In his 2010 State of the Union address, President Barack Obama promised to double U.S. exports by the year 2015. The ambitious trade policy, he said at the time, could create two million jobs and be a boon to the stagnate U.S. economy.
Halfway through this five-year timeline, however, the U.S. is nowhere close to realizing the goal.
According to the Bureau of Economic Analysis, which releases monthly trade figures, the U.S. trade deficit fell 3.7 percent in May to $48.7 billion, down from $50.6 billion in April.
While trade exports grew throughout 2010 and 2011, the growth numbers have slowed during 2012, primarily due to the global economic condition, Europe’s financial crisis and the softening of both the Chinese and Latin American economies.
The current export growth rate is around 5.5 to 6.5 percent, University of Michigan economist Mark Perry told The Daily Caller News Foundation. “We’d have to have 15 percent growth in exports per year every year for five years,” he said, for the U.S. to achieve Obama’s goal.
“It’s almost never happened unless it’s just a huge economic boom all around the world,” Perry said. “It’s a little bit of an ambitious goal to expect that we would have 15 percent growth in our exports every year for 5 years… we would have to go from $1.8 trillion in 2010 to $3.6 trillion by 2015 or 2016. That doesn’t seem like that’s going to happen, especially now with the slowdown.”
Economic realities aside, politics may also explain why Obama will fail to achieve his goal.
“Meeting that goal would require the president to engage in a fight to the death with the liberal wing of his own party, persuade China to allow its currency to appreciate 40 percent, get global economic growth to outperform the salad days from 2003 to 2007, and lower taxes for American companies that do business abroad,” The New York Times reported in 2010.
“How will he perform this miracle? It really is a mystery,” said Leslie H. Gelb, president emeritus of the Council on Foreign Relations, in an interview with the Times.
Investment adviser for SitkaPacific Capital Management Mike Shedlock calls the president’s export promise “freaking nuts,” adding that it is really inconceivable to double exports in five years.
“Simply put,” Shedlock wrote in a blog post, “President Obama is light-years away from his pledge to double exports. In terms of ‘net’ exports, there has been no progress at all.”
The White House filed a dispute last Thursday with the World Trade Organization claiming that China has unfairly imposed nearly more than $3 billion in export tariffs on American-made automobiles.
Obama highlighted the suit in a campaign speech in Ohio last Thursday, countering criticism that he has a weak stance on trade policy with China and playing to a blue-collar, auto-manufacturing crowd that has been hammered by Chinese competition.
“As long as we’re competing on a fair playing field instead of an unfair playing field, we’re going to do just fine. We’re going to make sure that competition is fair,” Obama said.
“The trade duties cover more than 80 percent of U.S. auto exports to China, including cars manufactured in Toledo and Marysville, Ohio, and Detroit and Lansing, Michigan,” Reuters reports.
According to Perry, an easy way to grow U.S. exports would be to sign more free trade agreements, a policy area where he feels the U.S. has fallen behind.
“Canada and Europe have moved much more quickly with free trade agreements with other countries,” said Perry. “I think there’s been some concern with the US, that they haven’t kept up with the pace of free trade agreements.”
“We do have these ones that just went into effect with South Korea, Panama, Columbia, so that should help boost our exports,” said Perry, adding that he doubts “it would be enough to double [exports].”
The Financial Times reports that for every one percent drop in the dollar’s value, exports expand by about $20 billion. And for every $1 billion in exports, 6,000 to 7,000 new jobs are generated.
Unfortunately, instead of losing value, the dollar has gained value, increasing 9 percent over the last 12 months. This makes American exports less competitive.
And while the Financial Times estimates a massive growth of jobs with the growth of exports, unions typically bemoan free trade agreements — the very thing that would bring unionized industries jobs. On top of that, using this estimation, exports would have to grow by $286 billion to create the two million jobs Obama promised.
“If we can export more to the world, especially with motor vehicles and tractors, and earth moving equipment and machinery and jet airplanes and so on, I think that would generally increase the union jobs,” Perry explained.
He added that recent free trade agreements with Colombia, Panama and South Korea offer huge potential for unionized industries and companies that produce heavy machinery, like Caterpillar and John Deere.
The International Business Times, however, asserts that the latest export data means nothing for the U.S. economy, concluding that “the country’s external trade, weighed down by a decline in real export orders, will be a drag on actual U.S. economic growth at least for the next two years.”
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