Dean- how does a drop in imports increase GDP? Is GDP a net number (e.g. domestic production minus the amount we import)?

Erik,

that's exactly right. Effectively they add up the value of everything that goes to consumption, investment, government, and exports, and then subtract out the items we imported. If everything else stays the same and we import less, then GDP rises.

A good piece by Jonathan Rowe in a recent Harper's Magazine about the misleading and even harmful results of using GDP as a measure of economic 'health':

http://harpers.org/archive/2008/06/0082042

Dean, The dollar has risen dramatically the past few weeks. What does that mean? More negative pressure on 3Q numbers?

Vara

GDP is a gross measure of "value added" by an economy. However its definition is a bit too artificial to take it as a measure of how well a country is really doing. It matters however a bit more for macro-level economic policy, for which arguably however GNP is a better indicator.

The best yardstick for how well an economy is doing is the classic "hours worked to pay for something" one; that is, for example how many hours less or more a median (that is, low income) worker must work this year to buy the same things that he bought say ten year before.

This is a measure used to compare different countries levels of development, and should be used to compare also how the economy of a country does across time.

Dean-its seems that you have done what you criticize others for-cherry picking. Yes the last 3 quarters GDP averaged 1.3 but the last 4 quarters averaged 2.1. Do unto others ....

EC, I took from Dean's post that he cited these figures to show that slowing import growth played a big role in what GDP growth our economy has enjoyed in the last three quarters and little these so-called trade deals contribute to the national economy. It was not to make some point about GDP growth in the last year. This article in USA today is really an example of newspaper just printing a press release which I think is the main point of Dean's post. It is just propaganda that calls these trade deals "good" for the U.S. without explaining what the trade deals actually do and why these companies believe they will benefit and hence why they favor the agreements. If am mistaken, or if you believe the U.S.A Today article serves some useful purpose other than as bird cage liner, please explain.

Your logic is strange to me. You argue that it was disingenuous to say that the trade deals help the economy because much greater growth occurs from increasing exports and reducing imports. This appears to mean that you think that reducing imports increases real economic growth (as trade does) not just a figure used to approximate output.

In the comments you admit that the reason a reduction in imports "increases growth" is because the GDP figure subtracts imports.

The GDP measure is faulty at best. Trade brings mutual advantage, and will add to real economic growth for this reason (simple comparative advantage). A reduction in imports does not - and if they are artificially reduced through tariffs they will almost certainly lead to lower growth.

Are you just pointing out the flaw in the GDP measure, and perhaps arguing that the trade balance should be left out of the figure?

Either way, you cannot honestly conflate the real growth from freeing up of trade with a faulty aggregate measure which is increased by a reduction in imports.

Rick:
Spot on.
Liberty:
The mail point is that "free" trade agreements to a great extent LIMIT real free trade -- demanding that our trading partners abandon their ideas of patent and copyright protection in favor of providing monopoly profits to our corporation, i.e. the ones lobbying for the deals.
That is the REAL reason the corporations and their lobbyest support such deals.

GDP is indeed a very poor measure of real wealth or social wellbeing.

The desolate U.S. health care system for example, inefficient, expensive and unjust by any reasonable measure, adds around 10% more to GDP than in other rich nations - without any visible additional social value. 47 million Americans without health insurance, 20-30 million underinsured, hundreds of thousands facing the risk of going bankrupt due to health care costs, life expectancy lower, child death rates higher, chronic diseases in most cases not better treated than in other rich nations ... The U.S. health care system certainly doesn't add more to the wellbeing of most Americans than in other developed countries ( and with some realism less ), but it bloats the U.S. GDP.

Or defense. The giant U.S. military-industrial complex contributes at least 4-5% more to GDP than in most other nations. I don't know how much it raises the living standards of Americans to be a citizen of a "super-power", but I think it's not much. Citizens of "powerless" little nations such as Switzerland, Denmark or Sweden live very well without a huge army and Europe had never a better time than in the decades of peaceful cooperation after the second world war, much better than in the times before with permanent arms races. There are good reasons to believe that most of the giant military expenditures of the U.S. are pure waste of human and financial resources. But they add to GDP.

Or crime. The U.S. has much higher crime rates than most other developed nations, seven times higher imprisonment, tens of thousands unnecessary victims every year. The U.S. crime prevention is a complete disaster. Inhuman and ineffective, but it adds to GDP.

Or energy. America needs twice as much energy as many other developed nations to provide the same kind of basic services such as transportation, mobility or heated houses. And the manufacturing output of the U.S. is - adjusted for population size - significantly lower than in Germany or Japan. Land area or population density are not the main reason. Scandinavian countries for example have a similar, perhaps better living standard, a much colder climate and a lower population density than the U.S.. Despite these facts they use, with the exception of Norway, less than half as much energy per capita as the U.S.. The U.S. energy system is obviously highly inefficient and wasteful, but it adds a few extra percent to GDP.

You could find a lot more reasons why GDP, especially the U.S. GDP, is a very poor indicator of real living standards, social wellbeing or sustainability. The problem with GDP is that it measures quantities not qualities. More is always better, even if it's more waste, more inefficiency, more resource depletion, more debt or more social exclusion. The system needs to keep growing at any price to survive. That's the problem with capitalism.

Dean makes a good point about the role in imports and exports in GDP, but the article does mention the dollar:

"Exports have increased largely due to the recent decline in the dollar, Lee said, which has made U.S. exports cheaper overseas."

The article, which is a kind of mishmosh, also gives this information.

"Sarah Thorn, a lobbyist for Wal-Mart, which is spearheading a coalition in favor of the Colombia pact, said the company imports almost 70% of the cut flowers it sells from Colombia."

Not exactly evidence that the relevant pact is designed to boost exports.

Anyone knows the status about the pending bill to lower tax rate for equity funds managers?

We need lower tax-rate to create more incentives to bring in top talents. Every $ counts.

"Supporters of pending trade agreements with Colombia, Panama and South Korea argue that the accords would lead to more exports and jobs." The article.

They don't talk about imports, just about exports. Usually, in a trade, we have both!

They don't say neither if there will be more imports than exports, or more exports than imports. If there is net imports, chances are that it will lead to less jobs for the citizen of USA instead of more.

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