Free Trade Area of the Americas faces opposition, from Capitol Hill to Brazil, reports the Washington Post , April 15, 2001. The Australian government is trying to harmonize financial market regulations in parts of Asia as a first step to creating a regional stock exchange and bond market, according to The Financial Times , April 17, 2001. But the cavernous trade gap inherited by President George W. Bush dwarfs those faced by his predecessors. Many economists worry that the huge trade deficit, which must be financed by foreign investors, could lead to a full-blown financial crisis if and when those investors become unwilling to fund the imbalance. Something as benign as stronger economic growth in another country, for instance, could attract a larger share of the world's savings, leading to higher U.S. interest rates, a weaker dollar, and a grimmer economic outlook for the United States and the world.
Economists offer various explanations for the persistent U.S. trade deficit.
Some argue that America buys more from the world than it sells because its companies are growing less competitive. Still others point to the underlying strength of the dollar, which makes American goods and services more expensive for foreign buyers. Given a choice, U.S. firms prefer to sell goods and services abroad through their foreign affiliates instead of exporting them from the United States. How U.S. firms compete in world markets, in other words, goes well beyond trade. Still, trade erroneously remains the standard benchmark of global competitiveness.