It's Time To End Asia's 30 Year Free Ride

Year in, year out, Asia runs large trade surpluses with the U.S. For economists, trade deficits are just a mirror of domestic saving and investment behavior: Countries that save more than they invest have trade surpluses. If Asians save massively, envy them--and emulate them if you can. A different account of why they have surpluses holds that Asia--and especially Japan--is closed, while the U.S. is not. Our trade deficits would then mirror the tilted playing field. A third version places the blame on a large gap in quality, worker skills, management, and technology: Asia has it all, and we have been slipping. There is room for yet another view: Asia's currencies are chronically undervalued, and that has given them the edge.

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