In January of 2010, President Obama challenged his economic team with the question, “if Germany can be a net exporter of manufactured products, why can’t we?” And he set a goal of doubling exports within five years. Though the goal was stated in broad terms of doubling “exports,” the real goal is to double exports of manufactured products, thus rebuilding the battered manufacturing sector of the economy.
In January of ’10, our manufactured exports were $131.05 billion per month. To stay on track for meeting that goal, exports of manufactured products should have grown to $152.25 billion by February, ’11.
This morning the Bureau of Economic Analysis released February trade figures. The overall balance of trade improved slightly from January, falling from $47 billion to $45.8 billion, though the January deficit figure was revised higher, from $46.0 billion to $47 billion. Here’s a chart of the balance of trade since President Obama set this export goal:
No improvement evident there! Worse, we continue to lag in our goal to double the exports of manufactured products. In fact, the shortfall between the goal and actual exports is the worst since the goal was set, coming in at $146.73 billion vs. the goal of $152.25 billion. Here’s a chart of trade in manufactured goods:
We were on track to meet Obama’s goal through July, but have faltered since. The shortfall in February of nearly $5.5 billion is the largest since tracking of this goal began, and represents approximately 900,000 manufacturing jobs alone, and perhaps as many services jobs that would support these manufacturing operations. The February trade deficit of nearly $22.0 billion in manufactured goods represents approximately 3.6 million manufacturing jobs and, again, perhaps as many supporting services jobs.
It’s no mystery why we’re failing to meet the president’s goal. Setting a goal is one thing. Actually taking action to assure that the goal is met is an entirely different matter. To that end, the president has done nothing, other than to cajole our trade partners to boost their imports of American products and to pursue policies designed to weaken the value of the dollar. The problem is that promises to boost imports of American goods are unenforceable and meaningless, and currency valuations have absolutely nothing to do with trade balances, as proven by the study I conducted last year.
Only actions that are within our control and enforceable have any hope of restoring a balance of trade and, with it, the manufacturing sector of our economy. That means tariffs. And only a tariff structure designed to counteract the driving force behind global trade imbalances – the gross disparities in population density – can correct the imbalances that are destroying our economy without simultaneously damaging beneficial trade. That means a tariff structure that is indexed to population density and applied only to manufactured products.
If you’re a newcomer to this site, I encourage you to read more about this new economic theory.