Zero-sum mentality won’t raise US employment
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People's Daily, February 1, 2012
The Obama administration has brought trade cases against China nearly twice that of the Bush administration, and is creating a trade enforcement unit to investigate “unfair trade practices” in China and other countries. At the same time, the White House vowed to do all it can to solve the severe unemployment problem. Will these trade protectionist measures really be an effective solution to unemployment?
The U.S. economy has been sluggish since it plunged into a prolonged recession caused by the subprime mortgage crisis in 2008. The country did not regain its 2007 level of gross domestic product (GDP) until the second half of 2011, but employment remains far below its pre-crisis level. The United States really needs to increase employment.
The main reason for the slow U.S. economic recovery is that the country has been stuck in a deep structural recession. As the global financial crisis seriously damaged the U.S. financial system, banks and other financial institutions as well as ordinary citizens all need to restructure the balance sheet, dispose of bad assets, and reduce debt leverage.
This is a slow process. International trade and outsourcing are not the major causes of the high unemployment rate that plagues the United States. Statistics showed that the U.S. trade deficit was inversely, instead of directly, proportional to the country’s unemployment rate. From 2006 to 2009, the U.S. trade deficit had been halved, while its unemployment rate increased 100 percent.
Due to the weak domestic demand, the United States pins its hope on export and has proposed the plan of doubling its export in five years. If it strengthens its trade protection measures to restrain other countries exports, other countries will definitely restrain the United States' export too, which will go against the United States' original intention.
In the past two years, the growth rate of the United States' export to China was much higher than the growth rate of its overall export, and therefore, deliberately starting trade frictions against China completely goes against the United States' plan of doubling its export.
The biggest challenge faced by the United States in revitalizing its manufacturing industry and increasing its employments is an internal challenge but not an external challenge. The United States' great expenditures in such areas as the medical care and retirement benefit are actually the barrier for many U.S. enterprises to increase employments. Some analysts believe that the unbearably high retirement benefit is the main reason that prompted General Motor’s bankruptcy procedure two years ago.
Maybe this viewpoint is not completely correct, but if the United States does not carry out effective reforms in its medical care and welfare systems, its economic efficiency, international competitiveness and employment will go backwards for sure. The difficult situation faced by some European countries is an example.
For the United States, updating long-dilapidated infrastructures may be a more effective way to promote GDP growth and employment recoveries comparing to Export Multiplication Plan and revitalizing manufacturing industry. American highways, bridges, electricity grids and other infrastructures are in a sad state of disrepair and lag behind some emerging economies to some extent. It's a pity that financial deficits of the American government saw drastic increase and it’s unlikely to cut other spending for supporting construction of infrastructures due to the game of congressional politics.
Trade, outsourcing and outward investment will not bring about zero-sum results for the countries involved, as long as they are done in accordance with market rules and give full play of the countries’ relative advantages. On the contrary, if trade protection measures are used to create barriers for international trade, outsourcing and investment in foreign countries, then everyone will be harmed.
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