Trade Deficit With Korea Soaring

Clyde Prestowitz, Foreign Policy As I soak up the rays here in Maui, I'm mellowing out and becoming more aware of the humor behind the headlines. Here are just a few recent examples. Driving back from the beach yesterday, I was listening to NPR when I happened to recognize the dulcet Irish tones of none other than Tom Donohue, the CEO of the U.S. Chamber of Commerce. He was talking about the truly awful jobs -- or perhaps I should say "no Jobs" -- numbers released by the Labor Department last week and offering his and the Chamber's views on what the government ought to be doing to help create jobs. His top item was for Congress to pass and the president to sign the proposed Free Trade Agreement (FTA) with South Korea. Never mind that the deal opens the U.S. market far more than the South Korean market, that the U.S. trade deficit with South Korea is soaring, that even if U.S. exports to South Korea doubled with absolutely no increase in U.S. imports from South Korea, the U.S. unemployment rate would still be about 9 percent, and that the International Trade Commission has estimated that the FTA with Korea would increase the U.S. trade deficit. As I thought about that I wondered if maybe Tom had swapped jobs while I was away and had become CEO of the Korean Chamber of Commerce. Speaking of trade, the numbers announced yesterday showed that the U.S. deficit jumped over 15 percent in May to $50.2 billion. This, mind you, is at a time when the U.S. economic recovery is stalling badly and virtually no jobs are being created in the U.S. economy. Can you imagine what that number would be if we really had a recovery. I mean, when your trade deficit is growing at 15 percent in the midst of an economic stagnation you have to understand that you are in trouble on the jobs/standard of living front. But here's the really interesting twist. The Wall Street Journal reported that one "bright spot" in the trade report was imports of capital goods such as computers, semiconductors, and industrial machines which were up over 13 percent from last year. Keep in mind that these are the high tech kinds of equipment at the production of which the United State is supposed to have a comparative advantage, yet imports are soaring. But the good news, said the Journal, is that "companies may not be hiring much but they're willing to make commitments when it comes to capital equipment." So three cheers for no hiring and big commitments to capital equipment imports? This tells us a lot about why the jobs numbers were so crummy. One of the funniest analyses came from the National Association of Manufacturers (NAM). According to NAM Vice President Frank Vargo, manufactured goods exports slipped by one percent in May, but still tied the record $95.8 billion set in March, seasonally adjusted. So I guess down really means up or at least level. Of course, imports of manufactured goods rose by three percent. So record or no record for exports, the trade deficit in manufactured goods increased to $42 billion. Then Vargo added the piece de resistance: "Those who are concerned about the US trade deficit need to recognize that our trade problem is with countries that have not entered into agreements which will allow US exports to them to increase faster. This highlights the need for more trade agreements to lower barriers to US exports to more countries." Hmm. Frank, you really think a nice FTA with Japan or China would turn those numbers around? Oh yeah, let me not forget the letter released by 470 executives including the CEOs of Alcoa, DuPont, Citigroup, and Proctor and Gamble. It called on the president and the Congress to raise the debt ceiling. Of course, the president and the Congress have both already committed to raising the debt ceiling. The issue is how. The executives didn't seem to have anything to offer in that regard. I guess it would have been too much to expect them to offer to actually pay some corporate taxes. The interesting thing is that out here in Maui I can see very concretely where that tax loophole money goes. The Kahului airport is full of fancy corporate jets this time of year. Read original post here.