In the aftermath of the Great Recession, there seems no reset in the persistent U.S. trade deficit. It widened in April, partly driven by the value of oil imports.
What’s troubling is the 0.7 percent drop in U.S. exports at a time when Chinese exports have just recorded a 46 percent jump and much of the world is recovering. Look at the trend line and American exports have struggled to show an increase in recent months, then have leveled off and somewhat declined. A few months does not a long-term trend make. But the overall dynamic is making it much more difficult to achieve the ambitious export expansion of the administration, with former Washington governor and now Commerce Secretary Gary Locke and Trade Rep Ron Kirk as point men.
The dollar plays a role. It has strengthened during the euro crisis, a vote of confidence in America — but also essentially extending the line of credit on our reserve-currency credit card. That’s not always for the good. In addition to hurting exporters, it encourages taking on more debt from our Chinese bankers.
But deeper, secular forces are working against a major export revival. America just doesn’t make as much as it once did, and manufacturing provides an essential foundation for a healthy export market. On a recent trip to Ohio, I was shaken by the number of closed factories in Dayton and Cincinnati. Contrary to myth, much of the Rust Belt had worked hard to become more productive and technologically innovative in the late 1980s and 1990s, and it was still a major manufacturing and export engine. Now, not so much.
Metro Seattle exports totaled $46.9 billion in 2008. It will be interesting to see what’s happened since. Of course, we have the big export gorilla, Boeing.
China’s reluctance to let its currency float and hence really compete in a market-oriented way is part of the problem. But renminbi reform won’t fix everything its supporters say. Major and even medium-sized corporations are placing more and more operations in Asia, to be closer to growing markets, take advantage of cheap labor and because governments there often push the companies to set up shop. This isn’t just widgets, but increasingly high-end research, too.
The Locke-Kirk mission isn’t hopeless. For one thing, it’s in China’s interest to work off the imbalances. Bill Gates and other executives are pushing President Obama to dramatically increase U.S. research spending, including on renewable energy. That would be a start.
Today’s Econ Haiku:
Will BP go down?
Even bankruptcy will give
Slick lawyers an edge