Mark Thoma likes to critique Robert Samuelson when he gets a little goofy but this time Mark is highlighting a nice discussion from Mr. Samuelson (so I’ll resist my usual “no relationship to Paul” dig):
We may be about to shoot ourselves in the foot – or maybe the chest – on trade. In the name of “fair trade,” we may punish our own exporters. In 2005, worldwide exports exceeded $10 trillion. Since 1980, they’ve more than tripled while the overall global economy doubled. Like it or not, massive international flows of goods and services (aka “globalization”) underpin all modern economies. We can accept this reality and try to benefit from it. Or we can rail against it. We seem to be edging toward railing … Faster economic growth in the United States than in many of our major trading partners has stunted our exports and increased our imports. Likewise, the dollar’s role as the main global currency has kept its exchange rate high. Companies, individuals and governments hold onto dollars rather than selling. This makes U.S. exports more expensive and imports cheaper. To be sure, that puts U.S. factory workers and farmers at a disadvantage on world markets. The disadvantage is compounded when some countries (China) keep their currencies artificially undervalued. But there are also larger truths. One is that China’s surging exports have (so far) come mostly at the expense of other Asian countries. Another truth is that U.S. jobs are destroyed for many reasons – new domestic competition, new technologies, changing consumer tastes, the business cycle. A remarkable statistic: Every three months, 7 million to 8 million U.S. jobs disappear, and roughly an equal or greater number are created. Trade is a relatively minor factor in job loss. It is, however, an easy scapegoat. It enables critics to blame foreigners and suggest a solution – restrict trade. Globalization becomes a convenient explanation for many economic discontents, from job insecurity to squeezed living standards. Hence, trade obstructionism.
Some of us who advocate free trade recognize that the job market is not necessarily that great for everyone and we also recognize the fact that income inequality has increased. Thankfully Mr. Samuelson does not blame free trade for these problems.
Think about the fact that worldwide exports exceeded $10 trillion last year – which suggests someone also imported $10 trillion. While U.S. imports represented 20% of all imports, our exports were only 13% of worldwide exports. Mr. Samuelson has a nice list of why the dollar is overvalued, which makes our exports less competitive. All he left for me to add is the elephant in the room – those Federal deficits created by the spend and borrow policies heralded by a Republican Administration and Congress. I guess that’s why the GOP mascot is an elephant. Here’s hoping Speaker Pelosi spends more time cleaning up Bush’s and Hastert’s fiscal mess than she does pushing trade obstructionism.