Last week, we noted below that there would be “More Stubborn Facts Coming on Friday”, and indeed they did. They came in the form of a press roundtable featuring Jerry Jasinowski, President of the Manufacturing Institute, Martin Baily, former head of the President’s Council of Economic Advisors, and the NAM’s trade VP and all around wise man, Frank Vargo. They were there to talk about the relationship between trade and jobs. Remember, these were facts.
Jasinowski opened by talking about the high cost — non-wage — of doing business in the US, citing the well-known 22% cost disadvantage which we face vs. our trading partners, in such areas as taxes, regulatory burdens and the queen mother of ’em all, legal costs.
Baily followed by talking about imports and exports, concluding that “the loss of jobs from trade was a result of export weakness.” In other words, the effect of the strong dollar on exports was devastating. He also noted that it was a long, several-year cycle, and it takes time to get into the soup, takes time to reverse. He said that our slump in exports was because we were selling to countries that were growing slowly and because we had lost competitiveness. By his calculations, 50-80% of our loss of competitiveness was due to the overvalued dollar. We’ve said in this space many times before that even the AFL-CIO said that the dollar was the biggest culprit in the trade deficit. Here’s a link to an article from the McKinsey Quarterly by Baily on point, entitled, “Don’t Blame Trade for US Job Losses”.
Frank Vargo batted cleanup, echoing Baily’s comments and reminding us once gain that 90% of our manufacturing trade deficit is with countries where we have no trade agreement. Trade agreements lower barriers to entry of US-made goods. Here’s a link to Frank’s slides.
Somebody forward this to Lou Dobbs, OK?
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