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Economic Perspectives, Vol. 29, 4th, No. 4, November 2005
The U.S. trade deficit: Made in China?
Most economists and policymakers agree that open international markets create important mutual benefits for the United States and its trading partners. By encouraging countries to focus on the activities in which they have a comparative advantage, the free international exchange of goods and services allows all countries to raise their living standards. Accordingly, the United States played a central role in the establishment in 1995 of the World Trade Organization (WTO), which now sets the ground rules for national trade policies worldwide and helps resolve trade disputes among its members. Within the WTO framework, U.S. officials have worked to eliminate remaining tariffs, quotas and other policy barriers to trade. At the same time, they have also negotiated agreements that further encourage trade flows with particular partners, such as the North American Free Trade Agreement (NAFTA) with Canada and Mexico.
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