Monday, December 13, 2010

Why Not Double Imports or Just Total International Trade Over the Next Five Years to Create Jobs?

Huffington Post -- "Buoyed by strong demand from China and India, the U.S. trade deficit dropped to its lowest level in 9 months, as exports rose to their highest level in two years. These numbers should please the Obama Administration, who've set out to double exports over the next five years to combat high unemployment rates and encourage domestic manufacturers. Analysis by the Economics and Statistics Administration indicate that exports will this year support close to 9.4 million jobs, an increase from a 2009 estimate that put the number at 8.5 million." 

MP: Isn't there an underlying mercantilist, fixed-pie assumption here that exports create jobs, and imports destroy jobs? As the chart above shows, more than half of U.S. imports are inputs (industrial supplies, raw materials and capital goods) that were purchased this year by U.S. firms and will become part of some production process in the U.S. that will help support or create jobs in the U.S.  Why shouldn't we have a goal to double imports over the next five years, or simply to double international trade in general over the next five years (see post below)? 

9 Comments:

At 12/13/2010 2:34 AM, Blogger PeakTrader said...

Will China really surpass the U.S.?

Becoming the world's factory, where half of output is exported, requires massive investment.

Special Report: The Chinese consumer awakens
Dec 9, 2010

"Spending might be sturdy in China, but investment has been off the charts. As a result, consumption was just 35.6 percent of Gross Domestic Product in 2009, from 46.1 percent a decade earlier - and that was helped by a massive government stimulus to counter the global financial crisis.

Still, he doubted China's consumption share would reach the roughly 60 percent rate of the European Union, let alone the 70 percent rate of the United States."

Y = C + I + G + NX

C down, while I, G, and NX way up, or C increased at a much slower rate.

The goal has been to increase G at the expense of C, or government growth at the expense of (private) consumption growth.

 
At 12/13/2010 3:23 AM, Blogger PeakTrader said...

Also, I may add, negative externalities, and relatively small gains-in-trade, from the "growth at any cost" policy aren't taken into account.

 
At 12/13/2010 7:20 AM, Blogger geoih said...

"Y = C + I + G + NX"

Macro-economic voodoo. Adding millions of individuals into meaningless aggrigates and then adding them together is still meaningless.

 
At 12/13/2010 9:10 AM, Blogger juandos said...

The HuffPo?!?! Ha! Ha! What's next? Words of wisdom from Krugman?

It seems to me that liberals have this driving desire to look at everything regarding economics through 'malthusian glasses'...

China has a rising inflation problem driven in part by employees demanding higher pay...

It would seem that the US could potentially fill some of the needs of Chinese citizens (i.e. farm products)...

Also China needs coal!

 
At 12/13/2010 9:30 AM, Blogger Hydra said...

Also, I may add, negative externalities,....

==================================

Why is it that we only consider negative externalities, and assume that positive externalities, when they occur, are free?

 
At 12/13/2010 9:34 AM, Blogger Sean said...

Why do we want to get in the export-led growth game?

When a trade deficit occurs, there is a always a question of how it is to be paid for. When a trade surplus occurs, the nation with the surplus tends not to have that concern.
Plus, export-led growth has worked for all of the other economic "success stories", and so we think it must work for us too.

 
At 12/13/2010 4:54 PM, Blogger PeakTrader said...

Geoih, it seems, you don't believe in addition (i.e. voodoo).

Hydra, do you believe the U.S. should pay for China's social costs?

Sean, hard work does work, even for slaves.

 
At 12/14/2010 12:03 PM, Blogger James said...

more than half of U.S. imports are inputs (industrial supplies, raw materials and capital goods) that were purchased this year by U.S. firms and will become part of some production process in the U.S. that will help support or create jobs in the U.S.

I don’t get this. We lay off those American workers making auto carburetion components and import them instead of making them. Those imports are inputs that are part of the production process that helps support jobs in the U.S.????

I just do not see how this can be. I am filing this beside the “outsourcing creates American jobs” and the 17 percent u6 which occurs with more “job producing” free trade than we have ever had before and the lowest tariffs we have ever had.

 
At 12/15/2010 8:10 AM, Blogger jmt said...

A question: One data point that I don't usually see included in the "import vs. export (or self-manufacture) debate" are the positive externalities of manufacturing. I specifically have in mind the innovation (propelled by an incentive towards efficiency) that can come from being intimately involved in the manufacturing process (which itself is a product of the valuable increased intellectual capital that individuals acquire)?

 

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