Determinants of the U.S. Trade Balance in Consumer-Oriented Agricultural Products

This study investigates the factors behind the growing U.S. trade deficit in consumer-oriented agricultural and food products by using reliable panel data and an empirical trade model derived from international trade theory. The results indicate that per capita income in the United States appears to be the most important determinant for the growing U.S. trade deficit. Increases in per capita income and trade liberalization in foreign countries improve the U.S. trade balance. U.S. foreign direct investment abroad in food processing, a strong U.S. dollar, and NAFTA are found to have negative effects on the U.S. trade balance