Forget the jobs bill. Obama's plan to boost exports by breaking down foreign trade barriers is the fastest way to employ jobless American. But will Obama be tough enough for the task, especially with China?
President Obama plans to create 2 million new jobs within five years by doubling – yes, doubling – US exports. To achieve that stunning goal will require him to bang forcefully on the doors of many countries that now block American goods and services.
Is Mr. Obama up to it?
“Commercial diplomacy,” to use a polite phrase, isn’t for the faint of heart.
Japan (or rather “Japan Inc.”) used stealthy means over decades to open markets for its goods. In the past decade, China has imitated Japan in many ways, by discriminating against foreign goods, poaching patents, heavily subsidizing exporters, and setting unfair currency rates. It now accounts for about a fifth of goods that Americans import.
But the payoff could be big. Exports as a share of the US economy are now three times higher than a half century ago. They are 11 percent of gross domestic product, support 10 million jobs, and often pay higher wages. Some economists estimate that more than half of the US economic growth in the last half of 2009 came from exports.
Breaking down trade barriers may be Obama’s best path to his goal of creating 95,000 jobs a month. Smaller US firms – the biggest job creators – need special help in learning how to sell abroad. Less than 1 percent of American companies sell abroad, and of those that do, most sell to only one country.
As if in a war, Obama issued an executive order Thursday that includes bold steps to ensure, as he put it, “a level playing field” for US exports.
He will assemble an “export cabinet,” consisting of the secretaries of Commerce, Agriculture, State, Treasury, and other agencies, that will coordinate governmentwide action. That minicabinet will be tasked to help US companies compete abroad with stronger incentives: more loans and tax credits, lower regulatory hurdles, and aggressive hand-holding by hundreds of government experts on trade. More than 40 trade missions are planned this year.
Another step is tougher enforcement of current trade rules to prevent foreign bias against US goods and services.
So far, however, Obama has been reluctant to force China – the country with the largest trade deficit with the US – to end manipulation of its currency rate that favors Chinese exports and discourages imports. China also ranks high as a thief of US intellectual goods, such as software.
Obama has also been reluctant to complete US approval of three pending free-trade pacts with South Korea, Colombia, and Panama. He’s lukewarm about challenging key members of Congress and unions that oppose such market-exposing measures. And yet approval of these pacts would quickly create valuable export-related jobs for many unemployed Americans.
In many fields – high tech, farm goods, entertainment, energy, finance – the US is world-class, relying on its strength in innovation. In agriculture, too, the US is a strong contender, with a quarter of farm revenues coming from exports. Yet American farmers face high barriers in Europe and Asia, especially in selling food grown with new biotechnology techniques.
Obama will need to show more political muscle than he’s displayed so far to knock down these foreign (and congressional) walls. He must lead the way to a new global agreement on trade (the so-called Doha Round of talks) while also pursing other bilateral trade agreements.
To avoid a jobless economic recovery, the president’s plan must show real results soon in creating jobs from exports so that there are not more exports of US jobs.