Smith Faculty Opinion Article
February 4, 2010
Obama's Export Initiative not up to the Task
President Obama is seeking to double U.S. exports and create 2 million jobs
over the next five years. The new Commerce Department program to accomplish this
goal is simply inadequate.
The Commerce Department initiative merely consists of redoubling existing
efforts and not addressing the fundamental issues-the undervalued Chinese yuan
and high tariffs, and other regulatory barriers that block U.S. exports in much
Commerce Secretary Gary Locke is launching a program by increasing
Export-Import Bank funding for small businesses from $4 to $6 billion; boosting
Commerce Department personnel that assist exporters at U.S. embassies and
consulates in China and India; and strengthening enforcement of trade laws and
Of course, these initiatives are helpful and could increase net exports by
several billion dollars; however, those will not double exports, which now total
$1.7 trillion or appreciably reduce a trade deficit of $440 billion caused by
$2.1 trillion in imports. The trade deficit is likely to grow in 2010 and drag
on the economic recovery.
The Administration is correct to target China and India but these initiatives
don't address the reasons U.S. businesses don't sell enough in those countries.
China is the larger and faster growing market, and maintains an undervalued
currency that makes Chinese products artificially cheap, whether at the Wal-Mart
or competing with U.S. exports in China. It imposes huge tariffs and
administrative barriers to U.S. exports. Conditions are not much better in
China exports about $330 billion to the United States but only purchases
about $88 billion. Without a revaluation in the yuan large enough to end China's
persistent purchases of U.S. dollars, the bilateral deficit is simply not coming
The president says he will try to persuade China to revalue its currency but
the diplomatic efforts by the Bush Administration wholly failed to significantly
alter China's policies.
Without strong U.S. action to offset China's currency market intervention,
which exceeds $400 billion a year, China simply is not going to change its
currency and trade policies, and the U.S. unemployment will stay close to 10
percent or higher.
Taxing dollar-yuan conversion to offset China's currency subsidies would
level the playing field but the Administration has offered no substantial
proposals that promise to even the terms of competition for U.S. businesses in
China or inspire a change in China's protectionist policies.
Peter Morici is a professor at the University
of Maryland School of Business and former Chief Economist at the U.S. International