17 April 2007

Editor, The Atlantic

To the Editor:

The usually astute Clive Crook misunderstands the U.S. trade deficit ("When the Buck Stops," May). First, it is untrue that the trade deficit "has to be financed by borrowing." If, for example, Toyota sells a Camry to an American and uses the sales proceeds to buy more land for expansion of its factory in Kentucky, America's trade deficit rises without any American borrowing a cent. The trade deficit is not synonymous with debt.

Second, much of what we offer to foreigners in exchange for their goods and services is our combination of relatively low taxes, secure property rights, skilled workers, culture of entrepreneurship, and - as economist John Makin points out - our "sometimes bewildering yet attractive array of wealth-storage facilities." America enjoys a comparative advantage as a haven for investment.

Sincerely, Donald J. Boudreaux


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