March 12, 2003 | Commentary on Foreign Aid and Development
We're used to hearing that trade deficits are bad, but the alarm
raised by some deficit-phobes doesn't stop there. According to
these critics, a trade deficit also threatens national security.
They contend that our military depends too much on imported goods,
so a trade deficit makes America vulnerable.
As William R. Hawkins, a senior fellow for national security studies at the U.S. Business and Industry Council, wrote in a recent op-ed: "If America is to maintain the robust industrial base and sound finances necessary for world leadership in turbulent times, it must reconcile its defense and economic policies to expand domestic manufacturing and high-tech investment while ending the debilitating trade deficits."
This isn't true. America, like any other trading nation, exports so that it can import. In other words, we're not trading out of desperation; we're trading by choice. And as President Bush notes in the national security strategy he released last fall, trade is a key building block of homeland security.
Take the fact that the United States imports semiconductors from Japan. Skeptics claim this poses a national-security risk. What would happen, they ask, if Japan stopped exporting such products? But think about it: Why would Japan choose to cut itself off from one of the largest semiconductor markets in the world? If it did, where would it sell the semiconductors it makes? The government couldn't let them pile up on the docks; Japanese manufacturers would risk bankruptcy. More likely, Japan would sell them to another country - in which case the United States could purchase the semiconductors from them.
Japan isn't the only country that supplies us with products for our military. We also import many raw specialty metals from Africa. These are often materials that don't exist here and can be obtained only through trade. In this way, running a trade deficit actually makes us safer by giving us a way to get these necessary raw materials into the United States.
As my Heritage Foundation colleague Daniel Mitchell pointed out in an op-ed for The Washington Times, a trade deficit isn't necessarily bad - in fact, it's a sign that our economy is strong. We wouldn't have a trade deficit if we weren't attracting foreign capital. Investors from other countries want to spend their money here because they have faith in our economy.
And while we have a deficit in some areas, agriculture is one of the industries that the United States has a trade surplus in; we are the world's largest agricultural exporter. But do other countries fear starvation because they rely on American agricultural products? Of course not.
As an example, the United States just negotiated a free-trade agreement with Singapore, a country that grows almost no food. But the government of Singapore isn't concerned about relying too heavily on the United States for food. If for some reason the United States stopped exporting agricultural products, Singapore would simply import food from many other countries. But again, what would American farmers do without a foreign market to buy their crops?
In the same way that it's better for Singapore to import its food, the United States can obtain some military components less expensively by buying them overseas than by producing them at home. If the United States can't obtain a product from one country, it is likely in this era of globalization another country will possess the same technology.
Still, it's not as if we produce no military components domestically. According to congressional testimony given by the National Association of Manufacturers in June 2001, we manufacture 54 percent of aircraft production, 49 percent of machine tools and 46 percent of turbine and generator output for export. As noted before, we export so that we can import.
The result? As the president's national security strategy notes, free trade "provides new avenues for growth and fosters the diffusion of technologies and ideas that increase productivity and opportunity." That's why America promotes it.
Good thing, too, because free trade, far from weakening a country, actually strengthens it. The relationship between America and its trading partners is stronger because of trade. That's because trade encourages countries to iron out differences through diplomatic - not military - avenues.
So there's no need to fear a trade deficit. The United States imports products from many countries, but our military wouldn't grind to a halt if these imported components were no longer available. Yes, we can get by without trade. But there's no question we're stronger - financially and militarily - because of it.
Originally appeared in The Washington Times, March 11, 2003 edition.
Sara J. Fitzgerald is a trade policy analyst at the Center for International Trade and Economics at the Heritage Foundation.