PrintObama's Trade Offensive Cannot Solve Unemployment
The New York Times published an op-ed by President Barack Obama on Friday to coincide with his trip to Asia. It was entitled "Exporting Our Way to Stability." In the wake of Republican victories in the midterm elections prompted by high unemployment and massive deficit spending, Obama is falling back on his Export Initiative as an easy, low-cost solution to America's economic woes. But the numbers do not add up, nor is the international situation favorable to such an approach. If this is the best that Obama has to offer, the next election will still be fought amidst dismal economic conditions.
The president will visit India, Indonesia, South Korea and Japan. The United States runs trade deficits with all of them, totaling $67.8 billion in goods last year and $116.8 billion in 2007 before the recession. These deficits need to be reduced as they are a drag on the U.S. economy, representing the use of American money (including from the stimulus program) to create jobs and production capacity overseas rather than at home.
A U.S. Treasury report released Nov. 3 stated, "Domestic demand increased at a 2.5% pace last quarter, though a significant share of that demand growth continued to be met by higher imports." The report on Third Quarter GDP released by the Commerce Dept. Oct. 29 showed that the trade deficit had cut the nation's real growth rate in half. Real imports of goods and services increased 17.4 percent during the July-September period (on an annualized basis), knocking GDP down by 2.0% against the 4.0% aggregate increase from other sectors.
In his op-ed, Obama said,
The biggest mistake we could make would be to rebuild our economy on the same pile of debt or the paper profits of financial speculation....
We want to be known not just for what we consume, but for what we produce. And the more we export abroad, the more jobs we create in America. In fact, every $1 billion we export supports more than 5,000 jobs at home.
He had made this reference before, when commenting on the October jobs report. Yet, the numbers run the other way as well, with jobs lost when America imports goods it could be producing itself. Obama hailed the fact that the private sector has created over 100,000 jobs in each of the last four months. But that pace will have to more than triple if unemployment is to be brought down substantially by 2012.
Obama wrote about the pending Free Trade Agreement with South Korea, which has been in limbo since 2007. The agreement as written will not adequately open the Korean market to American industry and farmers. Ford has launched a new ad campaign against the agreement, and Obama acknowledged that issues involving the auto sector still need to be resolved. In 2007, the U.S. sold only 7,000 motor vehicles in South Korea while Seoul exported 615,000 vehicles to America.
The U.S. trade deficit is on the rise again. From January through August, it totaled $426.8 billion in goods compared to $503.6 billion for all of 2009. The rest of the world is also struggling and looking to improve national trade balances. The U.S. can urge a "rebalancing" of global trade at the G20 meeting in South Korea, but it will be futile. It is not in the interest of nations running surplus accounts with America to see their positions decline, which is what would have to happen to balance global trade in textbook fashion. The U.S. cannot export itself out of its current predicament, because the rest of the world won't let it.
The markets the U.S. needs to recapture are here at home, where foreign industrial policies, informal barriers, tariffs, and currency manipulation can be countered by the sovereign right of Americans to run their own economy. The nation's future must rest in the productive hands of its own people.
