, and the idea that moving the manufacturing back to america would restore that time period is wrong. Because the world has moved on, and productivity has increased so much by now, that it definitely would be a sacrifice if conditions returned back to said time period.
Which means 100% of the money goes to the owner. At least now some goes to foreigners who watch stuff on youtube so american workers get a little of the money.
> Which means 100% of the money goes to the owner.
As more jobs get automated, this is becoming more and more inevitable anyways.
There have been massive strides in computer vision and planning in the past few years. I think in 5-10 years we'll have robots that can handle nearly any manual labor task.
In 10-15 years, we could be facing skyrocketing unemployment. We'll either see the collapse of society as the economy collapses, or we'll need to increase taxes on the owners to fund UBI.
> In 10-15 years, we could be facing skyrocketing unemployment
The productivity growth from such new technology would induce more consumption, and induce _different_ consumption. These would produce new work opportunities.
UBI is not necessarily the only solution. And to me, it cannot be a solution from which taxation is utilized to fund.
> The productivity growth from such new technology would induce more consumption
Whose consumption? There is nothing impossible about a scenario in which there are about 2-3 millions of owners of fully automatic businesses and/or landlords who, with their total output combined, produce more than enough of anything needed for, or desired by, 2-3 million people. The only problem is that the rest of humanity would have to somehow disappear to not sullen this perfectly harmonious market economy of entrepreneurs (which is ironically quite similar to Adam Smith's naive descriptions of it in his own times), but we do have negative fertility rates, after all.
So there is absolutely a path where the well-to-do will just switch to trading with each other, with aggregate output shrinking to match the shrunk demand, and the rest of people could go and drop dead or whatever they want, as long as they don't trespass on the private property. After all, most of what those losers would have would be their ability to work but it just won't be priced competitively: the fair market price equals marginal costs (which for labour is the price of the subsistence minimum), and if robot maintenance is cheaper... yeah. To quote on of the designers of the shock reforms of 1992 in Russia, "what do you care for those people? So, 30 millions will go extinct. They failed to fit into the market".
The future is looking a lot like the movie Elysium, with a few million owners doing all the commerce, safely segregated away from a few billion have-nothings who are barely economically relevant.
This is the obvious end-state of unregulated capitalism. Fewer and fewer people owning and benefiting from the means of production, and more and more people with nothing and nothing to do besides revolt and (eventually) chop heads off. All the ownership class needs to stop the "head chopping" part is a robust and powerful police/surveillance state, which we all know they are diligently working on right now.
The wealthiest 10% of America have increased the ownership of wealth from about 40% in the 1970s to 70% today, with no sign of slowing.
A typical HN techbro may not care because they're likely in the wealthiest 35 million, but the only way for the top 3 million / 1% to continue growing at the same rate once the bottom 90% have nothing more to lose is to take the wealth from the 32 million between 1% and 10%.
It took 50 years for the bottom 90% to halve the ownership of wealth in the US. Once they are fully tapped out the only way the 1% will continue to increase their wealth is taking it from the 10%. Then the 0.1% from the 1%.
wealth isn't a zero sum game. Not to mention that it's a false dichotomy to claim that the wealth increase could only have came from taking it from someone else.
The pie may be growing, but when the rich take proportionally more from the pie every time it grows, then to the poor, it might as well be zero sum. To use the other analogy: it's a rising tide, but only the rich have boats.
Are you arguing that if something hasn't been invented/adopted yet, then it will never be? Because IIRC the Chinese do invest into attempts to automate the phone assembly. It may not yet be price-competitive today but why not tomorrow?
The US government can tax the factory and spend the tax revenue on average Americans. The German government for example gets a big fraction of its revenue from taxes on export industries that employ only a small fraction of Germans.
The German export manufacturers show no great desire to leave Germany -- or at least they didn't till their energy supplies became very expensive in the wake of the Ukrainian invasion.
But, how does changing some number on a "trade deficit" spreadsheet materially affect Apple or Americans? Apple pays slightly more taxes to the government than it did before. Big deal. There is no incentive to demolish an automated factory in China and re-build it in Nebraska.
Apparently the US can sustain a trade deficit with the rest of the world, but certainly this ability to sustain one is not unlimited, so lowering the trade deficit tends to help Americans by making it more likely that the US economy can continue to import things (including some things are are available only outside the US, e.g., fruits that only grow in tropical climate).
If the trade deficit becomes or continues to be unsustainably large, that would devalue the dollar so that Joe's dollar buy less imports than it does now.
There are hints of a strange energy to your questions, which does not bother me, but I am curious whether you feel hostile to me, e.g., because you inferred from my answers that I probably support a political faction that you regard as the enemy.
Not really, you seem to think that the location of an automated factory which employs basically nobody makes a material difference to anyone, and I'm trying to work out what that is
America will gain the know-how how to make such factories and maintain them. Use the knowledge and experience to make more such factories in other fields. A whole industry can grow around it. Do you think factories in China pop-up like mushroom after rain by them self and there is no industry and jobs associated with building highly automated production lines?
You'd need to site it near to the Grand Forks air force base (almost Minnesota) because that's the only runway in state capable of handling 747 cargo flights.
Higher end Motorolas were mfg in the US in the early 2000s. It’s possible. Top of the line were ~$700, with inflation that’d afford iPhones. They were top sellers and not niche models.
That's what the UK was doing before WW1, when private army (including warships) from a private British company attacked places like Guangzhou, before the UK government forced their terms of trade on China.
They still are, in the same exact way: with contracts. I haven't paid for an iPhone with cash, ever; I only have to sign a multi-year contract, just like it was in the past. I am currently using an iPhone 16 for 'free' in this way.
It's just that people now want the latest and greatest NOW and are willing to pay monthly rates to do so, instead of waiting a few months for whatever carrier deal there is.
Whether you pay $40 a month to apple for 2 years and $10 a month for your contract, or $50 a month for a contract for 2 years with a "free" phone, doesn't change anything (other than being locked into the airtime contract needlessly)
There are some good deals out there where you basically get a free phone.
However, I've also seen ones adding another $20 - $40 to your monthly bill for the duration of the contract.
I only do the ones where they charge you for the phone but immediately reverse it as part of the contract; so, I'm net zero on phone charges aside from the contract which I'd have anyway.
You’re still paying for it. It’s already baked into the price of the contract.
Simple rule of thumb is to subtract $10/mo/line from your phone bill and the remainder is what you’re paying for the phone subsidy. Which is even worse if you don’t actually milk them for a new device every two years.
For most people who aren't very wealthy there is a huge difference between something making their $10 sandwich become a $20 sandwich and something making their $1000 phone become a $2000 phone.
Also, people are generally more flexible with sandwiches. If the $10 sandwich I have once a week goes to $20 I might respond be switching to having that sandwich every other week and get something else on the alternate weeks.
That won't work for a phone because I generally replace my phones when the old phone is no longer adequate.
If I'm buying 3 sandwiches a week most weeks of the year (or similar eating out) that's like 150 meals a year. Adding an extra $10 to that is $1,500.
I might get a new phone every 2-3 years. A $1,000 increase in my phone cost is $333-500/yr on average. And honestly if they jump $1,000 I'll probably try even harder to stretch it out another year or more.
A $10 sandwich going to $20 is probably going to be far more impactful to my budget than a phone going up $1,000 in price.
its the same like "health" food product vs industrial food
You can have option for product that got manufactured on US soil to support US worker vs cheaper product that manufactured in Asia because cheaper wages
in fact European,Asian country do this all the time
The Global Saving Glut hypothesis by Bern Bernanke is an interesting argument about how the glut of demand for US financial assets may have been the major factor in creating the housing bubble in 2008.
"Saving" in the accounting identity is just money not spent on consumption. Cheaper imports can increase domestic saving because people now spend less for the same goods. That could then increase domestic investment due to the increased savings.
Or the same situation could reduce savings, if people increasing consumption because the imports are so cheap.
The accounting identity doesn't explain anything other than the mathematical truth that the money needs to add up in the end. Savings are not inherently good, deficits are not inherently bad
A country that exports goods to the US earns dollars that can be invested in the US. So, one way to look at it is that American consumer spending funds foreign investment in the US. This consumer spending could alternatively fund US exports, but doesn’t if foreigners prefer to buy US investments. (They might buy Apple stock, for example.)
If Americans spent less and invested more, they might own more of these investments themselves, but they also wouldn’t have as much stuff, and foreigners wouldn’t have as much money to invest in the US.
Is there research on the link between the availability of cheap foreign goods and domestic saving and investment? E.g. would people invest more domestically if they could obtain returns making domestically manufactured goods? Doesn’t the availability of cheap Chinese goods arguably suppress domestic investment? E.g. Apple investing tens of billions into its Chinese supply chain.
I’d also be curious why the EU doesn’t consistently run trade deficits.