Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Obama Touts his Failing Trade Policy
President Bush, whose trade policies caused a decade of American stock market decline, liked to tout them while standing outside a Boeing (BA) aircraft factory, Boeing being one of America's premier exporters. On July 7, President Obama, having continued Bush's trade policies, brought Boeing CEO Jim McNerny Jr. to the White House to flank him while he discussed a progress report claiming success in enhancing U.S. exports. The report noted:
The Council of Economic Advisers’ analysis shows that over the past nine months, the increase in US exports contributed more than one percentage point to the US growth rate. During our recovery, exports have contributed as much as domestic consumption to our growth.
It cited a couple of examples of recent success at promoting U.S. exports:
The chart below shows that both imports and exports have been growing since the depths of the recession in May 2009:
Indeed, as the Council of Economic Advisors reports, the growth in exports during the 9 months from July 2009 to April 2010 has been impressive:
But, just as exports add to U.S. growth, imports subtract. From July 2009 to April 2010, the growth in U.S. imports has been even greater:
Thus if, as Obama's Council of Economic Advisors claim, the $19 billion growth in monthly U.S. exports added 1% to the U.S. growth rate, we can calculate that the $26 billion growth in monthly U.S. imports subtracted 1.4% from the U.S. growth rate. We can also calculate that balancing trade would add 2.1% to the U.S. growth rate - and that doesn't count the sustained growth that would occur from the added business investment if manufacturers thought that the U.S. government was serious about balancing trade.
American trade debate has been stuck in a tug of war between free traders who promote exports and protectionists who promote tariffs. Free traders claim that protectionists hurt exporters. Protectionists claim that free traders hurt domestic producers. Both ignore the third strategy -- balancing trade -- which helps both exporters and domestic producers.
Instead, of issuing a report designed to persuade the American people that failing trade policies are working, President Obama should be giving a speech such as the one my father, son and I recommended in our 2008 book, Trading Away Our Future:
Such a speech would probably get our mercantilist trading partners to take down their many, many barriers to U.S. products without ever requiring imposition of the threatened Import Certificates. Instead of pretending, Obama could adopt a trade policy that would really work.
Journal of Economic Literature:
Atlantic Economic Journal: