Trade Balance, Exports Are Price We Pay

Critics of free trade usually point to trade deficits as an
example of the negative effects from reducing trade barriers. However, trade
imbalances can signal several positive factors. First, a country pays for its
imports with its exports. Therefore, when it imports more than it exports it increases
the revenue it can use for other production.   Second, trade deficits can also reflect the
importation of foreign capital which only increases a country’s productive
capacity and economic growth.

The U.S. economy consumes more goods and services than it
produces thanks to foreign credit.   One
result is that each year’s external deficit adds that amount to net foreign
holdings of U.S. dollar assets.   This is
not necessarily a bad thing.   Foreign
investment has historically played an integral part in U.S. economic growth and
shows that America is attractive to investors.  
In addition, external investment mitigates the crowd-out effect of
government borrowing by expanding the pool of available credit.