With his goal of creating 2 million jobs from exports, President Obama has laid out a tantalizing but difficult objective for America.
In his State of the Union address Wednesday, the president identified a major potential source of much-needed jobs: Trade with the rest of the world. But as anyone familiar with a "Made in China" label knows, turning that potential into reality may not be easy.
"Tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America," Mr. Obama said to congressional applause. "To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security."
With US consumers and businesses struggling, many economists say that improving US trade performance is vital. But some also say Obama's goal is unrealistic.
Mr. Morici says it's that overall trade balance – exports minus imports – that counts when considering the degree to which trade can help make up for 7 million jobs lost in the recession.
Some good news: Prior to the recession, American exports were growing solidly, and creating well-paying farm and factory jobs. And the nation's trade deficit has been shrinking for three years, partly due to a retrenchment in consumer imports but also due to those export gains.
The US trade deficit is now running at about $400 billion, annualized, versus more than $700 billion at its peak in 2008.
As the global economy emerges from recession, however, a sizable US trade deficit may persist. And as long as imports outweigh exports, the economy may still be losing jobs from trade, on balance.
America's exports currently total about $1.57 trillion, using annualized numbers from the third quarter of 2009, according to the US Department of Commerce. It would require growth of about 14 percent a year to double that amount. That's a bit faster than the inflation-adjusted pace seen before the recession, when a weakening dollar helped spur export growth.
"This 2 million figure comes from the same bag of political numbers" as the White House’s rosy projections last year on clean-energy jobs and other stimulus-related jobs, Morici says.
The quest for jobs has been a key focus for Obama since taking office in the midst of a deep recession, and especially so in the past month. In addition to new promotion of exports, he outlined a new effort to spur the flow of credit to small businesses.
Impetus for job creation can come from a handful of places: domestic consumer spending, spending by US businesses on new equipment or facilities, and trade with other nations. Obama has also deployed government spending to create jobs – which economists view as a temporary aid to employment, at best.
Many economists expect at least a modest rebound in consumer and business spending this year. But they're worried that this won't provide enough fuel to address the nation's high unemployment rate.
With that problem in view, the Obama administration appears to be focusing harder on the potential of trade to help the labor market.
"One item that stood out as different [in his speech] was the acknowledgement that we are on our way to export-led growth, if we are to have growth at all," commented Andrew Samwick, a Dartmouth College economist, in an online analysis of Obama's remarks to the nation. "I don't think [2 million jobs] a reasonable projection, but it does signal a different way of talking about what's important in economic policy."
Balancing world trade
Most economists don't pin all their job-growth hopes on trade. In fact, if the US seeks export-led growth, a key challenge will be that many other nations are also trying that strategy. For every nation with a dollar of trade surplus, there must be one with a dollar of trade deficit.
The result is persistent imbalances in the world economy. Many experts say the world economy needs some post-recession retooling, with the US importing less and exporting more, while China and other Asian nations transition toward growth fueled by their domestic consumers.
A vital step, Morici argues, is for Obama to take a tougher stance against China on its export-promoting trade practices. Notably, that would mean an appreciation of the Chinese currency (with other Asian currencies likely following), which could make US exports more competitive.
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