Liberty Discussion on “America’s Misunderstood Trade Deficit” by Daniel Griswold

On 26th November 2021, liberty discussion session on the article titled “America’s Misunderstood Trade deficit” authored by Daniel Griswold was carried out. The discussion mostly delved upon whether trade policy even works towards manipulating the Balance of Trade in an open economy on grounds of the article’s argument that trade balance is the function of Savings and Investment (i.e., Capital Account) and not of Imports and Exports (i.e., Current Account). As such, the participants also delved upon whether the Balance of Trade is a vital indicator of a nation’s economic growth. At least, in comparison to trade volume in general.

The participants also discussed measures that Nepal as a limitedly open economy in terms of capital control and the fixed-peg exchange rate should carry out in order to pursue economic progress. As such, the participants came to unanimity that the country should improve its investment climate and switch to a controlled floating exchange rate, to begin with. The participants also agreed that the country should eventually relax capital control as the country develops the investment climate favorable to sustain Net Capital Inflow. Most importantly, the country should entirely transit from policies to improve trade deficit to gaining capital surplus in order to witness growth acceleration