As announced by the Bureau of Economic Analysis (BEA) this morning, the nation’s trade deficit rose in February to $42.3 billion. Not mentioned in the report (because the BEA doesn’t even track it, but can be derived through some simple math) is the fact that a $0.7 billion decline in manufactured exports contributed to the rise in the deficit.
Exports of manufactured goods, at $108.7 billion in February, have not risen in two years, actually falling by $0.1 billion from February, 2012. In January, 2010 the president set a goal of doubling exports in five years, the implication being that the growth would occur in manufactured goods as a cornerstone of his economic “plan” to grow manufacturing jobs. February’s exports lagged the president’s goal by $42.6 billion – a record margin which, once again, exceeds the entire trade deficit. Here’s a chart of the balance of trade in manufactured goods, followed by a chart of the deficit in manufactured goods: Manf’d exports vs. goal Manf’d Goods Balance of Trade.
The point is that the president’s failure was inevitable because neither he nor anyone in the U.S. has any control whatsoever over exports, which are determined solely by foreign demand for U.S. goods. Cajoling our trade partners into buying more U.S. goods has been a strategy tried and failed by presidents for decades. Federal programs designed to help manufacturers improve efficiency and to fund research don’t work either, since foreign manufacturers are working just as hard to improve efficiency.
And it’s equally predictable that the trade deficit isn’t just magically curing itself as other nations develop into more western-style consumers, as economists have long predicted. Global trade imbalances have nothing to do with any of these things. They are driven almost entirely by differences in population density, as badly overpopulated nations, crippled by endemic low per capita consumption, rely ever more heavily on manufacturing for export to employ their bloated labor forces. And American workers pay the price for their overpopulation – a problem they had no role in causing and are powerless to remedy.
Applied in appropriate situations, like between reasonably populated nations, free trade works just fine. But U.S. trade policy fails to account for the limitations of free trade, and applies it blindly to situations where it’s guaranteed to fail. In the final analysis, globalization and free trade, as they are currently applied, constitute nothing more than a poverty-sharing program, conceived in the wake of World War II as a means of heading off the kind of social unrest that arises from high unemployment in overpopulated nations like Germany and Japan.