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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: elmatador who wrote (53542)9/20/2004 8:19:02 PM
From: Seeker of Truth   of 74559
 
Professor Congdon thinks that the bulk of the imbalance of trade between the US and its outside is caused by artificial raising of the prices of products produced by foreign subsidiaries of the US which are then bought by the headquarters of the company in the US. In that way the profits are attributed to the foreign subsidiary. That certainly may be a factor but he forgot that most foreign subsidiaries of US companies provide services. Examples are banks, insurance companies, MacDonalds, Starbucks, to a considerable degree IBM, etc. The services are provided overseas, not shipped back to the US. Therefore the effect that Congdon is talking about can't be major. So we mustn't totally neglect it but it certainly doesn't explain away most of the bad balance of trade.
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