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Trade agreements can affect the types of goods being
traded and they can redirect trade toward one country, away
from others. They cannot directly affect any coun
try’s worldwide cu
rrent account balance. A count
ry that saves less than it invests will have to borrow foreign funds to import foreign goods to make up that difference.
There are two ways to reduce the US trade de
ficit. A serious rec
ession would reduce investme
nt, but nobody advocates that as a strategy. The only other path is to change the US financial and gove
rnment system to encourage increased savings. China has almost nothing to do with it.
Ironically, the disputes between the US and Chin
a center aroun
d both nations’ legitimate desires to
protect some current low-skilled jobs, or at least to allow an easier transition to new jobs and industries.
nomic policy has rightly focused on the need to
retain jobs for working-class people in the US. And, China’s companies that export to the U