Trade Saves the Day. Really?
Posted by spaul on 09/17/2008
The Peterson Institute's C. Fred Bergsten was granted a lot of column space in today's Washington Post to make the case that exports are helping the American economy keep its head above water. Fred's entitled to his opinions, but not to his own facts. Some selected nuggets: "The export boom...is generating two million new jobs." It's this type of accounting that gets companies like Enron and AIG into trouble. If you are going to count exports, you must add up imports, as well. The net result? A massive trade deficit remains. $62 billion in July alone; $25 billion of it with China. That means lost jobs. Our trade deficit with China cost the U.S. 366,000 jobs last year. "These jobs pay 15 to 20 percent more than the national average." Maybe so, but jobs displaced due to imports from China pay 4.4 percent more than any jobs gained through exports to China. American workers lost over $19 billion in wages last year because of this. Fred also trumpets a weaker dollar. A weaker dollar is indeed making American exports more competitive in places like the EU, but China and Japan, which continue to undervalue their own currencies in a mercantlist fashion, still have sharply one-sided balances of trade with the U.S. Finally, Fred thinks the way to build on this success is for Congress to pass FTAs with South Korea and Colombia. We disagree. We'd prefer it if Congress passed strong trade enforcement legislation to hold cheating countries like China accountable. This "export boom is saving America" myth is a nice line, but when you look at the overall picture, it's nothing more than a fantasy.
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