The Export-Import Challenge

President Obama spoke yesterday at the annual conference of the Export-Import Bank [1], where he discussed the creation of the Export Promotion Cabinet and last year's efforts by the Export-Import Bank to directly extend financing for the purchase of American exports.

It remains to be seen what the initiative will come to, but Obama hit the nail on the head regarding public sentiment on trade:

... And meanwhile, if you ask the average American what trade has offered them, they won’t say that their televisions are cheaper, or productivity is higher. They’d say they’ve seen the plant across town shut down, jobs dry up, communities deteriorate. And you can’t blame them for feeling that way. The fact is other countries haven’t always played by the same set of rules. America hasn’t always enforced our trade rights, or made sure that the benefits of trade are broadly shared. And we haven’t always done enough to help our workers adapt to a changing world. ...

Scott Paul, Executive Director of the Alliance for American Manufacturing, responded to Obama's remarks:

It’s a good thing to promote exports. But ...[we] also look to need at the type and value of exports we are promoting. Some of our fastest growing exports right now are scrap or raw, unprocessed commodities. Having a container ship of cell phones come in and a container ship of scrap metal going out does not mean we are achieving balanced trade. Such exports add little or nothing to job growth. We need to achieve market access for exports with long domestic value chains, products like automobiles, durable goods, and high-tech clean energy goods such as wind turbines. ...

Indeed, the US trade balance in advanced technology products has been growing rapidly since 2002 [2], and our standing in that market is deteriorating. This means losing our edge in precisely those industries with long supply chains and many opportunities for value-added work. As Dave Johnson pointed out earlier today, even Pat Buchanan has noticed this [3] and that man, let's be charitable, often has a loose grasp on the facts.

What the American public has seen is that there aren't a lot of good paying, family wage jobs in the agriculture sector, nor in selling imported products. Consequently, our ability to be patient with free trade proponents has vanished along with the housing bubble and our formerly roaring job market.

The productive economy has faced a death of a thousand cuts, with wholesale collapses in several industrial sectors that were very advanced and employed a lot of people. Problems range from individual states' incentives to "behave like sick people stealing each other's medicine," as Joel Rogers of the University of Wisconsin-Madison would say, to Sen. Debbie Stabenow's point that "our companies are competing against countries."

Obama's proposal begins to address the lack of coordinated support by our government of export promotion efforts, even though there's still the issue of border adjustments, internal competition over dwindling business capital. The administration has also begun to address the issue of trade cheating by enforcement of trade rules, sometimes even in time to save some jobs. It's a start.

The key problem is that American industry has been left to fend for itself in an economy where their competition is organized, organized and organized some more.

Maybe it's a surprise to our nation's social Darwinist contingent that this should be the outcome, but this is because most social Darwinists are biologically illiterate. The organisms that often survive best in nature, including the predators that have the highest success rates in hunting, are those that form strong cooperative relationships. These range from symbiotic relationships between different organisms to the social organization among cooperative packs and herds.

'Go it alone' and 'fend for yourself' sound like tough-minded foundations for policy, but both these strategies have had only marginal success throughout the last few billion years of evolution. Even bacteria succeed best when they cooperate and form colonies.

Abandoning each other to fight alone is as much poor biology as it is poor trade policy and, ultimately, poor job policy. I hope the administration really does get this.