Updated – Sept. 30, 2012

The Obama launched two international trade plans — without success. But is there new hope? There are new developments in China. It’s declining economically, which prompted me to write this column: Will Manufacturing Jobs Return to U.S. from China?

Obviously, U.S. exports, which would enhance the nation’s economy. With much publicity, you might recall the Obama Administration in 2010 re-launched its plan to create 2 million jobs and dramatically increase exports.

In addition, Congress held hearings on the manipulation of the Chinese currency, yuan. The then-Commerce Secretary Gary Locke visited Seattle to pitch the trade plan, Chinese officials vowed to increase trade with Washington state during a trade mission by Washington Gov. Chris Gregoire.

Now that Mr. Locke is the U.S. Ambassdor to China, what happened to the trade plan?

The trade plan was well-intentioned but is unfeasible, according to one of the nation’s most-widely quoted economists, Dr. Peter Morici. Ironically, the Obama Administration trade push follows some recent heavy criticism from the economist. (Note: This Biz Coach portal regularly publishes his Op Ed commentaries.)

“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,” says the economist in referring to China’s currency manipulations and other trade-protectionist practices.

Dr. Morici speaks from experience. He was the chief economist at the U.S. International Trade Commission in the Clinton Administration and currently teaches business at the University of Maryland.

Before leaving as Commerce Secretary, Mr. Locke implemented the administration’s five-year plan to double exports and create jobs.

It also sought to accomplish these goals:

  1. Promote free trade
  2. Provide more credit for small to medium sized business
  3. Enforcement of international trade laws

“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 of Asia,” argues Dr. Morici.

“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,” adds the economist. “The trade deficit is likely to grow in 2010 and drag on the economic recovery.”

There are no published cost estimates but it is a multi-billion dollar plan.

It would increase “…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 agreements,” Dr. Morici indicates.

“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,” he explains. “It imposes huge tariffs and administrative barriers to U.S. exports. Conditions are not much better in India.”

Dr. Morici says the U.S. imports $330 billion in goods from China but only sells $88 billion in products to the Asian power.

“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 down,” he asserts. “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.”

I’ve quoted Dr. Morici over the years and sometimes his views conflict with my free-market philosophy. However, he’s right in that something needs to be done to persuade China.

Moreover, what seems to have been lost in the discussion about the Obama Administration’s trade plan is a fundamental concern: Relatively little is manufactured in the U.S. any more. Consumer products are made abroad.  Even Boeing jet parts are made elsewhere.

As a management consultant, I recall Mr. Locke, as Washington’s 21st governor from 1996 to 2004, was innovative and practical. He was the nation’s first Chinese-American governor.

As a Biz Coach columnist, I’ve praised him because he implemented two valuable policies that ostensibly are not used today – he wanted consulting projects to be accountable with benchmarks for returns on investment and he implemented priorities in government budgeting instead of just taxing and spending.

So, if anyone in the Obama Administration is astute enough to assess the problems, he’s the one. Let’s pray he’s successful in strategy and implementation.

America is heavily in debt to China. That threatens our national security, and our individual economic and political freedoms. Unless, the Obama Administration is successful in trade, someday soon America’s official currency will be the yuan.

Meantime, what happened to the trade plan?

From the Coach’s Corner: Two related resources:

Things may be cheaper over the hill, but there is a cost to the community in buying over there, instead of here.”

-Margaret House


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.