Turning up the heat a little more in this long hot summer of our national discontent is the news that American exports are declining. This unexpected and decidedly unwelcome decline threatens the achievement of President Obama's ambitious goal of doubling U.S. exports by 2015 to create two million new jobs.
The President has the right goal. Every $1 billion in additional exports adds about six thousand new jobs, and jobs involving exports pay 15% more than average. With consumer demand sagging here at home, we must seize whatever additional markets we can elsewhere for our goods and services. And, until now, this part of his economic recovery plan has seemed to be succeeding. Exports have been rising, accounting for about half of all the jobs created in the United States in the past year, and, overall, exports remain up 16% so far this year.
But now this ray of light in Obama's plan seems to be dimming. U.S. exports fell more than 2% from May to June, and the monthly U.S. trade deficit increased to $53.1 billion -- the widest gap since the onset of the Great Recession in the fall of 2008.
Exports are declining because of a decreasing demand in other countries for what we have to sell in a slowing global economy. Europe is sputtering. Japan is struggling. Even vaunted China is slowing down. Other developing countries are being whipsawed economically by the ongoing whirl of global economic turmoil. The resulting drop in U.S. exports underscores the need for the White House to take a new look at its trade policy.
As our trading partners will be eager to tell us, much of our recent success in increasing U.S. exports can be traced to a devaluation of the dollar that has been furthered by the "quantitative easing" of the Federal Reserve. A weaker dollar has made our goods and services cheaper in foreign markets and foreign goods and services more expensive in the United States. (There is no small irony in the fact that we Americans -- quite rightly -- accuse the Chinese of doing much the same thing to us through their currency practices.)
Other than this tacit reliance on the trade results of a devalued currency, the Obama Administration has depended mainly on export promotion to keep the President's promise of creating millions of new jobs by exporting. True, there have been a few minor initiatives aimed at helping U.S. businesses engage in exports, and a few more are supposedly in the works. But Obama's export policy has largely been limited to business-as-usual by the executive branch and occasional presidential exhortation.
None too soon, the President seems to have realized that international trade must be a part of our national economic recovery. In this third year of his presidency, Obama is at least, and at last, talking about trade, if only about exports. (The word "import" seems not be part of the President's vocabulary -- though imports, too, are vital to our recovery.)
Export promotion is certainly needed. For all our professed focus on the global economy, only 1% of U.S. companies export, and 58% of those companies export to only one country, usually Canada or Mexico. Currently, exports account for only 9.6% of our GDP.
But to maximize job creation, we need much more than merely cheerleading for exports. America is much in need of a comprehensive trade strategy aimed at opening up more foreign markets to significantly more sales of American goods and services. And we Americans need our president to be an aggressive advocate not only for exports, but for all trade, and especially for the freer trade needed worldwide to help prevent a new global recession by jumpstarting the renewed growth of the global economy.
About 5% of the people in the world are Americans. As the President himself has pointed out, this means that 95% of the potential customers for our goods and services are in other countries. Many of those potential customers either cannot or do not buy from us because the markets of their countries are still closed to our exports or discriminate against them through tariffs and non-tariff barriers to trade. And these barriers have been rising -- subtly and not so subtly -- all around the world since the beginning of the global financial crisis.
So export promotion is not enough. Export promotion must be accompanied by market opening.
One way to open up more markets is by insisting that other countries comply with the treaty commitments they have already made to us in existing trade agreements as Members of the World Trade Organization. To its credit, the Obama Administration has been considerably more aggressive than the previous administration in seeking binding and enforceable rulings against the unfair trade practices of other countries in WTO dispute settlement. But we should be even more aggressive in asserting our legal rights in the WTO. (And we will be much more likely to reap job-producing results from doing so if we are equally respectful of the legal rights of other WTO Members.)
To cite one example of why we need to be more assertive in WTO dispute settlement: Ours is a knowledge-based and technology-intensive economy that, increasingly, depends for success on the protection of intellectual property rights. The United States International Trade Commission has concluded that we could create up to 2.1 million new jobs by ensuring that China fulfils its clear WTO obligations to protect the patent, copyright, trademark, and other intellectual property rights of U.S. businesses and other U.S. right holders.
But by far the best way to open new markets is to tear down trade barriers by concluding more trade agreements. And, to put it kindly, up until now, the conclusion of new trade agreements has been considerably less than a high priority for the current Administration.
Belatedly, Obama has come around to supporting long-delayed free trade agreements with three of our leading trading partners -- Korea, Colombia, and Panama. Now that he supports these three FTA's, the President should do more than give speeches extolling their merits; he should submit them to the Congress for approval now.
The Korean deal alone would result in a net increase of up to $10 billion in U.S. exports in its first decade. While we tarry, Europe is profiting from a new free trade deal with Korea, and a similar deal between Canada and Colombia has just taken effect. American businesses are losing opportunities in these key markets -- and American workers are losing jobs -- because we have allowed petty partisan politics to keep us from approving these important agreements.
Approving these three pending FTA's is, however, only the beginning. Other market-opening initiatives are much needed. We must reach an understanding with China on mutual market access consistent with our mutual WTO obligations. We must give higher priority to the proposed "Trans-Pacific Partnership," which could help pry open other Asian markets. The North American Free Trade Agreement can be improved by strengthening our mutual supply chains with Canada and Mexico, which account for 30% of all our trade. All of this would create more American jobs.
Above all, we can create the most new jobs for American workers by opening up more markets worldwide for American exports through a worldwide trade deal. The biggest bang for the buck in job creation through trade does not come from piecemeal deals among two or a few countries that lower trade barriers here and there; it comes from global deals that lower trade barriers everywhere. This is why previous presidential administrations of both parties in the United States have always given precedence to the conclusion of global trade deals among the more than 150 countries that are Members of the WTO.
Current global trade talks among the United States and other WTO Members are going nowhere. They have been going nowhere for nearly a decade. The only way they will ever get anywhere worth going is if the United States decides to summon the political will and spend the necessary political capital truly to lead. And only the President of the United States can make this happen.
By no means is the United States solely to blame for the sorry state of the Doha Development Round of global trade negotiations. Even so, those negotiations cannot be concluded successfully without the active and ardent engagement of the United States -- which, for all our current angst, remains the leading trading nation in the world. Moreover, at this late stage in the round, only an ambitious initiative by the United States could conceivably break the impasse. Yet, despite all the loyal efforts of our tireless trade negotiators, the Obama Administration has invested little in the way of political capital so far toward a successful conclusion of the global trade round or toward setting the stage for further global progress toward freer trade through the WTO.
The economic stakes in seeking freer trade from a global trade deal could hardly be higher for the United States. We Americans have gained in national income no less than $1 trillion annually from our cumulative successes in lowering barriers to trade and investment through global and other international agreements since World War II. We could gain another $500 billion annually in national income by agreeing with our trading partners to eliminate all the many remaining barriers to trade and investment worldwide.
The Doha round will not create a trade utopia. The agenda of the round is not nearly as ambitious as it ought to be in lowering global trade barriers. But the failure of the round could lead in these fragile economic times to an unraveling of the world trading system in ways that would surely harm American exports. And the success of the round would surely be a needed spur to the sputtering global economy. The successful conclusion of the Doha round could create more American jobs by achieving some of the vast potential gains from freer trade, and, perhaps most important, could establish the global political momentum for achieving much more.
With Doha behind us, we could then proceed, in concert with other WTO Members, to craft an even more ambitious global trade strategy aimed at maximum job creation for the 21st century. Indeed, whatever the outcome of Doha, we need a much bolder vision for the WTO. The fact is, far too little of what we need to do in trade is even on the Doha agenda.
To achieve the most for American business and workers in the new global economy, the WTO must move one beyond Doha to conclude additional agreements on intellectual property, investment, energy, technical standards, product safety, electronic commerce, green technology, and other critical commercial issues that have not been central to trade talks in the past. The WTO must also confront the global implications of proliferating bilateral and regional trade agreements that threaten to undermine the fundamental rules of non-discrimination that ensure the flow of trade in the world trading system.
All of these market-opening opportunities must be pursued if we hope to maximize the creation of American jobs through exports. This will not be done solely by cheerleading. This must be done if we hope to avoid further disappointing news about U.S. exports.