The week after that, the heads of the leading economic nations in the world—the G-20—with gather in Pittsburgh to discuss next steps in reviving the global economy.
Given the health care battle, the president may well decide to muffle the core issues in the soporific diplomatic quilting of shared principles and professed intentions. (Also on his plate is the stark question of whether to dispatch more U.S. men and women to a distant place called Afghanistan.)
But this can't be put off for long. The reason is simple, although not accepted by the self-professed nuts on corporate trade. We can't recover the old economy—and shouldn't want to. In that economy, the U.S. served as the world's consumer. America ran up deficits as high as 6 percent of GDP, borrowing some $2 billion a day from abroad. Global growth—particularly in mercantilist export nations like China and Germany— relied on Americans spending more than they earned, running up debts purchasing goods made abroad, often by branches of U.S. multinationals. We were shipping jobs, not goods, abroad, losing three million manufacturing jobs under Bush before the crash while the economy was growing. Not surprisingly, wages stagnated, family incomes lost ground, debts soared. And that was in the good times.
In his "Sermon on the Mount" economic speech, Obama summoned America to build a new economy, not on the quicksand of speculation and debt, but on the rock of investment and production. He laid out core elements of a new strategy—investment in education and training to create the best educated workers in the world, investment in research and development to stoke new markets, building a 21st-century infrastructure—from a new electric grid to fast trains and modern broadband—and getting health care costs under control.
But central to this new economy must be a more balanced global economy, one where the U.S. makes and sells more and consumes less, and mercantilist nations such as China and Germany consume more at home and export less abroad.
That sounds simple but it requires wrenching changes. A first order for the U.S., and one reason Obama has made new energy a centerpiece of his agenda, is to reduce our dependence on foreign oil, the import of which spiked at over half of our trade deficits, sending billions abroad to the corrupt emirates that aren't exactly a hotbed of enlightenment.
Second, we'll have to change our relationship with our largest creditor, China. Our deficit with China has peaked at anastounding 83% of our non-oil-goods trade deficit.
China lends us the money to buy the goods that American companies make with jobs and technology they sent there. It does so because it pursues what has been a remarkably successful mercantilist policy designed to make it the dominant global center of manufacturing, a 21st-century version of what the U.S. did in the late 1800s and early part of the 20th century.
Obama's commitment to new energy as a centerpiece of the new economy illustrates the question. It isn't sufficient to wean ourselves from dependence on foreign oil if, as Steelworkers President Leo Gerard notes, we become dependent on imported solar cells and windmills. But China has designated wind and solar as strategic industries that it intends to dominate. We need a clear industrial and trade strategy of our own.
That's why the decision on rubber tires is so important. The nonpartisan commissioners of the International Trade Commission have recommended the president slap tariffs on Chinese tires now being dumped on the market. The case arises under the laws that the Chinese agreed to as a condition of joining the World Trade Organization and gaining most favored nation status. Needless to say, the Chinese are not subtle in expressing their opposition to the tariffs, and suggesting that any such action would damage our relations. This is our banker talking. Bush faced similar choices several times and folded.
But the tire industry simply exemplifies the broader challenge that can't be ducked. The Chinese are intent on capturing this industry. They encourage U.S. tire makers to open factories in China, offering cheap labor and lax environmental standards and an underpriced dollar. They aren't subtle. One manufacturer was allowed to open a factory on the condition that the entire production be exported. ...
China has to be weaned of its export addiction, just as America has to revive its ability to make things in America. ...
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