There is no Crisis in U.S.Trade

Nobody on the conservative side can understand what is going on with the TPP (Trans-Pacific Partnership) trade bill. It is astounding (a) that the text of it is being kept more secret than a Clinton Foundation contribution and (b) that Congressional Republicans are pressing for fast track status to give the president a free hand in negotiations, presumably because of his demonstrated good faith on immigration, the Iranian Bomb, backing Israel, Affordable Care, and supporting the Muslim Brotherhood.

This legislation will see the light of day when it is passed, so what benefit is there to secrecy before it is passed? If it is to protect negotiating gambits, that is very minor compared to giving domestic constituencies the time and ability to evaluate it.

And there is a critical point here. There is no crisis in U.S. trade. The chart below shows this. It tells a very important story, so stick with me for a few minutes on it.

This is a chart of imports and exports of all goods and services for the U.S. for the last ten years, that is, from 2005 through April of this year (these numbers are reported with a month’s delay). That big swoop down in the data is the Great Recession of 2008 - 2009 due to the home mortgage/derivatives financial crisis.

Don’t rush by this chart. It has a lot of critical information in it. Let’s look at it more closely.

1. First, note that the trendline for exports (the black line through the blue data) is steeper than the trendline for imports (the black line through the orange data). This means that over the last ten years exports have been growing faster than imports. This is a good thing for the country and is not well known or, perhaps, not known at all.

2. Let’s look at the data itself. Take the lower line, the blue data, which is U.S. exports of goods and services. 

  • If you look at the left hand side of the chart, you will see that at the beginning of 2005, we were exporting roughly $100 billion a month of goods and services
  • If you look at the right hand side of the blue data series, although exports have declined at bit in the last few months, still they are roughly at $200 billion a month
  • $200 billion a month now; $100 billion a month in 2005. U.S, exports have doubled in the last 10 years. I bet you were not aware of that. That is a very good performance. That is over 7% growth a year, a very good number at the GDP level.

3. Now take the upper line, the orange data, which is U.S. imports of goods and services.

  • If you look at the left hand side of the chart, you will see that at the beginning of 2005, we were importing roughly $160 billion a month of goods and services.
  • If you look at the right hand side of the orange data series, although imports have declined a bit in the last few months, still they are roughly at $240 billion a month.
  • $240 billion a month now; $160 billion a month in 2005. U.S. imports have grown by 50% in the last 10 years.

4. Given this data, what can we say about the growth of U.S. exports and imports over the last 10 years?

  • Imports of goods and services have grown by 50% over the last 10 years, but exports of goods and services have grown by 100% over the last 10 years. The growth of our exports has been double the growth our imports over the last 10 years!
  • There is nothing “tricky” about this data. This is comprehensive official data. The starting point of 2005 was not an unusual year.

5. Let’s looks at the balance of trade. First 2005.

  • In 2005 we were exporting $100 billion a month of goods and services and importing $160 billion a month of goods and services.
  • Thus, we had a net monthly trade deficit of $100 billion -- $160 billion, or -$60 billion a month. We multiply this by 12 months in a year, and we get an annual trade deficit of -$720 billion. This is a very large number.
  • GDP in 2005 was $13,100 billion. The trade deficit in 2005 of -$750 billion was 5.7% of GDP.

6. Balance of trade in 2015.

  • In 2015 we are exporting $200 billion a month of goods and services and importing $240 billion a month of goods and services.
  • Thus, we have a net monthly trade deficit of $200 billion - $240 billion, or -$40 billion. We multiply this by 12 months a year and we get an annual trade deficit or -$480 billion. This is only two-thirds of our trade deficit in 2005!
  • GDP in 2015 is estimated at $18,000 billion. Estimated trade deficit in 2015 of $480 billion is 2.7% of GDP.

7. Summary Table

Where is the crisis? Where is the need for extraordinary measures in trade? Where is the need for secrecy?

And let’s face it, none of our trading partners are going to implement rules -- no matter what document they sign -- that are going to allow significant amounts of our higher-value-added manufactured goods into their markets. Nevah happen. Yes, they may import more raw materials, agricultural products and some lower-value-added manufactured products, but nothing they don’t themselves need.

But they are not signing up for more competition from us. That is just a fact. You don’t need to be Sigmund Freud to figure it out, although it may help to look at past trade agreements and their results.

We conservatives want a high-wage America, not a low-wage America. We cannot and should not expect free enterprise to be successful if it puts unbearable pressure on working America. The unions are right here. Yes, the work rules are a problem. But let’s not get our eye off the ball.

The TPP is not about work rules but about strip-mining the American economy. God only knows what, if anything, is going though the minds of McConnell and Boehner.