Trade is always perfectly balanced, even when dealing with debts. For example, China can purchase United States' debt bonds. A foreign purchase of debt is only bad if a tax payer bailout occurs. Many people don't agree with this, and view it as China "taking over" America. Why would saving/investing be virtuous when it's done within the country, but bad when "foreigners" do it? Political borders don't have any meaning when it comes to the benefits of trade.
The majority of trade occurs between high-powered manufacturing firms. This is because trade lessens transportation (pollution), and less resources are used (not every country has to grow all crops--> specialization). Every 10% increase in someone's income has a 20% benefit to the environment.
Smithian Notion
- Specialization frees of time
- Specialization allows you to apply specific knowledge and capital that you otherwise could not
- Specialization allows you to expand the market
Ricardian Notion
- Specialization and trade lower cost (opportunity cost)
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