In his State of the Union speech, President Obama vowed to double U.S. exports in five years to (altogether now) “create jobs.”
Exports are dandy, and they do support higher-paying jobs, but the president’s pledge was unrealistic and raises false hopes that it will make any dent in the unemployment rate.
U.S. exports have not doubled in dollar terms during a five-year period since the inflation-plagued 1970s, not exactly a golden era for the U.S. economy. In real terms, according to the U.S. Bureau of Economic Analysis, exports have not come close to doubling during any five-year stretch in the past 40 years. The fastest growth in inflation-adjusted exports came in the second half of the 1980s, when they grew by two-thirds from 1985 to 1990. Other periods of robust growth were the mid-1990s, and during the second term of George W. Bush, when five-year export growth approached 50 percent.
Export growth is certainly enhanced by a weaker dollar and lower trade barriers abroad, but the primary driver of export growth is rising GDP and demand abroad, and that is something outside even this president’s direct control. The key to reducing U.S. unemployment is not primarily selling more to growing markets abroad, but selling more in a robustly growing market at home.
Other Obama policies will actually make it more difficult to achieve his export pledge. The president renewed his misguided pledge last night to raise taxes on U.S. multinational companies that “ship jobs overseas.” Yet as I pointed out in a Free Trade Bulletin last year, U.S.-owned affiliates in other countries sold $4 trillion worth of U.S. branded goods and services in 2006. A large chunk of our exports go to those affiliates to help them make their final products for sale. Forcing U.S. firms to cut back their foreign operations will douse an important source of demand for U.S. exports.
The only major foreign market that has recently doubled its demand for U.S. exports in a five-year span is China. Yet President Obama has needlessly antagonized potential customers in our fourth-largest export market by imposing tariffs on Chinese tire imports and threatening other trade-reducing actions.
We can best promote more open markets abroad by setting a good example ourselves.