NCPA - National Center for Policy Analysis

U.S. Demand for Imports is Propping Up Europe

March 4, 2003

European politicians and central bankers are fretting that the U.S. trade deficit, coupled with high government spending, is unsustainable and a "cause for concern." But such an interpretation misses the reality of real economic growth in the United States versus flat-line economic trends in Europe, say analysts.

In fact, economists assert that the U.S. trade imbalance is the only thing standing in the way of a global recession.

  • With few exceptions, the United States remains the world's only economic growth engine -- with Germany and France especially weak and Japan entering its second decade in the doldrums.
  • Through the third quarter of last year, the European Union managed economic growth of only 1.1 percent of Gross Domestic Product (GDP) -- and a similarly poor performance is expected this year.
  • The U.S. economy over the same period grew by 3.3 percent.

Imports subtract from GDP growth, while exports add to it. So without Americans buying European products, American growth would be higher and European growth nonexistent or negative.

In other words, America's "unsustainable" demand for foreign products is the only thing sustaining Europe's shuffling economy.

Source: Editorial, "Hurray for the Trade Deficit," Wall Street Journal, February 24, 2003.

For text (WSJ subscription required),,SB1046039408672780103-search,00.html


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