Auto Service World
News   May 16, 2002   by Auto Service World

Don’t Blame Canada for U.S. Trade Deficit, says Globalization Guru

Don’t blame Canada, noted economist and globalization proponent Dr. Jeffrey Rosensweig told the Global Automotive Aftermarket Symposium.
If the U.S. has a deficit, it’s the fault of a policy that has kept the U.S. dollar strong, he told more than 400 executives in Chicago, Ill., for event being held today and tomorrow.
While a strong dollar is good for the ego, it’s bad for the trade deficit, he said.
"The U.S. dollar is too strong an the U.S policy of the Clinton administration and the Bush administration has been very bad to the U.S. economy.
"A dollar is almost $1.60 Canadian makes it very difficult for us to compete with the Canadian auto industry, lumber, and then we lost the gold medal."
Rosensweig strove to explain how the U.S. trade deficit has dramatically grown over the years and that sometimes this has been a positive move in the short run, but that it is an unhealthy situation over the long term.
"The U.S. trade deficit it was relatively small in 1990. Then it went to $1.5 billion (U.S.) a month (in the latter part of the decade). I relate that to the wealth effect and the tech boom. As stocks went up people felt they were wealthier. If you feel really wealthy, or at least wealthier, you might take a trip to Europe, you may drink French champagne instead of New York champagne, you might buy a car made overseas."
"We were having a technology boom in this country, so our companies were buy switching equipment from Canada, displays from Japan, etc. We were buying capital goods to continue to build up our industry. Some of that was good but it did mean we had a trade deficit."
Lately, after uneven impact of the recession, which he tracked back to prior to the oft-blamed September 11, 2001 attacks, has turned around which has meant the deficit has increased.
"At least we’re buying again. Or at least our stock market has settled down again. It think the trade deficit will be even bigger, because imports are higher and I think that this is very good news because in the short term I want to see Americans having the confidence to be buying."
Yet, he says, the growth in profits in a global economy may require a devaluation of the U.S. dollar. "If the dollar falls it makes it more expensive for us to bring our families to Rome, but it makes production here more affordable to foreign buyers.
"If the dollar falls it makes foreign currency profits rise (for American-based companies). It would really help stocks improve. I want the dollar to fall."