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Management article
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Reference no. 87305
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1987

Abstract

Two arguments against low trade barriers - that U.S. manufacturing is bound to lose out to places like Korea and Taiwan because they pay rock- bottom wages, and to Japan and other aggressive foreign competitors because they help favored industries with subsidies - don''t stand up to the facts. The United States imports less from low-wage countries now than it did in 1960; protection levels haven''t changed much since 1981, the year the United States last had a surplus in manufactured goods. What is at the bottom of our massive trade deficit? The huge gap between our production and our spending, fueled largely by the enormous federal budget deficit.

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Abstract

Two arguments against low trade barriers - that U.S. manufacturing is bound to lose out to places like Korea and Taiwan because they pay rock- bottom wages, and to Japan and other aggressive foreign competitors because they help favored industries with subsidies - don''t stand up to the facts. The United States imports less from low-wage countries now than it did in 1960; protection levels haven''t changed much since 1981, the year the United States last had a surplus in manufactured goods. What is at the bottom of our massive trade deficit? The huge gap between our production and our spending, fueled largely by the enormous federal budget deficit.

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