It’s a good subject–“What Can Be done About the Trade Deficit–” but Eduardo Porter today offers the single lamest exploration of this subject I can recall. Ever.
First of all, he uses the old canard that Japan is finished. “Hobbled by a two-decade slump, Japan is out of the picture.” I covered the trade tensions between the United States and Japan, and wrote a book entitled The Japanese Power Game. Yes, Japan’s financial bubble popped in 1990 but it remains the world’s third largest economy, after the United States and China, and retains strong technological leadership in many crucial arenas. Porter is flat out wrong in saying “Japan is out of the picture.”
Porter also never once mentions that increasing American exports would be one solution to the trade deficit. We might not be able to erase it altogether but if Americans got serious about nurturing more high-tech industries and improving our export ecosystem, we could increase our exports by billions of dollars.
Porter also never once mentions reshoring. Some American companies that shifted manufacturing to China and elsewhere are bringing those jobs home, which I described in an article for Chief Executive magazine last year. Taking steps to encourage American companies to move more manufacturing home and encouraging more foreign direct investment are tangible ways to attack the trade deficit. Porter seems unaware of this issue.
Moreover, Porter falls for the old canard from economists like Fred Bergsten–the only person who is quoted by name in the article–that the root cause of the trade deficit is the result of financial flows from abroad. “Economists argue that the deficits will stop when Americans stop consuming and investing more than they earn, reducing the demand for money from overseas,” he writes. The money coming in from abroad is a side effect. The obvious root cause of the trade deficit is that we buy more goods from the rest of the world than we sell.
I think this is what happens when journalists with deep experience in these issues are flushed out of journalistic institutions, which the vast majority of those who were around for the trade frictions of the late 1980s have been. The result is that news organizations keep discovering and rediscovering subjects that once were well-understood. I have no personal relationship with Porter and he does not appear to be particularly young. But he is equally clueless.