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## New PEF publication – guide to Joe Biden’s economic programme

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The Progressive Economy Forum is today publishing a detailed new guide to the economic programme of the Joe Biden administration.

In less than six months since his inauguration as US President, Joe Biden’s administration has staked out a new agenda for US policymaking, breaking with the previous four decades of Republican and Democratic domestic economic policy to focus deliberate government action on job creation, addressing racial equality, environmental goals, and rebuilding American manufacturing industry. A dramatic expansion in trade union rights, pushing back on four decades of draconian restrictions on workplace organising has been pledged, and over $6tr of public spending is lined up, to be funded mainly by taxes on the richest Americans and the biggest corporations. The UK equivalent for the whole programme (using share of 2020 GDP as the baseline) would be £560bn: £170bn for immediate coronavirus relief; £240bn for investment and business support; £150bn for welfare and education. Surprising many with the scale and scope of its ambitions, the Biden Administration’s domestic economic programme has raised the bar for progressive governments across the world. This briefing breaks down the emerging details of the programme for a UK audience and lays out the main political conclusions. The post New PEF publication – guide to Joe Biden’s economic programme appeared first on The Progressive Economy Forum. ## The Biden plan would be improved by federal job guarantees and compensated free trade Published by Anonymous (not verified) on Fri, 18/06/2021 - 4:02am in ### Tags LONDON – US President Joe Biden has set out to emulate Franklin D. Roosevelt by spending huge amounts of money, something that FDR avoided doing until World War II. This threatens to trigger the sort of inflation that wrecked Keynesian economic policies in the 1970s. Since January 2021, the Biden administration has spent or committed to spend$1.9 trillion for immediate COVID-19 relief, $2.7 trillion for investment and business support, and$1.8 trillion for welfare and education. This amounts to $6.4 trillion, or nearly 30% of US GDP. The$1.9 trillion already delivered through coronavirus spending will tail off, leaving $4.5 trillion, or about 20% of GDP, to be spent over the next ten years. The spending will be financed largely by US Federal Reserve bond purchases, with tax hikes coming later. But will it represent the biggest mobilization of US public investment since WWII, or rather an inflationary splurge? We don’t know yet, because we have no accurate way of measuring the output gap – the difference between actual and potential output, or, roughly, the amount of slack in the economy that can be absorbed before prices start to rise. The International Monetary Fund predicts that the US economy will be growing above potential by the end of this year, and that European economies will be close to their potential. This signals inflation ahead and the need to reverse deficit finance. Against this static view is the belief – or hope – that government investment programs will increase the US economy’s potential output, and thus enable faster non-inflationary growth. Much of Bidenomics is about improving the workforce’s productivity through education and training. But this is a long-term program. In the short run, so-called supply-side “bottlenecks” could drive inflation. There is thus a palpable danger that an overambitious agenda gives way to abrupt policy reversals, renewed recession, and disillusion. There is a steadier course available, but the Biden administration has ignored two radical suggestions that might make its life a lot easier. The first is a federal job guarantee. Put simply, the government should guarantee a job to anyone who cannot find work in the private sector, at a fixed hourly rate not lower than the national minimum wage. Such a scheme has many advantages, but two are key. First, a federal job guarantee would eliminate the need to calculate output gaps, because it would target not future demand for output but present demand for labor. This in turn underwrites an unambiguous definition of full employment: it exists where all who are ready, willing, and able to work are gainfully employed at a given base wage. On this basis, there is substantial underemployment in the United States today, including among people who have withdrawn from the labor market or are working less than they want. Second, the job guarantee acts as a labor-market buffer that expands and contracts automatically with the business cycle. The 1978 Humphrey-Hawkins Act in the US – which was never implemented – “authorized” the federal government to create “reservoirs of public employment” to balance fluctuations in private spending. These reservoirs would automatically deplete and fill up as the private economy waxed and waned, creating a much more powerful automatic stabilizer than unemployment insurance. As Pavlina R. Tcherneva of Bard College says, a job guarantee “continues to stabilize economic growth and prices, using a pool of employed individuals for the purpose rather than a reserve army of the unemployed.” No “management” of the business cycle, with its well-known political risks, is involved. The second radical idea is the economist Vladimir Masch’s compensated free-trade plan. America has lost millions of manufacturing jobs so far this millennium, largely owing to offshoring of production to cheaper labor markets in Asia. The counterpart of this has been a structural US current-account deficit averaging about 5% of GDP. One of the Biden administration’s main objectives is to rebuild US manufacturing capacity. While the COVID-19 has fostered a conventional wisdom among all deindustrializing countries that they should reserve “essential” procurement for domestic manufacturers, Biden’s “Made in America” efforts echo former US President Donald Trump’s “America First” approach. But Biden’s plan to rebalance US trade by means of tax subsidies for domestic producers, trade deals, and international agreements, rather than tariffs and insults, is vague and unconvincing. In a world of second-best options, the Masch plan offers the quickest and most elegant way for Biden to secure the balanced trade that he wants. The basic principle is simple: any government in a position to do so should unilaterally set a ceiling on its overall trade deficit, and cap the value of permitted imports from each trading partner accordingly. For example, China, which accounts for about$300 billion of the current US trade deficit – half of the total – might be limited to $200 billion worth of annual exports to the US. If China exported more, it could either pay a fine equal to the excess over its quota or face a ban on excess exports. Compensated free trade, Masch argues, “would stimulate a return to the US of the off-shored enterprises and jobs.” It would also automatically prevent trade wars, because “any attempt by the surplus country to decrease the value of its imports from the US would automatically decrease the value of its allowed export.” Policymakers seeking to stimulate the economy must pay more attention than past Keynesians did to avoiding inflation and ensuring that job creation at home is not offset by a drain of production capacity abroad. The Biden administration will have no choice but to learn these lessons. If it’s wise, it will shun austerity and unfettered trade in favor of full employment and the manufacturing capacity needed to achieve it. Robert Skidelsky ## The differing effects of globalization on trade versus migration Published by Anonymous (not verified) on Wed, 02/06/2021 - 6:00pm in ### Tags Rebecca Freeman and John Lewis Compass on old map Better communications, enhanced transport links, integration agreements between governments, and other factors have all helped increase global economic interconnectedness over the past few decades. Yet, comparing a state-of-the-art gravity model for trade versus migration reveals important differences in the evolution of globalization over time on flows of goods versus people. For trade, the boost from free trade agreements declines the farther apart signatories are, but for migration the boost increases with distance between signatories. Further, while both border and distance frictions have declined for trade over time, this is not the case for migration flows. Globalization has many drivers and many consequences. Over the past decades innovations such as the internet, containerisation, the growth of air travel, better telecommunications, and improved transport infrastructure have all played a role (Freund and Weinhold (2004); Bernhofen et al (2016); Hummels (2007); and Sachs (2020)). In parallel, on the policy side, governments have enacted Regional Trade Agreements (RTAs) and Freedom of Movement Agreements (FMAs) to lower barriers to the movement of goods and people across borders, respectively. But whilst there are some common drivers and ‘globalization’ is often used as a catch-all term, it is not necessarily a uniform process which affects all cross-border flows in the same way or at the same speed. This poses important questions for policymakers and economists seeking to understand how the globalization process has reshaped trade and migration flows, such as: 1. How does distance affect how RTA (FMA) policies boost trade (migration) between signatories? 2. How has the drag of distance on each type of flow changed over time? 3. How have border frictions for trade and migration flows changed over time? On the trade side, empirical studies have long confirmed that RTAs boost trade flows between partners (see Limão (2016) for a survey). More recently, it has also come to light that the greatest boost to trade is likely to come from signing agreements with nearby partners (Baier et al (2018); and Freeman and Pienknagura (2018)), and that distance and border frictions have declined over time, fostering international trade flows (Bergstrand et al (2015)). On the migration side, the literature is somewhat smaller, but has similarly found that FMAs boost migration between signatories (Bertoli and Fernández-Huertas Moraga (2015)). Further, Lewis and Swannell (2018) find evidence that the elasticity of distance declines under FMAs. But relatively little is known about the effects of distance and border frictions over time on migration, or the effect of distance on the total boost to migration flows associated with signing a FMA. In recent work (Freeman and Lewis (2021)) we apply recent advances in gravity models to explore the questions above under a common econometric framework. By using an identical approach for trade and migration specifications, our analysis demonstrates that the important differences between trade and migration results in gravity models stem from underlying economic mechanisms rather than differences in estimator employed, functional form, control variables, or any other econometric feature. The boost from RTAs is larger for closer signatories but the boost from FMAs is larger for more distant signatories To answer the first question, we combine data on bilateral trade flows, RTAs, migration flows, FMAs, and distance for a set of 182 countries over years 1980–2014. Examining the interaction between distance and RTAs confirms the multiplicative nature of trade agreements and proximity. On the other hand, we find significant and increasing returns to FMAs with distance. Using the estimated coefficients, we calculate the implied percentage boost to flows across the range of bilateral distances observed in our dataset (Chart 1). For RTAs, that boost declines with distance, falling relatively quickly at first. What might the economic mechanisms be? At shorter distances transport costs are low, so the distant-invariant costs (e.g. paperwork, delays at the border, etc.) account for a higher proportion of overall costs. Because RTAs act on the latter, they lead to a larger percentage reduction in trading costs when signatories are close together. Taking this to the data, Freeman and Pienknagura (2018) demonstrate that supply-chain activity, which is characterised by trade in intermediate goods, is the key channel through which RTAs create additional trade between closer signatories. Proximity plays a crucial role for just-in-time delivery and supply-chain development (Pisch 2020; and Conconi et al (2020)), so these trade flows are unlocked more by RTAs when distances between signatories are short. Chart 1: Agreement effect by distance (km) On the flip side, the boost to migration flows from FMAs increases with bilateral distance, rising relatively quickly at first. One possible explanation could be that FMAs help overcome distance-related search frictions because they permit individuals to migrate first, and then search for a job; whereas without an FMA moves are more likely to require a job offer first. In all likelihood, search frictions are greater over longer distances: it’s relatively easy for someone in Munich to cross the border and travel to Innsbruck for job-search activity, interviews, etc.; but far harder for a Londoner to do the same to look for work in Sydney. And so by eliminating the need to search from distance, FMAs have a larger effect for more distant signatories. The falling drag of distance on trade flows over recent decades is not seen for migration flows An important feature of our data is that we have information on both domestic trade and migration flows. Intuitively, this allows us to identify the changing role of distance on trade (migration) outcomes by allowing for an explicit consideration of the choice to produce for the domestic market (remain at home) versus exporting (emigrating) overseas. To do so, we interact countries’ bilateral distance with time dummies, applying the method pioneered by Yotov (2012) when examining the distance puzzle for trade. Implementing this approach, we find an important difference between the role of distance on trade and migration flows over time (Chart 2). Chart 2: Distance estimates by year Distance has a negative impact on both bilateral trade and migration flows, i.e. distant countries trade less with one another and further distances hinder migration. Thus, when the (blue) trade line rises, this means that the overall distance effect becomes less negative over time. That is, distance is exerting a progressively smaller drag on trade over time. The intuitive explanation for this result is that improvements in transport and communications have lowered the marginal costs of trading at an extra kilometer of distance. For migration (crimson line) the puzzle remains as stark as ever. One might have expected these developments to have had a similar effect—in direction if not size—on migration flows, but three and half decades of globalization have seemingly not led to any discernible fall in distance frictions for migration. To the extent that technological advances have made it easier to search for employment (e.g. through online job platforms) and travel abroad (e.g. via easy access to air travel and high-speed rail), this result is a puzzle. Border effects have declined for trade, but not for migration In the same vein, we investigate how international border frictions have changed over time for each type of flow. Simply put, we do this by interacting a dummy variable for cross-border (as opposed to domestic) flows with time, in a similar way to the distance exercise above. Chart 3 shows the results. Chart 3: Border estimates by year Borders have a negative effect on international (relative to domestic) trade and migration flows, so a rising line indicates the friction imposed by borders is getting smaller over time. For trade (blue) we see that border frictions have consistently declined over time. This seems consistent with the overall stylised fact that trade flows have increased relative to GDP, in large part as a result of broad-scale reductions in policy barriers and technological advancements (Antràs (2020)). For migration on the other hand (crimson) there has been no discernible change. Interestingly, the above result for migration is consistent with the equivalent stylised fact: an array of papers have found that migration outflows have not risen relative to population (Abel and Cohen (2019); and Lowell (2007)). In that sense, the constant border friction result is consistent with that stylised fact, but raises a broader question about the underlying cause for this migration trend. Summing up The literature using gravity models to understand trade flows is more voluminous and more developed than the corresponding body of work for migration. Applying recent advances in gravity models of trade to migration, we highlight that the process of globalization appears to have reshaped trade and migration flows in markedly different ways over the past several decades, even though evolutions in some of the underlying factors shaping such flows (communication, transport, etc.) have been similar. For trade, the key results that the drag of distance and border frictions on flows of goods have declined over time seem to have a fairly straightforward explanation. But for migration, we do not find such an effect. While the border result is line with aggregate migration flows being relatively stable compared to population, there is still an open question as to why this trend has persisted. The result on distance remains a puzzle. Rebecca Freeman works in the Bank’s Global Analysis Division and John Lewis works in the Bank’s Research Hub. If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below. Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge — or support — prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees. ## Does deglobalisation make economies more resilient to recessions? Published by Anonymous (not verified) on Wed, 26/05/2021 - 6:00pm in ### Tags Marco Garofalo Are less open economies more resilient to downturns? There is general agreement on the benefits of openness, but its adverse link to volatility is ambiguous. On the one hand, globalisation makes countries less sensitive to domestic disturbances, yet it also makes them more exposed to foreign shocks. In this post, I use local projections (LP) to show that international business cycles since 1870 appear to support a positive effect of openness on the economic resilience of a country, and that we may thus expect the current international slowbalisation trend to worsen future recessions. The edges of the sword Many dub globalisation as a ‘double-edged sword’. The ‘good’ edge arguments highlight that specialisation and better allocation of resources across countries should increase productivity and, by extension, output. Openness may also boost productivity through higher innovation and adoption of ideas, and economists have tried to estimate this positive relationship. The effects on trade and output that followed the closure of the Suez Canal between 1967 and 1975 illustrate what a sudden shock to openness might look like. The ‘bad’ edge arguments are, however, anything but conclusive. Some find that globalisation increases volatility, while others argue the opposite; still others claim the openness-volatility relationship to be ambiguous. For example, increased specialisation due to openness may make economies less agile when hit by shocks, and more vulnerable to global disturbances. However, supply and demand diversification can reduce volatility, as open economies are less sensitive to domestic shocks: Caselli et al (2020) find this effect has played a larger role in recent decades for most countries. My findings below seem also to support the more positive view in this debate. Empirical evidence from international historical data: a LP approach One way of understanding whether deglobalisation is expected to make future recessions better or worse is by looking at the international historical data on previous downturns. To do this, I use the Jordà-Schularick-Taylor Macrohistory Database, which includes macroeconomic variables such as GDP for 18 advanced economies over the years from 1870 to 2017. Following Jordà et al (2013) I identify the peaks and troughs in the series for the logarithm of real GDP per capita. These delimit contractions (from peak to trough) and expansions (from trough to peak) at expected dates (Chart 1), eg the beginning of the global financial crisis (GFC) in 2007 and the downturns in the 1970s. Chart 1: Turning points in UK Log GDP per capita (per cent) Chart 2 shows the box-plot of the distribution over the considered countries and identified cycles of the cumulative percentage change in GDP growth at each year of the contraction starting after the peak. (Horizon 0 is the year of the peak.) These types of graphs aim at summarising a variable by drawing a box whose edges are the first and third quartile of its distribution; what you would normally expect to happen to GDP growth at that given stage of a contraction should fall within the bounds of the box. Notice how in Chart 2 there are many historical outliers falling very far from the box, ie certain countries have experienced extraordinarily deep contractions. For comparison, I have added in light blue the cumulative change in GDP growth the UK experienced during the GFC, and what we have seen so far since the Covid-19 outbreak in red. Both look very severe compared to the international historical experience (For another example of putting UK recessions in an historical context using hundreds of years of data, see Thomas et al (2010).) Chart 2: Box-plots of international historical contractions for the four years after a peak Armed with a panel of cross-country contractions over more than 100 years, we can employ some simple econometric techniques to estimate the effect of openness on the expected severity of downturns. (Disclaimer: should econometrics not really be your cup of tea, I would not be offended if you decided to skip the next couple of paragraphs and jumped to the description of the results in Chart 3.) To do this, I follow Jordà et al (2020), who estimated the typical trajectory in a recession conditioned on the behaviour of business versus household credit observed before a peak. I want, instead, to condition on the evolution of trade openness, and thus set up the following linear regression for local projections: $y_{i,peak+h} - y_{i,peak} = c_h + \alpha_{i,h} + \beta_h\Delta_{10}OPEN_{i,peak} + \Gamma_h controls_{i,peak} + u_{i,peak}$ Where on the left-hand side I set the percentage change in real GDP (y) for every country i at 1 to 4 years (h) since the peak. On the right-hand side, beyond the error term (u), I include a constant (c), country fixed effects ($\alpha$) to capture the influence of cycle-invariant characteristics at country-level, eg national language, and my main variable of interest, ie the change in the sum of exports and imports over GDP – a common measure of trade openness (OPEN). For this, I look at the difference over 10 years before the peak, as substantial changes in openness tend to occur over decades rather than from year to year. I also include a vector of control variables, namely a linear and quadratic time trend, the percentage change in population since the peak, current (at the peak) and two lags of annual growth real GDP, consumption, investment, CPI, population, exchange rate against the US$, exports and imports, as well as the first difference in the short-term interest rates on government debt. These controls, together with the predetermined status of the change in openness as occurring before the contraction, should help prevent my results from being driven by factors other than the conditioning on a certain change in openness. That said, my findings cannot be interpreted causally, meaning that what I estimate is just the typical path for a contraction after a change in openness occurs.

Before I move to my results, I wanted to point out that, by applying a simple normalisation of the country FEs to sum to zero and demeaning all the explanatory variables, we can interpret the estimated constant as the average cycle path.

Chart 3 shows the results of this estimation. The average contraction a country should expect given the international historical experience of the advanced economies considered here is of a somewhat sharp drop in the first year after the peak, followed by a quick and steady recovery. Interestingly though, an increase in openness is estimated to support growth and a decrease in openness (deglobalisation), to make downturns worse. Indeed, the red line in the chart suggests a worse contraction followed by a slower recovery for countries experiencing even just a moderate reduction in openness before a downturn (appropriately proxied by a one standard deviation change).

Chart 3: Expected average contraction in real GDP and associated worsening after a 1 SD deglobalisation ‘shock’

In the contention over the ‘double-edged sword’ of trade openness, my exercise seems to support that globalisation makes countries more resilient to adverse shocks. However, there are some caveats to bear in mind.

As already mentioned, these results cannot be interpreted causally, as the identification scheme described above may not be enough to do so – but they provide helpful evidence based on statistical regularities. Globalisation appears to be associated with less severe downturns and deglobalisation with worse.

Moreover, my framework does not tell us anything about the channels through which globalisation may be exerting a positive effect on a country’s economic resilience. To speak to this, I run the same exercise looking at the contraction in real consumption, investment, exports and imports (results not reported here). What I find is that deglobalisation seems to worsen downturns in consumption and investment, but its effect is insignificant for exports and imports. This could provide some evidence, although admittedly only tentative, that the support to growth may not come from the ability to tap on internationally diversified demand and supply, but perhaps from the economic strength gained through innovation and higher productivity following years of surging openness.

Conclusion

In this post, I showed how international business cycles since 1870 seem to support that higher trade openness might be associated with milder contractions, suggesting that countries following the ongoing slowbalisation may find themselves in worse conditions when the next recession strikes. Strengthening international co-operation and other strategies of ‘safe trade openness’ may be a wiser alternative to global decoupling for countries trying to increase their economic resilience (D’Aguanno et al (2021)).

Of course, we still need more investigation on such an important research and policy question, in order to move beyond simple empirical regularities and produce conclusive evidence of the ultimate effects of trade openness on an economy and its channels.

Marco Garofalo works in the Bank’s Structural Economics Division.

Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge — or support — prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.

## Offshoring Critical Industries Is So Harmful It Should Be Treason (Covid Edition)

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I was impressed how fast the UK and the US were vaccinating their population. How were they doing it, after they had been so incompetent during the rest of the pandemic?

Simple enough. Restrictions on vaccine exports.

Meanwhile:

India delays big exports of AstraZeneca shot, including to COVAX, as infections surge

And then there’s this:

(Spare me the self-serving arguments that breaking the patents wouldn’t have helped because it takes too much time to ramp up production. However long it takes, the sooner  your open up the IP, the faster it happens.)

And we could make it happen faster:

But the global capacity for producing vaccines is about a third of what is needed, says Ellen t’Hoen, an expert in medicines policy and intellectual property law.

….

To make a vaccine you not only need to have the right to produce the actual substance they are composed of (which is protected by patents), you also need to have the knowledge about how to make them because the technology can be complex.

The WHO does not have the authority to sidestep patents – but it is trying to bring countries together to find a way to bolster vaccine supplies.

The discussions include using provisions in international law to get around patents and helping countries to have the technical ability to make them.

Rich countries use IP law to keep poor countries poor, and to kill and impoverish their citizens to make even larger profits.

And, of course, if you’re stupid enough to believe neoliberal bullshit about how your countries will be OK and don’t take steps even though you have manufacturing capacity, (Europe), well, your citizens die. The EU is now restricting imports to the UK. I wonder how many Europeans will die because of not having those 10 million doses?

“I mention specifically the U.K.,” said EU Commission Vice-President Valdis Dombrovskis. Since the end of January, “some 10 million doses have been exported from the EU to the U.K. and zero doses have been exported from U.K. to the EU.”

OK. I have said this for years and years but I’m going to say it again now that it is being illustrated brutally: if you can’t make it yourself, you can’t be sure you’ll have it when you need it, since countries that can make it will tend to prioritize themselves.

You must make and grow everything essential to your country domestically if you can. Any international laws that forbid you from doing so are illegitimate. They may exist; they are not Just. This doesn’t mean completely breaking patent law (though it needs to be much less draconian and a lot less long), it does mean, at the least, writing in mandatory licensing provisions at reasonable prices.

A lot of people are going to die who didn’t need to because neoliberal “free trade” orthodoxy said you didn’t need to be able to both design and make vaccines in your own country: the “market” would supply you.

Eventually.

Don’t offshore anything that matters. If your citizens have to pay 5% or 10% more, slap on tariffs.

To not do so, if you think the welfare of your citizens is your duty, is treason.

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## Trade, saving and an economic disaster

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The UK is running a trade surplus. No, really, I am not joking. This is from the ONS's latest trade statistics release:

The UK total trade surplus, excluding non-monetary gold and other precious metals, increased £3.8 billion to £7.7 billion in the three months to August 2020, as exports grew by £21.4 billion and imports grew by a lesser £17.5 billion

It's the first time the UK has run a trade surplus since the late 1990s:

And if you were thinking this was because of the lockdown, you would be wrong. The UK has been running a trade surplus since the beginning of 2020:

Admittedly, the trade surplus widened under lockdown. But the UK economy reopened to some degree from June to August - and yet the trade surplus continues to widen.

This is no doubt music to the ears of balance of payments obsessives. Could the UK at last be pivoting away from a consumption-led growth model to an export-led one?

At first sight, it appears so. Exports have increased more than imports. And the strongest growth in goods exports was in manufactured goods, particularly machinery and transport equipment:

Hooray! If this continues, the UK will become an export powerhouse to rival Germany! There will be jobs and prosperity for all!
Not so fast. The trade balance is a net figure. The gross figures that make it up matter too - and gross imports and exports have both fallen considerably since August 2019:

The UK's trade surplus is not a sign of a booming export economy.  Far from it. The only reason for the trade surplus is that imports have fallen even more than exports over the last 12 months.
An abrupt switch from trade deficit to trade surplus accompanied by sharp falls in both imports and exports is usually caused by what is known as a "sudden stop", when investors abruptly pull their funds from the country, causing the currency to collapse and bond yields to spike. It is almost always associated with a deep recession. The UK has experienced sudden stops twice since World War II, in 1975 and 1989. In both cases, the pound's exchange rate fell sharply - so sharply, in fact, that in 1975, when the UK still had exchange controls, it was forced to ask the IMF for help to stop the pound collapsing.
But this time is different. Sterling's exchange rate did drop sharply in March, but it bounced back again:
There was no sustained currency collapse. And although there was a brief spike in March, bond yields then fell to the lowest levels in history:

Resilient currency, falling bond yields....this is hardly a typical "sudden stop".
In fact the UK is in no serious danger of running out of the foreign currency it needs to pay for imports. Permanent central bank swap lines make FX-driven sudden stops a thing of the past for currency-issuing developed countries (though not for Eurozone countries). Imports are falling not because of lack of FX, but because the UK population has cut back discretionary spending hard. This is what is causing both the widening trade surplus and the deep recession. And the fact that the UK was already running a trade surplus before pandemic restrictions were imposed shows that it was collapsing consumer confidence, not the lockdown, that caused the switch to trade surplus.

The import figures for August show that domestic consumer confidence is still on the floor. And this is supported by the GDP figures:
A trade surplus is not necessarily a sign of a healthy economy.
When there is a trade surplus, domestic saving must be high, since the country is exporting capital. The UK's domestic saving ratio is currently at an all-time high:

In my view this massive increase in the domestic saving ratio is the cause of the trade surplus. And it is not a healthy sign. It does not reflect the desire of people to provide for their own age or build an economy for future generations. And it is not providing capital for needed investment: if it were, interest rates would be significantly positive, rather than heading for the basement. The extraordinarily high domestic saving ratio actually reflects the unease that many people feel about exposing themselves to the virus for the sake of an evening's entertainment, the fear of many more people that their jobs and incomes will evaporate, and the obstacles that pandemic restrictions create for people who do want to spend.
The saving ratio is a tale of two halves, too. Higher earners who can work from home are saving like mad, while people on lower incomes are losing their jobs or suffering pay cuts, forcing them to dis-save:

(chart from Resolution Foundation)

So both high and low earners are cutting discretionary spending, though for very different reasons. And large though it is, the UK government's deficit spending is nowhere near large enough to compensate for this massive fall in domestic consumption. That's why GDP has fallen so much and has been slow to recover. Now that the government is imposing more restrictions while cutting support for those affected, GDP will fall again.
Neither a trade surplus nor a high saving ratio necessarily mean a strong economy. It depends on the circumstances. A country with a large middle class and an effective social safety net might have a low saving ratio and a trade deficit, because people enjoy buying foreign-made goods and have little need to save. But this is without question a more prosperous country than a country with a trade surplus and high saving ratio, if the population of that country doesn't earn enough to buy foreign-made goods and must save because there is no social safety net.

If the prosperous country, driven by mistaken envy of the poorer country's trade surplus, deliberately depresses domestic incomes to gain international market share, and shreds its safety net with the aim of "making work pay", then it might find its saving ratio rises and its trade balance shifts towards surplus. But its population won't be more prosperous. They will be poorer. Rather than the poorer country becoming more like the richer one, the richer one becomes more like the poorer.

Right now, the UK's high but divided saving ratio is raising its (already high) wealth inequality, while collapsing consumption is destroying the jobs and incomes of those at the lower end of the income spectrum. The trade surplus and high saving ratio aren't making us prosperous. Indeed they have no causative effect at all, in either direction. As is so often the case, the switch to trade surplus and excessive saving simply reflects the effects of an economic disaster. Those who think that a trade surplus and a high saving ratio are the route to prosperity for all might like to reflect on this.