If the United States makes possible new development opportunities for poverty- ridden nations by giving them trade preferences--if both we and they are to benefit from the comparative advantages of each--then U.S. investments abroad must grow and return profits in order to at least partly offset resulting trade deficits.
Total U.S. investments abroad climbed from $32 billion in 1960 to $86 billion in 1971, when they returned $10 billion in earnings to the United States. According to President Nixon's Council of Economic Advisers, those earnings will reach $17 billion by 1975. When trade deficits are measured against these profits, the financial balance solidly favors the United States. In view of this we may ask: Is it worthy of our nation, with a national output more than double that of the entire underdeveloped world, to deny poor countries fair trade?
The answer obviously is no, and that means we must offer trade preferences. Trade preferences, however, not only justify but necessitate U.S. investment profits in other countries. The crucial need in that case is to build investments abroad with-