Increasing Exports = New Jobs

By: Jerry Jasinowski
Issue: Spring 2010

Public opinion polls – and recent election returns – strongly suggest that Americans are more concerned about jobs than health care reform. Unfortunately, it’s hard to see anything on the horizon that might incite strong job creation. The dot-com bubble drove growth in the ’90s, and then the real estate bubble took over for a while. Now we’re cruising on stimulus money. But the stimulus is about to run out.
American consumers, at least those who still have jobs, are frightened of the future and reluctant to spend money on anything beyond the bare necessities. Business will not make substantial investments — or start hiring — until it sees clear prospects for growth. Meanwhile, millions are unemployed or under-employed, the federal budget is deep in the red, Congress is tied up in knots and the Obama Administration seems to have lost the initiative.
I have been following economic trends for many years, but I have never seen a situation quite like this. The Democrats want more spending and the Republicans want more tax cuts, but no one puts it together in a way that makes sense. Business as usual will not get us out of this jam. The world is changing and we have to change with it or be pushed aside by more resilient nations. We need a serious long-term growth plan that’s not based on bubbles or government largesse, and it must be significantly different from what we’ve done in the past.
Any real job creation strategy must combine the basics of cutting edge technology with human and physical capital in innovative ways to increase productivity and growth. Increasing our exports should be in the forefront of any job-creating growth strategy. Exporting world quality products, backed with high- quality service, can and will foster a virtuous cycle of rising profits, business investment and job creation.
There is robust growth in the world, but it isn’t in the United States. A full 95 percent of the world’s consumers do not live here. China, India and Brazil are growing rapidly as hundreds of millions of aspiring consumers forge their way into the middle class. We have much to offer them in quality goods and services, but we make meager efforts to do so. We’re the world’s third largest exporter, but as the world’s largest economy, we should be number one.
The discouraging reality is that our export intensity — the proportion of our production exported overseas — is the lowest of the world’s largest 15 economies. This is the core of our problem — complacent dependence on our domestic market because it is the world’s largest. To get back on a growth path, we must pursue exports as a national priority, just as the Chinese and Germans do. Exporting means wealth pouring into our country, not out of it. Exporting is one sure way to create good jobs for our legions of unemployed.
To step up exporting, we need a serious commitment to manufacturing which accounts for about two-thirds of our exports. Many of our problems, in particular the loss of almost 6 million manufacturing jobs over the last decade, are the result of our failure to make manufacturing a national priority. We are still the world’s largest manufacturing nation, but that status is fragile. In particular, we need to focus on encouraging small and medium-sized manufacturers to export because they are the source of most new jobs.
We should begin our export campaign by turning a deaf ear to ill-considered criticism of Free Trade Agreements (FTAs). FTAs gain us equal access to foreign markets. In fact, we actually have a trade surplus in manufactured goods with FTA nations. FTAs are part of the solution, not the problem.
China, on the other hand, is a big part of the problem. China takes advantage of our manufacturing by manipulating the value of its currency. We let them get away with it because our consumers benefit from cheap Chinese goods, and also our government needs China’s money to fund its profligacy — $1.5 trillion more in red ink this fiscal year. But we’ve made a devil’s bargain, sacrificing millions of jobs and compromising our economic future for temporary benefit. Meanwhile, China’s wanton disregard of international trade and technology rules is stoking worldwide resentment that could lead to a catastrophic outbreak of protectionism. China is now a major world economic power and, as such, must learn to play by the rules.
A national commitment to exporting would also offer an excellent opportunity to overhaul our tax code, which is a mess. The ideal tax system should be designed to encourage and reward productive investment. Ours is designed to encourage and reward political contributions. There is talk in Congress and academic circles about shifting to a value-added tax system like at least 130 other nations have. A significant movement has developed around a specific proposal described at www.fairtax.org.
There are other key pieces of a job creating growth strategy – technology, energy, health care, education and training, infrastructure and investment capital – to name a few. If we are honest with ourselves, we know what needs to be done. The business community would welcome a national commitment to growth and expanding exports. In the present crisis, President Obama and Congress have an excellent opportunity to step up and make it happen.

“To step up exporting, we need a serious commitment to manufacturing which accounts for about two-thirds of our exports.”

Jerry Jasinowski, an economist and author, served as president of the National Association of Manufacturers and later The Manufacturing Institute.udy McCauley is director of the U.S. Small Business Administration’s West Virginia District Office in Clarksburg. For additional information on SBA, contact the West Virginia District Office at (304) 623-5631, via email at wvinfo@sba.gov or visit the office’s Web site at www.sba.gov/wv.