Plan to Double Exports Just More Trade Policy Blundering

http://www.cnbc.com/id/35143495

It seems I wasn’t the only one who found Obama’s pledge in the State-of-the-Union Address to double exports in five years to be unbelievable.  Check out the above-linked CNBC article. 

Since the Obama administration has not yet clearly articulated a trade policy or even sent several completed trade agreements to Congress, his pledge to double exports in five years was greeted with incredulity, even among Democratic trade policy experts.

Never mind health care, the stimulus plan, Afghanistan, or all of the other issues that have distracted his attention so far.  Obama’s failure to articulate a trade policy or come up with a plan to address the trade deficit is, by far, his biggest failure.  Contrary to his campaign promises, he’s done nothing to correct the imbalance with Mexico that arose from the North American Free Trade Agreement.  Worse, he’s done nothing in response to tariffs that Mexico slapped on American goods the first time he tried to raise the issue.  Nor has he done anything in response to persistent dumping by the Japanese.  Nor has he done anything about China’s refusal to unpeg their currency from the dollar. 

His stimulus plan has failed to revive the economy.  Unemployment isn’t dropping.  With credit rating agencies on the warpath about sovereign debt, another big stimulus isn’t an option.  Reinflating the housing bubble isn’t an option.  He seems to understand that revitalizing manufacturing is the only way to get the economy back on its feet. 

So he’s faced with a choice:  rein in imports so that manufacturing can focus on meeting the needs of domestic consumption, or manufacture products to be consumed by other nations.  The first option is completely within his power and success would be guaranteed, but at the price of angering other exporting nations.  The second option is something over which he has absolutely no control and there is virtually no chance of success, but at least China wouldn’t be P.O.’d at us. 

So what does he choose?  True to form, he’s opted for the appearance of doing something that angers no one, as opposed to real action that requires real leadership.  By setting a goal of doubling exports in five years, he can fall back on the excuse that “we still have two years to go” when the next presidential election rolls around. 

Boosting exports has been our trade policy ever since the signing of the Global Agreement on Tariffs and Trade in 1947.  The idea is to open new markets.  But it’s precisely this plan to open new markets and boost exports that has saddled us with an enormous trade deficit.  How?  Because trade negotiations always involve the U.S., in a gesture of good faith, offering to open up our market first.  So in comes a fresh tide of imports. 

Then, when the exports don’t materialize, we ask, “why aren’t you buying any of our cars?”  The answer:  “because our nation is too crowded for everyone to drive cars.”  “Our commuters rely on mass transit.”  Then we wonder why they don’t buy American-made lawn mowers until we realize that – oh, yeah, we forgot – they’re so crowded that they don’t have lawns.  Then we wonder why they don’t buy American-made applicances until we realize that – oh, yeah, we forgot again – their homes are so tiny there’s barely room for a bed and a toilet. 

Too late.  The trade deal is done and now we’re stuck with an even bigger trade deficit.  The solution?  Move on to the next country, perhaps with an even bigger population, and hope that things turn out differently.  We keep applying the same failed trade model while always expecting different results. 

Since Obama so loudly and publicly proclaimed such a commitment, I’ll hold his feet to the fire.  I’m going to chart our monthly progress on export growth, along with imports and the overall trade deficit, using January 2010 trade results as the starting point (which won’t be released until March).  To meet this goal, exports must rise at a rate of 1.2% per month for the next five years, while any growth in imports must be held to about half that value in order to achieve a balance of trade.  Oh, by the way, I’ll be tracking this in constant dollar terms, not letting him inflate his way toward meeting this goal. 

Anyone care to place a bet on Obama meeting this goal?  I wonder if the president himself would make that bet. 

So stay tuned.  It’ll be fun to watch how this unfolds.

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15 Responses to Plan to Double Exports Just More Trade Policy Blundering

    • Pete Murphy says:

      Thanks for providing that link, Jeffrey. Sure looks to me like he has the authority. In addition, the U.S. always has the option of the withdrawing from the World Trade Organization, giving the president the freedom to do whatever he pleases in terms of tariffs. The WTO is a paper tiger. All it has the power to do is authorize other nations to retaliate against trade practices it deems unfair, which is nothing more than the right they had before the WTO ever existed.

  1. mtnmike says:

    Pete…

    As I’ve submitted before, exports are massive energy consumers due to shipping and handling costs from halfway around the world and then transport across America from primarily the west coast.

    Having Americans make the things that Americans buy and consume every day is our ONLY possibility. That will require heavy modification of NAFTA and the WTO agreements.

    Americans have no desire to live in abject poverty and therefore we cannot, under any circumstances, compete with those who do without falling to that unfortunate level.

    That being said, expanding exports to the third world has met with about as much success as Lyndon Johnson’s Great Society. Johnson’s war on poverty included increasing immigration of millions of non simulating poverty stricken people to the U.S.. How’s that been workin’ out for us?

    The War ‘OF’ Free Trade includes the expectation of poverty stricken people buying American manufactured goods. The smart 3rd graders could have pointed the fallacy of that plan!

    As you suggest, our president and congress have chosen to take a path that doesn’t upset anyone other than the American people.

    • Pete Murphy says:

      Absolutely, Mike. This is a real pet peeve of mine – the five million gallons of oil burned by each container ship that arrives in our ports. If for no other reason, anyone outraged by our lack of energy policy and by our inaction on global warming should be raising hell about a trade policy that’s so wasteful of dwindling energy supplies when every single manufactured product that’s imported could be made just as easily, efficiently and, in most cases, as cheaply as it’s made overseas. It’s just a complete, idiotic waste of resources.

  2. mtnmike says:

    Whoops, I should have said, Exports from and Imports to…are huge unnecessary energy consumers.

  3. Mark A. Hall says:

    Does the phrase “Plan to Double Exports” bare any resemblance to the phrase “Plan to Double Cross”?

    Possible Double Crossee’s would like to know!

  4. Mark A. Hall says:

    Does the information listed below represent the successful interpretation and implementation of prescribed “Free Trade” policy?

    U.S. Non-Energy Trade Deficits:

    1996 = $ 107.69 Billion

    1997 = $ 117.06 Billion

    1998 = $ 185.83 Billion

    1999 = $ 266.85 Billion

    2000 = $ 316.22 Billion

    2001 = $ 300.92 Billion

    2002 = $ 364.89 Billion

    2003 = $ 394.14 Billion

    2004 = $ 467.19 Billion

    2005 = $ 509.30 Billion

    2006 = $ 530.31 Billion

    2007 = $ 485.97 Billion

    2008 = $ 401.06 Billion

    2009 YTD= $ 261.53 Billion

    *******************************
    TOTAL = $4,708.96 Billion or $4.71 Trillion

    * Information obtained from U.S. Census Bureau website.

    AS NORMAL & CUSTOMARY, OUR GOVERNMENT OFFICIALS HAVE THEIR “COST CUTTER” SCISSORS AIMED AT THE WRONG DEFICIT.

  5. Mark A. Hall says:

    We might be the only nation on Earth whose government recognizes “Massive Systemic Failure” as a better than expected result.

    I’m getting convinced that this might be a plot to eliminate the “middle class” and return to the “Cast” system where ONLY the rich and the poor exist.

    What else can explain this “acceptance” of failure.

    Our Founding Fathers are rolling over in their graves.

    America as we knew it may be gone forever.

  6. Mark A. Hall says:

    Pete:

    We are in a new era.

    The era of Triple “A” (Allow, Avoid & Accept)economics.

    a.k.a.

    “Chicken Economics”

  7. mtnmike says:

    Mark,

    You do have a way with words,I’m still laughing to keep from crying. Oh how true. I will definitely incorporate this “credited” quote on my site. “We might be the only nation on Earth whose government recognizes “Massive Systemic Failure” as a better than expected result.”

  8. Mark A. Hall says:

    Pete:

    What’s this “I’ll Be Tracking”?

    Don’t you trust them?

    Have they “ever” failed us?

    Name “one” time!

    • Pete Murphy says:

      Those kinds of pledges, especially the ones that stretch over the years, are often forgotten. It’s such a critical issue, I’m not going to let that happen. Someone needs to track progress against this goal, and not just come back in five years and note that it was missed.

  9. Mark Hall says:

    Pete:

    You’ll be our Sherlock Holmes to their Detective Frank Drebin.

    How is “slight-of-hand” similar to a sight gag?

    With both you have to be watchful and know what your looking for and looking at!

    So, since your on the case, can we sit back and watch the show? Will it be a Mystery?, a Comedy? or Both?

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