America's record-breaking current account deficit has set off alarm bells about the health of the U.S. economy, with many commentators lamenting America's low savings rate and insatiable appetite for foreign goods. Policy makers have responded with a variety of proposals, such as giving tax breaks to exporters, renegotiating bilateral trade agreements, encouraging the Chinese government to appreciate the yuan, and limiting imports through quotas or tariffs.
But before any such action is taken, policy makers should consider the fact that nearly one third of the overall U.S. current account deficit is due to the foreign activities of U.S.-based companies – activities that can create enormous value for U.S. consumers, companies, and shareholders. Launch this perspective (PDF - 486 KB)
