When we hear about trade in the media, quite often the topic concerns the current account. While the current account factors in trade, the current account deficit is not the same as the trade deficit. The current account calculates all payments and receipts from abroad. Besides net exports, the current account also includes dividends, social security checks paid out to retired U.S. citizens living abroad, and forms of aid or grants. Prior to the early 1980s, the United States had seldom run significant current account deficits. However, beginning in about 1983, the United States began to consistently compile annual deficits, with the exception of a period in the early 1990s (the current account deficit tends to decrease in recessionary years, due largely to a slowdown in imported goods). In recent years, the trade portion of the current account deficit has garnered the most attention. The trade deficit, occuring when a country imports more goods and services than it exports, is the portion of the current account deficit that this study will look at.
The U.S. trade deficit became more noteworthy in 1996 when a trend in slowing exports began. This new trend was a cause for concern because traditionally the trade deficit in the United States did not stem from exporting too little; it derived from importing too much.
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Publication information: Book title: The Impact of Banking Policy on Trade and Global Stability. Contributors: Neil H. Ashdown - Author. Publisher: Quorum Books. Place of publication: Westport, CT. Publication year: 2002. Page number: 7.
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