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Current Trade Deficit:    
US Trade Representative Celebrates 40 Years of Failure
William R. Hawkins
Wednesday, December 18, 2002
Photo of William R. Hawkins
William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.
        The Office of the United States Trade Representative recently held a reception to celebrate 40 years of 'achievement' in negotiating foreign trade agreements.  Before the reception, President George W. Bush visited the USTR headquarters in the historic Winder building.  

The Winder building dates back to the mid-19th century and is thus a fitting place for the USTR office, as the ideology that drives the present USTR, Robert Zoellick, is rooted in that long ago world of fanciful liberal notions.  The Winder building has been renovated more recently than the policies of its occupants.

"In looking back over the past 40 years, I join my colleagues and staff in feeling honored to be a part of a bipartisan legacy of promoting trade liberalization, and advancing prosperity, freedom, and human progress," said Zoellick.  High sounding words that left out any reference to whether the net effect has been to advance the economic preeminence of the United States in the world economy, the basis for America's Superpower status.

The Bureau of Economic Analysis has reported that U.S. net payments on all worldwide Current Accounts during the Third Quarter were in deficit by $127 billion.  This puts the country on track to run a record Current Accounts deficit for the year of over $500 billion.  The BEA noted the main cause for this financial meltdown was a worsening in the trade deficit.  

The trade deficit on goods increased to $123.2 billion in the third quarter from $122.5 billion in the second.  Though exports were up a bit, to $175.7 billion from $172.4 billion in the second quarter; Goods imports increased to $298.9 billion from $294.9 billion.  This means that imports were 70% higher than exports.  Thank you, USTR!

"The strong leadership and skillful negotiations of my predecessors in this office have propelled the opening of markets throughout the world, creating new economic opportunities for millions of Americans," Zoellick said.  It is true that U.S. exports have increased since 1962 --  when a position called the Special Trade Representative was created by President John F. Kennedy, and that millions of Americans earn their living from exporting.  America has always been a trading nation, though to a much lesser extent than most major modern economies.  But the question is about the net effect of trade, and that has shifted from good to terrible during the decades since an independent office was set up to focus on trade as an end in itself.

In 1962, the United States ran a trade surplus in goods of $4.5 billion.  For every $4 worth of imported goods, the U.S. sold $5 worth.  Indeed, America had run a trade surplus on goods every year since the end of World War II, and would continue to do so until 1971.  However, starting in 1971 the U.S. would run mounting trade deficits.  For the next thirty years, the country would enjoy a trade surplus in goods only twice, in 1973 and 1975.  

The Trade Act of 1974 elevated the STR to a cabinet-level position within the Executive Office of the President.  Congress also gave the government more tools to use to protect American firms threatened by import surges or unfair trade practices.  However, the weak and ineffectual Ford Administration was dominated by 'free traders' like Treasury Secretary William Simon, who actually welcomed the U.S. trade deficit as a "desirable shift" because he thought it would help foreign economies grow if they could export more into the American market -- a position held by the Bush Administration today.

The desire of those who make U.S. trade policy has too often been oriented towards some idealized view of the world economy or of private transnational corporations rather than the U.S. national interest. For example,  Zoellick has just revamped the Advisory Committee for Trade Policy and Negotiations (ACTPN), which is supposed to represent a cross-section of groups affected by trade.  However, the non-partisan reporting service Inside U.S. Trade described the new ACTPN appointees as "a mix of major Republican campaign donors, free-trade theologians and a few people with close ties to USTR Robert Zoellick." There is no one there who will think strategically about trade's role in improving America's position either at home or abroad.

Nothing better illustrates the rogue nature of the USTR than Zoellick's new proposal at the World Trade Organization for a "tariff-free world by 2015" for all manufactured goods.  Such a complete 'free trade' regime is exactly what the transnational corporations want, as it would allow them to place their factories anywhere they could find cheap labor, low taxes, and lax regulations, and then ship the output anywhere they wanted.  Zoellick himself knows how the multinationals would run this scheme.  In fact it is revealed in his power point slide show available on the USTR's website.  

Under "Benefits to America" nothing is said about new factories or job creation.  Instead, 'free trade' is lauded as an "$18 billion tax cut for working families" --  assuming they are still working.  The next slide proclaims "A Tariff Free World: Every corner store becomes a duty-free shop for working families." The emphasis is entirely on cheap imports from overseas plants.

There is no more wrong-headed notion imaginable for the USTR to embrace.  No family or nation ever got wealthy from consumption.  A 'blue light special' is no substitute for a good job.  Consumption is a use for income, it does not generate income nor does it provide anything for savings which will help a family (or a nation) build for the future.  

This shift in argument by Zoellick is an admission that he has no intention of pushing for new international rules that would give American firms and workers an advantage in overseas competition.  Zoellick should thus drop the United States from his title and go back to being known as the Special Trade Representative, since 'special' interests are all he cares about.  

William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.