Once again, rhetoric from the Obama administration has trumped action.
President Barack Obama’s pledge to double exports in five years is off to a rocky start. Tax relief and support for U.S. exporters has failed to materialize. The result is the U.S. trade imbalance continues to grow.
The U.S. trade deficit in goods and services increased to $558 billion in 2011 from $500 billion in 2010. That’s up 11.6 percent from 2010 as imports continue to rise much faster than exports.
As a percentage of U.S. gross domestic product the goods and services deficit was 3.7 percent in 2011, up from 3.4 percent in 2010. For December 2011, the trade deficit increased to $48.8 billion from $47.1 billion in November. Every indicator is going in the wrong direction despite the emphasis placed on exports by the administration.
As expected, it is hard to ignore China’s impact on the trade deficit. The goods deficit with China increased from $273.1 billion in 2010 to $295.5 billion in 2011. Exports increased $12.0 billion (primarily passenger cars and copper) to $103.9 billion, while imports increased $34.4 billion (primarily computers, household goods and apparel) to $399.3 billion.
Our imports from China are increasing nearly three times faster than our exports to China despite all the tough talk and saber rattling by Obama and Vice President Joe Biden. It doesn't seem the Chinese are taking their lectures on fair trade, equal access and currency manipulation too seriously.
But China isn’t alone in running whopping surpluses with the U.S. We ran $119 billion and $63 billion trade deficits with Europe and Japan, respectively, last year. We also had large deficits with India and Brazil.
This growing trade imbalance is one of the major causes for the stubborn U.S. unemployment rate remaining above 8 percent and impacting 14 million Americans who can’t find a job. When exports rise, employment rises. Small businesses, the spark plug for exports and job creation, are simply not getting the support they need to open foreign markets to their products and services.
But all is not doom and gloom. The U.S. continues to reap the benefits of the North American Free Trade Agreement (NAFTA), which has created important trade opportunities with Canada and Mexico.
The goods deficit with Mexico decreased from $66.4 billion in 2010 to $65.6 billion in 2011. Exports increased $34.1 billion (primarily petroleum products and computer accessories) to $197.5 billion, while imports increased $33.2 billion (primarily crude oil and automotive, parts, and accessories) to $263.1 billion.
Mexico buys more American products than China and Japan combined and if we removed our imports of crude oil from the trade figures our trade deficit with Mexico would be negligible.
This should spur the administration and Congress to expand our free trade agreements with other nations. When the U.S. trades on a level playing field, we do amazingly well. We have nothing to fear from global competition.
Perhaps the most important reason for expanding U.S. trade is that China makes no secret that they want to see the Yuan replace the dollar as the world’s currency. There is no current danger yet since U.S. Treasurys continue to dominate and show strength worldwide.
But while the euro is in peril, the Yuan has gained prominence as the only possible alternative to the dollar.
There are five steps to get our exports moving.
Step One has already started. We are moving to disassemble the U.S. government’s archaic and ineffectual trade structure. Eliminate the current multi-organizational structure and replace it with one entity with the authority to make decisions and get things done.
Step Two is to aggressively go after countries that steal our intellectual property with impunity. The U.S. Department of Commerce estimates that China alone is responsible for over $300 billion in U.S. intellectual property theft, which coincidentally, is the size of our trade deficit with China.
Step Three is to systematically promote “back shoring” by incentivizing companies that moved operation overseas to come back home. We must turn this trickle into a flood.
Step Four is to reward U.S. companies that export by providing them incentives and loan guarantees so they have access to working capital. Our small businesses and entrepreneurs, whom are the backbone of our export community, are not asking for anything for free --they just want to be able to compete. We must fully recognize we live in a world where our foreign competitors are being heavily subsidized by their governments.
Step Five is to hold this administration and the congress accountable for our growing trade imbalance. If they aren’t willing to support trade, it is our duty to export them out of office.
The bottom line is that a robust export program is essential to American growth and prosperity. We must create an environment that gives people around the world the opportunity to purchase U.S. goods at fair prices while exposing them to U.S. fair play and freedom.
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