A week ago, the Bureau of Labor Statistics released the jobs report for September – a report that was the worst in four years. The same thing could be said for the trade report released earlier this week. Manufactured exports, which the president had vowed to double – a cornerstone of his economic policy, fell to a level that was actually less than July, 2011. The trade deficit in manufactured goods worsened to $60.6 billion, the second worst reading ever. (The record was $63.7 billion, set only five months ago.) Here’s the chart: Manf’d Goods Balance of Trade.
In 2012, the president hailed a new trade deal with South Korea as a “big win for American workers.” The trade deficit with South Korea, which was $13.2 billion in 2011, nearly doubled to $25.0 billion in 2014 and is on track to reach nearly $30 billion this year.
Our trade deficit with China was $268 billion in 2008, the year the president was elected. This year our deficit with China is on track to easily surpass $350 billion.
The president’s mistake on trade policy is the same mistake made for decades by the presidents who preceded him – putting blind faith in “free” trade, taking no account of the role of population density in driving trade imbalances. He fails to understand that, when dealing with nations far more densely populated than our own, “free” trade is a worse policy than no trade at all. That’s not to say that we shouldn’t trade with nations like China, Japan, Germany, South Korea and others who are totally dependent on manufacturing for export to sustain their bloated labor forces. It simply means that some mechanism for assuring a balance of trade – tariffs, quotas or whatever – is essential to prevent a crippling of our own economy.
The Trans Pacific Partnership trade deal that Obama has recently concluded again blindly applies “free” trade policy to each nation regardless of their population density. Based on the long track record we have with that approach, it’s easy to predict the results if Congress is foolish enough to enact it.