Global Adjustment Problems of the 1990s: The Effects on East-West Trade Policies

Abstract

A series of very large trade deficits have rapidly transformed the United States from the world’s largest creditor nation to the world’s largest debtor. While these large deficits and the complementary surpluses of some trading partners may continue for some time, global imbalances of recent magnitudes are unsustainable distortions in global capital flows and trading patterns. Both political and economic forces will dictate a narrowing of these imbalances. But doing so while maintaining good global economic growth rates will be a slow and difficult process, with many opportunities for things to go awry along the way. Intense competition for world markets for manufactured goods will risk rising protectionism that could lead to severe global and national economic disruptions.