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Crying Wolf

Fear of the trade deficit is common--but is it warranted?

Don't let 'em scare you. "America's trade deficit is a sign of strength, not weakness," argues Daniel T. Griswold, associate director of the Center for Trade Policy Studies at the Cato Institute, a libertarian think tank in Washington, DC.

Griswold is the author of a recent study that dispels a number of economic myths. "The trade deficit isn't a result of unfair trade barriers," he contends. "What controls the deficit is investment flows. The money flowing out of the United States to buy imports flows back in net investment."

In other words, the cash Americans spend on goods helps drive foreign economies, which export capital back here. That keeps interest rates down, making it easier for U.S. companies to acquire the equipment they need to grow.

"Entrepreneurs should focus on the capital side of the trade deficit issue," Griswold says. "They should realize there's a lot of capital coming into the United States, and that creates more opportunities."

For more information on the Center for Trade Policy Studies, check out its Web site at

Christopher D. Lancette is a journalist in Atlanta who covers international topics for Hispanic Business and other publications.

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This article was originally published in the December 1998 print edition of Entrepreneur with the headline: Crying Wolf.

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