How to create jobs? Reduce the trade deficit.
The Alliance for American Manufacturing (AAM) today praised a new report by the Economic Policy Institute (EPI) that sees trade deficit reduction as a key step for U.S. job growth. The study suggests that eliminating currency manipulation by trading partners, and investing in a series of coordinated manufacturing policies, could create between 2.2 million and 4.7 million U.S. jobs. Reducing the trade deficit could also lead to a manufacturing recovery, particularly in industrial states like Ohio.
“This report shows that Congress is obsessed with the wrong deficit,” said AAM President Scott Paul. “To grow jobs and boost the economy, we must eliminate the trade deficit. Ending currency manipulation will get us part of the way there, but we also need a smart manufacturing policy, one that focuses on innovation, public investment, skills, and trade enforcement.”
According to the report, the international U.S. goods trade deficit could be reduced by between $190 billion and $400 billion over the course of three years through elimination of currency manipulation on the part of America’s trading partners. Such a reduction in the trade deficit could reduce the national unemployment rate by between 1.0 and 2.1 percent, and create 620,000 to 1.3 million manufacturing jobs.
In addition, such a reduction in the trade deficit could shrink the federal budget deficit by between $78.8 billion and $165.8 billion as growth in output expands tax receipts and reduces safety net payments. These reductions would continue as long as the trade balance remained stable.
Currency manipulation is only one of many constraints on manufacturing job growth. Paul says that other countries’ dumping practices, along with insufficient U.S. investment in infrastructure and other factors have also been barriers to the recovery of U.S. manufacturing.
“Eliminating our trade deficit would be an incredible shot in the arm for the U.S. economy,” said Paul. “We are pleased the EPI report sheds light on this overlooked deficit. We commend Sen. Sherrod Brown for his leadership in working to grow manufacturing jobs in Ohio and the rest of the nation, and we look forward to working with him to enact common-sense solutions.”
AAM has called for the implementation of a national manufacturing strategy, and Paul says the EPI report will add urgency to calls for a manufacturing recovery.
Said Paul, “With 7.9 percent unemployment and manufacturing jobs growth stalled, we need action, not talk. Solving our trade deficit must take precedence.”
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