- The Washington Times - Tuesday, February 2, 2010

ANALYSIS/OPINION:

So President Obama wants to “double our exports over the next five years” in order to “support 2 million jobs in America.” I’d have greater-than-zero confidence in this State of the Union goal being reached if I saw any evidence that the president knew anything about exports, employment, and the relationship between them. Tragically, that evidence is nowhere to be found.

The president doesn’t even start off on the right foot. It may seem the soul of logic that “the more products we make and sell to other countries, the more jobs we support right here in America.”

But just as more earnings only boost wealth if they exceed or grow faster than spending, more exports only create more jobs on net — the only way to reduce unemployment — if they exceed or grow faster than imports. In other words, doubling exports won’t create jobs if imports double along with them. Trouble is, he didn’t specify what “doubling” meant, or present plans for controlling or limiting imports.

More optimism about the president’s export goal could also be justified by some awareness that how exports — net or not — get doubled matters decisively. For example, the United States could pursue a superweak dollar policy — which would make U.S.-produced goods and services much cheaper than most of their foreign counterparts. But as former President Jimmy Carter learned the hard way, the exchange rate is not like a cork. It doesn’t pop up at least as easily as it can be talked down.

Alternatively, American leaders could follow the advice of the U.S. Chamber of Commerce (which also proposes to double exports in five years), and other business groups dominated by outsourcing multinational companies. They could reduce American taxes and regulations to pre-New Deal levels — or maybe to Chinese levels. Of course, the reduction in protections and benefits would trigger political protests making today’s rallies look like, well, tea parties.

So exports must grow in ways that maintain or boost American living standards, and preserve a first-world society. But the famously eloquent Mr. Obama was silent on that score as well.

Finally, Mr. Obama doesn’t seem to understand that doubling exports in economically and politically acceptable ways will take far more than “launching a national export initiative” targeted at “farmers and small businesses” and reforming government controls on defense-related exports.

After all, despite the Great Recession and the comparable Great Slowdown in U.S. and world trade, both exports and imports today still represent historically lofty shares of the American economy — 10.9 percent and 13.7 percent, respectively, in 2009. Two-way trade, therefore, stood at 24.6 percent of gross domestic product, and net exports, at minus-2.7 percent of the economy, totaled $390 billion.

So doubling net exports in five years nowadays is much more challenging than accomplishing this goal during, say, the 1963-1974 period, when such doublings and even faster increases occurred routinely. For in those years, net exports ranged only between 0.8 percent and minus-0.3 percent of gross domestic product, and these trade balances amounted to only $6.9 billion and $3.4 billion, respectively.

This doesn’t mean that greatly boosting net exports and slashing the trade deficit isn’t critical. Quite the contrary, precisely because the ongoing economic crisis results from America’s still-exorbitant levels of debt, U.S. output must be greatly increased relative to its spending in order to restore financial health. And the necessary rebalancing of spending and earning requires a dramatic rebalancing of trade — i.e., much greater net exports.

Mr. Obama can only realize his export and economic recovery ambitions if he addresses the nation’s still-excessive imports — and recognizes that, because America’s dismal economic and financial realities have been ignored for so long, greater short-term pain has become inevitable. If the president’s trade and related policies don’t quickly start making these hard choices, then his talk of doubling exports will be unmasked as double-talk.

Alan Tonelson, author of “The Race to the Bottom,” is a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 1,900 members are mainly small- and medium-sized domestic manufacturers.

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