Abstract
Global imbalances are still crucial. They are driven by major trade deficits of some countries (such as Germany and China) and surpluses of others (such as the USA). Trade surplus drives growth and employment; this is generally referred as export-led growth. However, while export-led growth is praised, the negative effects of imports and trade deficits are generally neglected. Trade deficits—in particular those due to ‘unnecessary’ imports—mean less growth and more unemployment for the importing country. As manufacturing constitutes the major part of world exports and imports, this implies that it is vital for growth and employment. This chapter explains these ideas using a facile mathematical framework for the general audience. Like Chap. 5, it forms a basis for why industrial policy is necessary especially in developing countries.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Bernanke (2015).
- 2.
Current account basically refers to a country’s trade balance, the difference between its exports and imports. Technically the income balance and net current transfers are also part of the current account balance. In many countries, their magnitude is generally small compared to the trade balance. Income balance refers to revenues of the country from returns on international financial assets (such as bonds) net of the opposite financial assets issued by the country held by non-residents of the country and remittances of employees working abroad net of expatriates working in the country.
- 3.
Yülek and Yağmur (2015).
- 4.
The remaining part of total manufactured exports is mostly accounted for by the primary goods (mainly food and agricultural products, ores, fuels) (WTO 2016: 76).
- 5.
China’s current account deficit was within 8–9% of GDP during 2006–2008 before drastically falling to 1.8% in 2011. Germany consistently ran very high current account surpluses after the year 2004. These surpluses are projected to continue at least in the medium run.
- 6.
O’Brian (2013).
- 7.
KfW (2015).
- 8.
This conclusion obviously requires the aforementioned qualifications on the necessity of exports. For example, reduction in imports that are necessary for the conduct of domestic production (e.g. energy) naturally would lead to a reduction in domestic production rather than an increase.
References
Bernanke, B. (2015). “Germany’s trade surplus is a problem”, Brookings Blog, April 3, 2015. https://www.brookings.edu/blog/ben-bernanke/2015/04/03/germanys-trade-surplus-is-a-problem/.
KfW. (2015). “Germany remains Europe’s growth engine”. https://www.kfw.de/KfW-Group/Newsroom/Aktuelles/Pressemitteilungen/Pressemitteilungen-Details_296832.html.
O’Brian, M. (2013). “Germany’s export obsession is dooming Europe to a depression”, The Atlantic, November 2, 2013, https://www.theatlantic.com/business/archive/2013/11/germanys-export-obsession-is-dooming-europe-to-a-depression/281087/.
WTO. (2016). World trade statistical review. Geneva: WTO.
Yülek, M. A., & Yağmur, M. (2015). Readapting macroeconomic management to a globalized economy: How to handle the accountability on the current account balance. Socio-Economic Problems and the State (Соціально-економічні проблеми і держава), 12(2).
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
Yülek, M.A. (2018). Global Imbalances: Export-Led Growth Versus Import-Led Slowdown. In: How Nations Succeed: Manufacturing, Trade, Industrial Policy, and Economic Development. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-0568-9_6
Download citation
DOI: https://doi.org/10.1007/978-981-13-0568-9_6
Published:
Publisher Name: Palgrave Macmillan, Singapore
Print ISBN: 978-981-13-0567-2
Online ISBN: 978-981-13-0568-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)