Saturday, November 03, 2012

A thought about economic policy

International trade is a positive sum game. There is good reason, both from theory and from experience, that fairly conducted trade benefits the trading partners. Kids trading comic books understand that in a fair trade, each kid gets a comic that he/she wants more than the one traded away. When you go to a store and buy something, you get a product that you value more than its cost and the store owners get money that pays for the wholesale cost of the product, the cost of doing business, and provides a modest profit. So too, countries in fair international trade should import goods and services that they value more than do the products that they export -- and of course should in the long balance their imports and exports.

The United States learned to its great profit that investing in the economic recovery of Europe after World War II resulted in great economic benefits to the USA as its European trading partner grew to be a full economic partner. So too, as Asian countries develop their economies and provide better lives for their peoples, their entry into full participation in the global economy should benefit Europe and North America as well as Asia.

As Tom Friedman says in Parade magazine, not only is Asian growth beneficial to Europe and America in a fair trade environment, Asian recession would be bad for our economies.

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