Trade Deficit Inaction Assures A Jobless Non-Recovery

Isaiah J. Poole

The Commerce Department on Wednesday is expected to release new international trade figures that will underscore how critical it is that Congress and the White House move forward with an aggressive “Make It In America” program combined with a rejection of the right-wing-driven trade agreements of the past.

We already learned the key headline this morning with the news that China’s surplus with the United States reached an 18-month high. That is despite China’s recent promises that it would revalue its currency to begin to chip away at the 40 percent unfair cost advantage Chinese imports have over American goods because of of Chinese undervaluation of its currency.

That news brought a harsh reaction from Scott Paul at the Alliance for American Manufacturing: “China’s expanding trade surplus tells us two things. First, China is back to its same old mercantilist tricks. Second, China’s currency announcement was a sham.”

As Peter Morici, a former chief economist at the International Trade Commission and professor at the Smith School of Business at the University of Maryland, reminds us in an article today, this matters because outsize trade deficits make it that much harder for the country to recover from the Great Recession.

The trade deficit is a huge drag on economic recovery and jobs creation.

In the second quarter overall, the imports grew so much more rapidly than exports that the growing trade gap subtracted 2.8 percent from growth.

But for the increase in the trade gap, GDP would have grown 5.2 percent instead of 2.4 percent. At that pace, unemployment would fall by 2013 to less than 5 percent, the level accomplished the two years prior to the Great Recession.

Taking a tougher stance with China and writing future trade agreements in a way that better balances the interests of American workers and those of our trading partners has to be a core part of the job-creation discussion this fall, both in Congress and on the campaign trail.

“A September hearing is scheduled in the House of Representatives on China’s currency manipulation,” Paul notes in his statement. “But that can only be a first step. Before Congress adjourns, it must also pass legislation to assure a level playing field for American workers and businesses and to hold China accountable for its currency manipulation. Otherwise, the “Make It in America” agenda will never fulfill its promise. We look forward to working with the House and Senate to pass China currency legislation that will put Americans back to work.”

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