The trade balance with Argentina, Colombia, and Asia is negative.

Oil accounts for 40 of exports and contributes to maintaining a positive trade balance.

In fact, the trade imbalance is more complicated than the currency issue per se.

In addition to the trade and budget deficits, there is a jobs deficit.

Unless the US economy improves its trade balance, the dollar will fall.

Such a tax would not have prevented the US China trade imbalance.

Indeed, Mexico s trade deficit with China reached 9 billion in 2003.

This large, steady fall in the country s trade surplus makes the Chinese government hesitant to allow the RMB to appreciate significantly, for fear of the lagged impact on the trade balance.

The flaw consists partly in viewing China, India s largest trading partner, as a threat.

Doing so will raise the cost of imports and lower the cost of exports, leading to an improvement in its trade balance.

Let s hope that on this occasion in international diplomacy, the only thing that disappears are the massive global trade imbalances, and not the leaders and institutions that are supposed to deal with them.

Some have suggested that the trade imbalance is related to China s currency peg to the US dollar.

Perhaps most important, a weaker dollar s effect on the trade balance, and thus on growth, is limited by two factors.

Empirical studies estimate that the overall impact of a weaker US dollar on the trade balance is close to zero.

Only when a country invests less in fixed assets than the amount that it saves will the surplus savings show up in the trade balance.

Until recently, the region maintained a trade surplus with the US, but with liberalization, the region will increase imports of more affordable goods, thereby turning the surplus into a deficit.

In fact, however, exchange rates will change and need to change in order to shrink the existing trade imbalances.

As an immature creditor lender, the trade balance and current account are in surplus as well as a mature creditor lender, the trade balance returns to deficit finally, as a creditor borrower, the country s current account swings into deficit.

With central banks around the world full of dollars and trade imbalances becoming worrisome, there are three possible solutions.

In sum, the fact that the US trade balance has defied gravity for so many years has made it possible for the dollar to do so, too.

Consider Mexico's trade balance with the US since the North American Free Trade Agreement (NAFTA) came into effect. In the years between 1995 and 2002, Mexico's annual trade deficit with the US increased to 1 billion.

To judge whether their prices are too high at the existing exchange rate we have to look at the trade balance.

Many factors other than exchange rates affect a country s trade balance. A key determinant is national savings.

There is simply no agreement on how to address glaring problems such as America s increasingly fragile trade deficit, or financial dysfunction in a number of emerging markets.

Savings could remain high, even as current consumption grows slowly, while the trade balance would be held in check by higher demand for imported capital goods.

Asia in the Balance

The true risk lies in the possibility that the renminbi is significantly undervalued and that appreciation would have a major impact on China s trade balance.

Furthermore, exchange rate movements are essentially determined by financial flows and may have no effects in terms of correcting global trade imbalances.

CAMBRIDGE China s trade balance is on course for another bumper surplus this year. Meanwhile, concern about the health of the US recovery continues to mount.

Indeed, some Chinese authorities also maintain that renminbi appreciation would have no significant impact on China s trade balance because they believe that China s trade surplus is a reflection of excess saving and hence has nothing to do with the exchange rate.

The experience of 1914 implies that a credible alternative can replace an entrenched world currency, especially after an unfavorable balance of trade has weakened it.

The current account deficit is increasing relentlessly, owing to a widening trade deficit (now at 13 of GDP), raising the danger of a balance of payments crisis.

The same proposed policies for closing global trade imbalances also, by and large, help address each country s domestic economic concerns.

White Balance

White balance

Is there any way to coax the IMF s largest members, especially the United States and China, to help diffuse the risks posed by the world s massive trade imbalances?

European leaders are arguing, with some justification, that their exporters are paying the price for America s huge trade imbalance with Asian and oil exporting countries.

First, a weaker dollar is associated with a higher dollar price for commodities, which implies a drag on the trade balance, because the US is a net commodity importing country.

But the euro area as a whole nonetheless had a trade surplus of more than 30 billion over the past 12 months. And, with the euro down significantly relative to many other currencies over the past year, Europe s trade balance can increase further in the months ahead.

Not surprisingly, the empirical evidence that trade imbalances can be resolved through exchange rate changes alone is unconvincing.

Of course, a strengthening of the oil currencies (including not only the Gulf States, but also other Middle East countries and Russia) would not turn around the US trade balance overnight.

And yet many policymakers are insisting on immediate action to rectify not only fiscal deficits, but also trade imbalances and banks balance sheet weaknesses.

The Trouble with Japanese Nationalism

Indeed, if foreign owned enterprises exports are deducted from the total trade volume, the surplus vanishes, because both the overall balance of merchandise trade and the balance of trade in services normally run deficits.

So the good news is that developing countries can continue to grow rapidly even if world trade slows in and there is reduced appetite for capital flows and trade imbalances.