Exports and Jobs

Mar 24, 2010

This article, in the Washington Post today with the rather distressing headline “Obama’s export plan won’t necessarily create jobs,” opens with:

The Obama administration’s effort to boost employment by promoting U.S. exports may be undercut as business owners find ways to increase production without new hiring and as trade disputes threaten to crimp American sales abroad.

And continues on the first point with:

...economists, business officials and others say that companies emerging from the recession may have ways to meet new export orders without adding new employees -- by accelerating underused production lines, restoring full workweeks to employees or improving worker productivity, for example.

While orders are up, demand is low for many industries. On March 15, the Federal Reserve reported: “Capacity utilization for total industry moved up 0.2 percentage point to 72.7 percent, a rate 7.9 percentage points below its average from 1972 to 2009.”  Until factory orders pick up and capacity utilization reaches a level similar to that historical average near 80 percent, hiring won’t take off.

What’s the solution? U.S. industry needs customers, and it so happens that 95 percent of the world’s consumers lie outside the United States. Moreover, 87 percent of the world’s economic growth over the next five years will take place outside the United States, according to the IMF, and 73 percent of global consumption this year will take place outside the United States, according to J.P. Morgan.

In other words, if you’re looking for customers, look abroad.

More from the article on the second point from the lead:

Without action on China’s exchange rate or the negotiation of more open markets in countries such as Brazil and South Korea, some analysts argue, exports are not likely to grow as fast as Obama hopes... The government of Brazil recently proposed a broad set of punitive tariffs against U.S. goods in response to a long-running disagreement over the subsidies paid to American cotton growers.

So yes, we need to resolve outstanding trade disputes so that everyone is playing fairly; and we need to negotiate more trade agreements and pass the ones we have already negotiated in order to open more markets. All of this is hard work, and the article is correct in showing we have a long way to go. Those two things don’t detract from the worthiness of the goal or the necessity of achieving it. It’s time to roll up our sleeves and get started.

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