00:00Trade deficits and surpluses are meaningless statistical artifacts that in and of themselves mean nothing.
00:13Hello, I'm Steve Forbes and this is What's Ahead, where you get the insights you need to better navigate these turbulent times.
00:20Back in the 1960s, when Hong Kong was under British control, the civil servant in charge of the economy, Sir John James Copperthwaite,
00:30famously refused to compile certain economic statistics because they believed they would lead to officials meddling in the economy, doing more harm than good.
00:40When asked what countries should do to promote growth, he replied, they should abolish the Office of National Statistics.
00:48Copperthwaite's free market policies, low tax rates, low government spending, less regulation, and more free trade,
00:55were crucial in turning Hong Kong from one of the poorest economies in the world into one of the most prosperous.
01:03His advice on statistics is especially relevant now.
01:08The focus on our trade deficit is a prime example.
01:11It is leading to considerable mischief.
01:14Such a number is no measure of an economy's health here or anywhere else.
01:19It is manifestly not the equivalent of a company losing money.
01:23The U.S. has had trade deficits for most of its existence.
01:27It routinely imported more than it exported in the 1800s as the U.S. became an economic colossus.
01:34We had trade surpluses during the catastrophic Great Depression when unemployment reached 25%.
01:41After Ronald Reagan's economic reforms in the early 1980s, the U.S. trade deficit grew as the economy expanded.
01:50All of us routinely run trade deficits.
01:53Forbes magazine has had deficits with its paper suppliers for over a century.
01:59Consumers do the same when they shop.
02:02What determines prosperity, as Sir John noted, is indeed low tax rates, sound money, responsible government spending, and minimal regulation.
02:12Certain misunderstandings get in the way of understanding trade.
02:16Too often, our trade number deficit leaves out services like finance, entertainment, and certain high-tech services.
02:24Service exports come to over $1 trillion a year.
02:28Our surplus, almost $300 billion.
02:31Trade numbers include the buying and selling between American companies and their overseas affiliates, which is healthy.
02:39They ignore that the patterns of trade can distort reality.
02:43Trade numbers include the buying and selling between American companies and their overseas affiliates.
02:49Trade numbers ignore the patterns of trade that can distort reality.
02:53Singapore's imports look huge because they're often the first stop in their final destination in other parts of Asia.
03:01The same is true of the Netherlands for imports for other parts of Europe.
03:06They ignore the sales of stocks and bonds to foreign buyers.
03:09Related to that, they ignore the trillions of dollars foreigners have invested in the U.S. economy.
03:15Foreign capital has played a crucial role in our growth and will do so in the future if we get our economic act together,
03:23which we're starting to do in the areas of regulation, government waste, and hopefully soon, taxes.
03:28After World War II, we learn from the disastrous protectionist-ridden 1930s the need for reducing barriers to generate growth.
03:39As Adam Smith taught us, trade is not a zero-sum game.
03:43Each party gets something from the transaction.
03:46By systematically reducing trade barriers, the U.S. and the world prospered as never before.
03:52Trade is taking a bum rap for certain woes.
03:55Trade didn't have government damage manufacturing with obscenely excessive regulations and high taxes,
04:03or burden us with excessive government spending, or an unstable dollar,
04:07or rules that bogged down getting proposed projects like building a bridge actually done in a timely manner,
04:14or letting China get away with stealing our intellectual property,
04:17or unfairly treating American companies there,
04:20or aiding the flow of fentanyl into the U.S.
04:23Trade doesn't prevent us from blocking investments that harm our national security,
04:28or similarly blocking security-sensitive exports,
04:31nor does it prevent us from pursuing trade agreements that reduce barriers,
04:36as we've been doing for decades.
04:38We can't avoid trade numbers the way Sir John could,
04:42but we could see them for what they truly are.
04:45I'm Steve Forbes. Thanks for listening.
04:47Do send in your comments and suggestions,
04:49and look forward to being with you soon again.
04:51I'm Steve Forbes. See you soon.
05:00I'll be right back.
05:13I'm Steve Forbes.
05:14I'll be right back.
05:15I'm Brian Anne.
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