Sunday, December 3, 2006

US Trade Deficit?

A Financial Times article published last year correctly pointed that "roughly one-third of the current account deficit results from U.S.-owned subsidiaries abroad: Ford importing cars made in Mexico, for instance, or a U.S. bank using call centres in India" . Moreover, the same article added "sales through U.S. foreign affiliates abroad have topped $2,900 billions, roughly three times the value of U.S. exports. These sales generated $134 billions in income for their U.S. parent companies in 2002, and added nearly $3,000 billions to their market capitalisation.". Assume that somehow that $6,000 billions is a grossly exagerated number, by a factor of, say, 10... and you still end with a roughly neutral current account, even without taking into consideration the already stated one-third of the deficit results from U.S.-ownded subsidiaries abroad. Take that into account, and even by a factor of 10, the U.S. carries, thank you, a nice account surplus. Assume a factor of 5, and the account surplus is staggering large.

In summary, the "trade account" is actually a strong competitive advantage, helped by globalization, in augmenting sales and market capitalization of US-company goods, inside and outside of the Unites States.

No comments: