The new figures on (stalled out) U.S. economic growth for the first quarter of this year make clear that more points on trade and this feeble American recovery need to be made. Mainly, they greatly strengthen the case so studiously ignored by President Obama and other American trade cheerleaders that trade policies have been major drags on this historically weak recovery.
Though these figures aren’t broken out, it’s easy to calculate from these (preliminary) gross domestic product (GDP) figures a new set of data showing how miserably U.S. trade policy has failed the economy – the merchandise (goods) deficit as a share of the economy and how it’s changed in recent years.
Adjusted for inflation, during the first quarter of 2015, this number reached 4.35 percent – or $708.7 billion. That absolute number is the highest since the first quarter of 2008, right after the last recession technically began (when it was $738.3 billion), and the first time since then that the number had exceeded $700 billion.
More important, as a share of real GDP, it’s the biggest number since the third quarter of 2010 (4.38 percent). So not only is this portion of the overall trade deficit (which strips out services), growing in absolute terms. It’s growing considerably faster than the economy overall. Indeed, during that third quarter of 2010, the economy expanded at an annual inflation-adjusted rate of 2.70 percent. Growth was less than one-tenth of that in the first quarter of this year (0.25 percent).
But it gets worse! For faithful readers will recognize that this goods deficit includes oil – where thanks to the domestic energy production revolution, America’s trade flows have performed stunningly wereal ll. We have to wait till next Tuesday to get the first quarter figures for the non-oil goods deficit, but the latest data show that from that third quarter of 2010 to the fourth quarter of 2014, the inflation-adjusted oil trade shortfall plunged from $201.76 billion (on an annualized basis) to $112.19 billion.
Of course that remaining non-oil goods deficit is the part of the trade balance that’s most heavily affected by trade policies and deals – like the Pacific Rim trade treaty (TPP) President Obama is pursuing. And as I’ve reminded, when the trade deficit worsens, economic growth is slowed.
I’d like to think that the president and most of his trade policy supporters in the think tank world and the media simply don’t know this (which makes them pretty dubious authorities on the subject). But when I hear them repeat the now-popular mantra that it’s trade itself (or “globalization”) that have been pressuring American jobs and wages, not trade agreements, I have to wonder whether there’s actually a cover-up going on – and if the wool can be kept over Congress’ eyes as it debates the TPP, along with fast track legislation aimed at speeding its way to approval.