Trump and Trade

Here is the editors note from a voxeu blog posting.

In assessing the underlying causes of the US’ significant trade deficits, the Trump administration’s focus appears to be on alleged unfair trade practices of foreign countries. This column argues that international trade policy has a negligible effect on trade balances. The aggregate US trade deficit results from macroeconomic pressures, while bilateral deficits are due to structural factors, supply chains, and how trade is measured.

Academic but readable. You can read the rest here.

 

Larry Summers and Caesar

Motivated by Trump’s promise to invest in America, I’ve been doing some background reading on economics of infrastructure spending.

It is over a year old (April 2016) but reported in USA Today, Larry Summers offered some interesting insights into just how inefficient America is in the public sector.

Anyone who thinks problems of inadequate institutions and poor governance are the stuff of the less-developed world would do well to consider the bridge across the Charles River outside of my office.

The bridge is 462 feet long. The bridge was built in one year at the beginning of the 20th Century. The bridge has been under repair — complete with closed-off traffic and huge traffic jams — for 50 months now. And it’s expected to be another nine months.

 

I have made the point (semi sarcastically) to those involved that it is a complicated bridge and a difficult bridge, one that needs extensive consideration. On the other hand, to my mind, World War II was kind of a big, complicated war, and it only took the United States 3.5 years from the time it entered until the time it left. …

 

So I was talking about this with one of our … professors, and I learned that there’s a span over the Rhine which is about four times as long as the span over the Charles — and that Julius Caesar built a bridge over that span of the Rhine in nine days!

 

Two percent as long as it’s taking us to fix this bridge.

 

So yes, this is a huge issue.

 

On the other hand, I think it is tempting — and I see this in the United States — for the avatars of austerity to invoke inefficiency as a reason for not moving forward. And I think one has to be cautious about that.