President Obama’s Trade Failure

Derek Scissors / November 13, 2009

There is a consensus, spanning the Democratic and Republican parties, our Asia-Pacific trade partners, and those interested around the world that President Obama is heading to Asia with one hand tied behind is back. The reason is his failure to develop and present a clear, coherent trade policy.

Economics is king in the Asia-Pacific and trade with the US is the jewel in the king’s crown. Ignore most of what you hear about China as the engine of growth; China runs a huge trade surplus. That means, in the short term, it is taking GDP away from the world, not adding to it. Goods are flowing to China from the rest of the region but still chiefly in order to assemble and export to the US. The US is by far the most important country for the region.

Unfortunately, we’re undermining that lofty perch, in more ways than one. First and most pressing is the long-term health of our own economy. A government that isn’t sure when it can stop borrowing $1 trillion every year sends a terrible signal about economic health. Deficit spending weakens the dollar, which makes East Asia uncomfortable about taking the dollars we pay for products streaming across the Pacific. (more…)