ECB Says More Trade Can Be Solution to Current-Account Deficits
- Participating in global value chains improves competitiveness
- Imbalances result from shocks rather than domestic distortions
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The European Central Bank might have some advice for U.S. President Donald Trump as he tries to reduce his nation’s current-account deficit: trade more.
Countries trying to improve their balance should facilitate greater participation in global value chains, according to an article to be published in the ECB’s economic bulletin. Substituting domestically produced intermediate goods with cheaper imports increases competitiveness, in turn boosting exports and raising income.