As I was researching what's been going on in China, I couldn't help but notice that China's exports widened the U.S. trade gap (Financial Times)—
A surge in imports from China pushed the US trade gap sharply wider in May, adding to a stream of weak data that has put Barack Obama's administration under pressure for its inability to right the faltering economy and stimulate the stagnant jobs market.
The trade deficit grew by 4.8 per cent to $42.3bn, according to commerce department figures, the highest since November 2008 and at odds with the consensus of economists, who forecast the gap would shrink in May.
From Calculated Risk
Oh, no! Here we go again, asking China and other countries to finance American consumption without a concomitant increase in our own production and exports. Oil imports make up a large portion of the trade deficit, and thus we pay others $75.97 (today) for each barrel of oil we can not produce ourselves. Imported goods are analogous to an imported resource like oil in this context—we also pay for manufactured stuff we do not make ourselves, thus sending money & jobs overseas.
Has nothing changed? Actually, yes—things are getting worse. The number of Americans who have manufacturing jobs has shrunk considerably in the last decade. Thus, the growing trade gap reflects the dubious benefits of "free trade" for the United States. From the Financial Times again—
The persistent US trade gap had narrowed in the initial months of the recession from late 2008, but analysts said on Tuesday the swelling shortfall could knock a percentage point from gross domestic product in the second quarter. Although exports have been growing in recent months as world trade continues to recover from a plunge last year, the strong dollar and the lack of domestic demand in the rest of the world mean the contribution of net trade to economic growth is likely to be negative over the next two years.“Less domestic production, because of increased imports and less demand for higher-priced US exports, means less job creation in the manufacturing sector, a higher unemployment rate, and less income growth domestically,” said Stuart Hoffman, chief economist at PNC.
That doesn't sound good. The Emperor President has recently become aware of the problem, so he launched a National Export Initiative to fix it. The Financial Times covered the story in Obama unveils plans to double US exports—
President Barack Obama on Thursday unveiled five steps that he said would lead to the doubling of US exports and the creation of 2m jobs within the next five years, part of his administration's efforts to strengthen the American economy and foster private sector job growth after the worst recession in generations.
Under the “National Export Initiative”, the Obama administration will establish two boards to focus on boosting exports, expand export financing and help US exporters in existing and new markets...
“In a time when millions of Americans are out of work, boosting our exports is a short-term imperative. Our exports support millions of American jobs,” he said, adding that every $1bn increase in exports supported more than 6,000 additional jobs.
“It’s also critical for our long-term prosperity. Ninety-five percent of the world’s customers and the world’s fastest-growing markets are outside our borders...”
In addition to the export promotion cabinet and the president’s export council, the national export initiative will give the Ex-Im Bank a new facility to provide up to $2bn a year for trade finance for small and medium enterprises, and will increase funding for export promotion programs by $134m next year. The Obama administration will also seek to ensure that existing trade agreements are properly enforced, and would press ahead to ratify pending agreements with South Korea, Panama and Colombia.
We can be confident that new bilateral trade agreements with South Korea, Panama and Columbia will help halt & reverse the problems caused by 3 decades of decline in U.S. manufacturing and large, persistent, insidious trade deficits. And beyond these new agreements? Do most economists think the National Export Initiative will fix the ongoing disaster? Let's quote the Financial Times one more time—
Mr Obama, after largely letting trade policy languish during the first 18 months of his administration, recently announced a drive to double exports within five years and promised progress on three long-stalled bilateral trade deals.But few economists think the plan will have much impact. The proposal involves limited concrete actions beyond some bureaucratic reshuffling, a commitment to redouble efforts on marketing and a proposal to increase the activity of the Ex-Im Bank, the US official export credit agency.
Bureaucratic reshuffling. A redoubling of marketing efforts. A proposal to increase activity at the Export-Import bank. Wow, that's impressive. For some reason, I am reminded of the movie What About Bob? starring Bill Murray and Richard Dreyfus. You know, Baby Steps!