Since it will be months at best till a new trade agreement comes before Congress, trade policy has almost disappeared as a subject for mainstream media coverage and commentary. More’s the pity, since the details of the latest set of U.S. Government trade figures strongly indicate that President Obama keeps missing a great opportunity to energize the still-phlegmatic American recovery. His key mistake: emphasizing export growth.
Thanks to the U.S. International Trade Commission’s terrific interactive trade flow database, anyone wonky enough to want to play with it can see why restricting imports is a much better bet for faster U.S. growth – and therefore job creation.
The proverbial view from 30,000 feet provides support for the export focus – and the related view that the strong U.S. dollar lately is inflicting the most damage on that side of the trade ledger. For these data, let’s use the Census figures from that bureau’s latest monthly report on American exports and imports. And let’s zero in on manufacturing, since oil trade has almost nothing to do with trade policy decisions, and since the prices of raw materials have been so depressed in recent months. Those price changes dramatically influence detailed trade data for these products, because such figures don’t factor in inflation or disinflation.
The Census statistics make clear that, from the first six months of 2014 through the first six months of 2015, U.S. manufactures imports were indeed up – by 2.85 percent. But exports of industrial goods dropped by a considerably greater 4.61 percent. In other words, score one for the export-oriented. A closer look, however, reveals the first cracks in the case for emphasizing overseas sales: Because import flows are so much greater, their increase amounted to about $26.5 billion, while the export decrease totaled only about $17 billion.
And the further down you drill, the better import curbs look. Consider this exercise. I looked at the 2014-15 trade flows and balances for the 20 categories of manufactured goods that produced the biggest export numbers during that period. Not surprisingly, they include major industries like aerospace, semiconductors, organic chemicals, plastics and resins, pharmaceutical ingredients, construction equipment, telecommunications gear, and surgical and medical equipment. Perhaps somewhat more surprisingly, this group also includes autos, auto parts, computer parts, and steel.
Over the past year, ten of these sectors saw their trade balances worsen, and ten saw them improve. Remember that when trade balances get better (whether via expanding surpluses or shrinking deficits) America’s growth speeds up. When surpluses decrease or deficits increase, growth slows down. More to that exports vs imports point, exports fell year-on-year for 12 of these 20 sectors and rose for eight, while imports rose for 15 and fell for five. That alone is a tantalizing sign that even America’s biggest export winners also face powerful foreign competition for their home market. At least as revealing, this competition has persisted even though U.S. growth has been weak, and should be at least slowing the rise of imports.
Even more interesting, of the 15 cases in which imports rose, they increased by double-digit percentages in four instances, and by near-double digits in three more. Yet of the 12 cases in which exports decreased, only three did so by double-digit percentages and only one other was near that ballpark. These results clearly point to stronger import flows.
It’s true that, as suggested above, because imports so greatly exceed exports in America’s manufacturing trade, looking at percentage moves can mislead. In fact, of these 20 leading export winners, 13 were still running trade deficits as of the mid-point of this year. (More encouragingly, nine of these gaps had narrowed.) But that statistical reality seems trumped (no pun intended) by a truth that even trade and export cheerleaders will always be hard-pressed to deny even in the best of economic times: The United States will never be able to open foreign markets nearly as easily as it can control its own.