In his January State of the Union Speech, President Obama first committed his administration to the goal of doubling U.S. exports within five years. Mr. Obama said that this will "create two million jobs, about the same number that the U.S. manufacturing sector has shed during this economic downturn." His administration spokesman said just the other day that "the U.S. is on track to hit this export target."
There are three problems with this pledge. First, doubling U.S. exports would create just 10 percent of the 22 million new jobs we need, and yet, combined with multiple new free trade agreements (FTAs), it seems to be the only specific jobs policy coming from the White House. Second, this strategy wrongly overshadows the more critical imperative of 'import substitution'. Third, the first three FTAs being proposed -- with South Korea, Panama and Colombia -- are very poorly negotiated and will cause even more American jobs to be lost overseas.
As the United States Business and Industry Council (USBIC) just concluded:
"the President's decision to limit his trade-related recovery policies to export expansion efforts is too narrow, since the most promising source of the new orders needed by U.S.-based manufacturers and their workers are home market shares that have been lost to imports."And as the economist Clyde Prestowitz has determined, with plenty of supporting evidence, "the more free trade agreements the U.S. has entered into, the bigger America's trade imbalances have become and the less our allies have seemed to like or pay attention to us".
To appreciate why doubling U.S. exports and rushing into new FTAs isn't at all the combined overall trade and jobs policy we require as a nation, all we need to do is look carefully at the pending FTA with South Korea (the ROK), the largest of the three pending FTAs, and do so against the backdrop of the dismal results of NAFTA and China's entry into the WTO.
The South Korea FTA
The Obama administration says that it has "made new progress" on the ROK FTA first negotiated by the Bush administration in 2007 and is now poised to advance it. Unless, however, "new progress" means a substantial renegotiation of the simply awful version we have in front of us, then the Obama administration will be giving a major unwarranted victory to America's multinational corporations and Korean workers at the expense of America's workers. And assuredly down the road, we will see results that track the screw-ups which NAFTA and China-WTO each became, differing only in relative size.
Polls in Korea have shown that South Koreans widely believe that their negotiators bested the U.S. in the 2007 and later negotiations -- and they absolutely did, especially in automobiles. The FTA would lock in Hyundai Motor Corp.'s dominance of the South Korea market while locking out American manufactured vehicles. In beef, the U.S. would largely be excluded from exporting all but young carcasses. South Korea currently exports each year to the U.S. about $40 billion of goods and services while we send only $29 billion of our goods to it, and with this already large imbalance it is complete poppycock for the White House to now threaten American workers (and Congress) by saying that without the ROK FTA "we stand to lose about $30 billion in [U.S.] exports".
As Mr. Prestowitz has noted, America's trade problems with Korea stem from "its undervalued currency, the inability of its anti-trust regime to discipline the predatory business practices of its giant chaebol whose control of distribution can impede entry of foreign products into the market, the unwillingness of its courts to enforce intellectual property rights for foreign companies, and deeply rooted 'buy Korea' attitudes." The Bush-cum-Obama ROK FTA doesn't address a single one of these issues.
NAFTA and China's Entry Into the WTO
In pushing forward the South Korea, Panama and Colombia FTAs, the administration is completely overlooking what happens when FTAs are not fair and balanced and don't provide clear and measurable benefits for American workers.
When NAFTA was proposed in 1993, five promises were made about the positive effects that were certain to come to the U.S., not one of which has been kept. The two 'biggies,' of course, were that (1) "NAFTA will generate a U.S. trade surplus with Mexico of around $100 billion between the years 2000 and 2010" -- in fact, our trade deficit with Mexico for these ten years will be around $527 billion; and (2) "NAFTA will create many new high-wage jobs in the United States" -- instead, at least two million American workers have already lost their jobs.
Two recent examples confirm this. First, just this month, we watched Whirlpool completely shut down its once 10,000-worker plant in Evansville, Indiana and move the last remaining operations and jobs to Mexico -- when the workers were asked who's to blame, they said President Bill Clinton for having negotiated NAFTA. Second, and of even greater impact, we've learned, also this month, that despite the Obama administration spending $80 billion last year propping up General Motors and Chrysler, the Big Three U.S. auto companies, including Ford, are now intending to put most of their new jobs and plant capacity in Mexico, with NAFTA's imbalances again 'setting the table.'
But even more imbalanced has been China's entry into the WTO, which occurred a decade ago. Back then, President Clinton promised that this would be "a hundred-to-nothing deal for America when it comes to the economic consequences" -- instead, our overall trade deficit with China has increased 173 percent since 2000, China is now responsible for around 75 percent of our overall annual trade deficit in manufactured goods, and we've lost more than one-third of our manufacturing jobs, mostly to China (and Mexico).
President Obama is not wrong to want to double U.S. exports -- with every $1 billion increase in the U.S. trade deficit 10,000 to 20,000 American jobs are lost -- but this achievement would, in his words, create only two million new jobs and then only over five years, when we need to create 22 million new jobs now.
There are the five things the President needs to do to bring this all together:
1. He needs to assert that job creation is the number one objective of his administration's economic policies. This means, as many of us have been demanding for years, outspokenly 'valuing manufacturing' and having a domestic manufacturing policy for America that is as jobs-centric and mercantilist as the policies of our major trading partners.
2. He then needs to get his entire administration committed to and acting in support of his exports and trade agenda. Right now, this isn't even close to being the case. For example,
(a) Larry Summers, chairman of his National Economic Council, continues to say that a job is a job, the loss of manufacturing jobs and goods can be offset by the export of movies and management consulting and legal services, and the U.S. economy is strong when GDP grows no matter the real unemployment rate and the magnitude of our trade deficit, all of which is complete BS;
(b) James McNerney, chairman of the President's Export Council (and CEO of Boeing), says that Mr. Obama's export goals won't be met unless the U.S. finalizes those job-eliminating FTAs with South Korea, Colombia and Panama while confidentially telling Boeing's suppliers that they should begin making parts in Mexico; and
(c) The U.S. Export-Import Bank denied, just last week, loan guarantees to an Indian utility building a power plant poised to buy $600 million worth of US-manufactured mining equipment from Bucyrus International, a South Milwaukee-based company, solely because the project's "carbon footprint" was deemed too large, even though there are no objective guidelines by which the Bank could make this judgment.
3. He needs to shift our global trade focus to fair and balanced "bilateral and regional trade agreements," as the other members of the G-8 just acknowledged in Toronto, which means dropping his commitment to finishing the nine-year-old Doha round of global trade talks, which frankly he should have abandoned the first day of his presidency. In the process, because the proposed FTAs with South Korea, Colombia and Panama are definitely not fair and balanced, they need to be radically amended or we need to start each negotiation over again.
4. He especially needs to level the trade playing field between the U.S. and China, absent which there is simply no way to double U.S. exports, balance our trade, and create those millions of new jobs. The actions needed remain obvious:
(a) Balance out China's unfair trade advantages gained through its abysmally low direct labor costs and lack of meaningful environmental and labor standards; and
(b) With tariffs and levies (and a baseball bat if need be) go after China's currency manipulation, its regulations that block non-Chinese firms from selling their products to Chinese government agencies, its technical standards that prevent or at least greatly hinder the Chinese government and businesses from buying non-Chinese goods, and its rules that force Western companies to give up technological secrets in exchange for access to China's markets.
5. He needs to emphasize the primary (not secondary) role of responsible 'big business' in creating the bulk of the millions of new jobs we need and stop saying, as he did on June 11, that, "Government can't create private-sector jobs, but it can create the conditions for small businesses...to grow and hire more people." This fixation with small businesses started in the Reagan administration, but that was only after what we thought was a largely non-erodible manufacturing foundation had been established with 20 percent of America's workers in, and 20 percent of GDP coming from, manufacturing. With 50,000 factories having closed in just the last decade, however, the corresponding figure today in each category is 11 percent, and no matter what the theory of "comparative advantage" says, this nearly halving of our industrial base, especially our big-company manufacturing base, means that America, with its very large population, wide geography and great diversity, is destined for economic mediocrity unless we give large American corporations policies and incentives that generally mirror those available to them overseas.
Last Friday, President Obama said, "Make no mistake, we are headed in the right direction [even as] we continue to fight headwinds from volatile global markets." In fact, we're not even close to making sufficient progress in reemploying America, and those "headwinds" are actually powerful turbines pointed in our faces by China and Mexico (and India). I can only hope that the continuing depressing trade and real unemployment numbers will wake up President Obama and his economic team to the reality that if they want to reach their export and trade goals and materially reduce U.S. unemployment, they need to materially change course.
So, Mr. President, take the five actions outlined above and there will be 'prosperity throughout the land', as they say. Don't take them, however, and a double dip recession will look like a God-send compared to the extended jobless recovery that will hang around our economy like the plague for years to come.
Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.
Send all your eco-inquiries to Jennifer Grayson at eco.etiquette@gmail.com. Questions may be edited for length and clarity. Somebody said to me that carbon footprint isn't...
But for Obama to promise to double exports as a way of creating jobs is truly bizarre -- and he forgets to mention that doubling exports would actually raise prices for US consumers!
If they’ve, it’s a secret as confirmed by their public posturing. Maybe, it’s some sort of guarded brinkmanship in play but I shan’t place money betting on such intent. Barring radical change in direction, the US economy is heading for greater straits for want of resolve and committed leadership to bring equity and fairness in global economic activities. Granted, they’re not in control of every aspect globally, but fear not the US possesses the capacity to demand and effect change, if so inclined. And, by that I’m not advocating American jingoistic solutions.
These scathing thoughts and solutions rebuff Barack Obama, his advisors, and their misguided and pitiful economic programs being proffered as American economic recovery. Four decades ago, Robert Reich and Ira Magaziner granted an eye opening analysis to the fraud underlying exporting American industries and jobs overseas then. Evidently, this administration has yet to learn those little dirty business secrets. Then again, are we talking novices running the show? I say no to that proposition whilst arguing they’re marching to the beat of a silent drummer for whom the malfunctioning global paradigm is working to their favor.
(1) That they are "trade."
(2) That they are "free."
(3) That anyone actually needs them.
The wet-dream fantasy of a "free trade agreement" is that we ("the privileged ones") can lock "the rest of them" into a race to the bottom, competing to feed us whatever we want to eat and to do so at the lowest possible price. We simply generate our Almighty Dollars, literally right out of thin air, to pay for whatever we want.
Poppycock.
"Trade" is, and is only, about "things." Not dollars. Not currency-units of any kind. Although trade can be denominated in dollars (e.g. "trade deficits"), trade never consists of currency.
Trade consists of: "Things."
Countries must produce. In fact, they must be capable of producing almost everything that they require, using internal domestic sources. "International trade" must always be in direct competition to "domestic trade."
"The ability to produce" is like physical fitness: it must be acquired, then it must be sustained. If you stop self-production, you quickly become flabby, and guess what happens next: you die.
Our nation has quite-literally swallowed Rumpelstiltskin's kool-aid in prodigious quantities, transforming Charles Atlas into a 97-pound weakling in just a couple of generations. The poison-pill was, and is, "bribery."
Our only option is to go back to what our forefathers knew: you must be strong yourself to help your neighbor.
This admin has made it clear that America needs to be taken down several notches.
Our arrogrance is a real global problem, a hinderence.
Other than hyperbole, what is "explosion of green jobs in this country"?
Millions of us building windmills, installing solar panels?/ What??
fear not, we will soon be standing and working together in the rice fields. And you WILL like it.
What is wrong with Americans being employed in the fields of engineering and design to bring us better types of engines to power our cars, or building the infrastructure we need for mass transit, or upgrading homes and buildings to be more energy efficient?
And what is wrong with employing Americans to build all of the things that prosperous Americans will buy when the economy is good?
Please, explain to me what is wrong with that. I'd really like to know!
How can Obama be so pathetic when it comes to the economy? Is it lack of interest, ignorance or both?
I do believe, however, that we will not see relief under President Obama. The reason is that Obama really has been absorbed into the culture in Washington. Every which way you turn you see it. Finreg, HCR, War in the East, etc.
I think the icon that says it best is the picture of McCain, Biden and Joe Lieberman in the green zone in Iraq on the 4th of July.
How long have these people been in the beltway bubble, collectively? Biden is the youngest congressman every elected, I believe. McCain wasn't born in an actual country. He was born in a "zone", the Panama Canal Zone. He got his first paycheck from Uncle Sam at 18 and never stopped. Joe Lieberman is so enamored of the beltway game that he stabbed every friend in the back to run as an independent when his own State dems told him it was time to come home.
But these guys have no home. Their home is the beltway, K Street, the Green Zone.
No picnic with Aunt Mabel and the folks back home on the 4th for these guys. They wouldn't know what to say.
It seems the forest is consistently missed for the trees as the White House examines the poll numbers. Like high priests examining tea leaves, Obama's oblivious advisors stand by while the swirling mists absorb the simple fact that anger with the administration has far less to to with what is being done than with the fact that everything done is a half measure. Assertiveness is a distant campaign memory in the minds of those who voted for him, vascillation a constant while Machiavellian knotheads Rahm Emanuel try to constantly water down expectations for the sake of what is possible. November looms.
It really is a no-brainer. I just saw the charts on US unemployment on another Huffpost article. What do you think happens when a whole generation of young people can't find jobs? Our young people will riot in the streets.
It sure would be nice if a few others would wake up and smell the coffee, but I suppose that's too much to ask of the average apathetic American.
The public was sold on the FTA's with noble sounding speeches, only to get screwed again.
"Free Trade Agreements" just gives them free legal license to sell us out, handing our jobs and industries over to foreigners for a quick profit by the executives.
The executives of America have sold out the American people, and are therefore treasonous.
The People of America need to Unite to take back our country, and cleanse ourselves of the traitors in our midst!
The way to come out ahead in the next century is by anticipating and becoming the world leader in the next critical industry: Green technology. After WWII, the Japanese became an economic powerhouse by focussing their entire country on developing and leading the world in technological advancements.
We need to similarly focus our energies on becoming the leader in development of alternative energy sources, green technology, while ending our unsustainable addiction to oil. That is how the US will get back on top of the global economy. Not by trying to increase exports of American goods which are more expensive than ones made elsewhere because we have to pay our workers a decent amount.
"There is no way we can ever compete in the GLOBAL economy with countries that pay workers 25 cents a day. Increasing exports is NOT the answer."
While investing in green technology is a good idea, the fact is that even if the US were to finally come up with an industrial policy and catch up in green technology development, the production would still be offshored as long as we're willing to play the globalization race-to-the-bottom living standards game. The only way to reverse the decline in US living standards is stop the game of forcing workers everywhere to compete to see who will work for the least while the capitalists get ever richer. We have to get back to employing workers in the US to make products in the US to sell the consumers in the US. Workers who pay taxes in the US on real wages. If the US government can't get interested in defending the living standard of workers/voters in the US - the people whose interests they were elected to serve - instead of the interests of the people lining their pockets, then we need a different government.
The key to a comprehensive energy policy and a robust economy in the next century is not only in spending vast amounts on research and development, but in education of the American workforce.
The reason that production of these technologies wont be offshored is because the technologies will be extremely complicated and will require specialized training to produce. This is where the American education system comes in. We have to start increasing the quality of an American education so that our workforce will be able to step in and take over production of these technologies at the bottom.
At the top, currently, the best and brightest are being funnelled into high finance, which is where the money is. But because the world of credit default swaps and derivatives trading is just a high-priced shell game, we are wasting our best talent while really providing no value to the global economy. If we properly incentivize the best students to go into energy technology, then we can start to compete again by building our economy around something that will be in great demand, rather than the financial equivalent of a financial casino full of bubbles and busts.