Thursday, February 12, 2009
America provides security, property law and an individual's claim on profits to nations that lack these institutions or capabilities.
This is an extremely valuable service and one that is UNIQUE in the world. You cannot replicate 800 years of piecemeal improvement in the law since Magna Carta (and more recently, Blackstone's codification of English Common Law, and even more recently the Federal Code) overnight. Nor can you duplicate the capability of the U.S. military (in conventional warfare, at least).
So, if you are China or another country lacking these institutions, exporting to the United States protects profits from domestic "leakage" (corruption, cronyism, possibility of expropriation or defalcation, etc.)
The world is not as "imbalanced" as economists who look ONLY at trade figures and capital flows believe. There is a context involved, and economics is only one facet on a very complex multi-dimensional surface.