Why Trade Matters — Protecting Against Protectionism as Exports Climb

Even though a number of folks in the manufacturing supply chain would rather cut back on US imports to protect domestic jobs and contracts (e.g., steel companies, unions, etc.), it's clear that keeping export markets open remains a key priority for keeping the economy strong. And keeping export markets available requires supporting trade policy that keeps our own commercial borders open as well. The latest trade news to come out of the Wall Street Journal analysis of the situation suggests "tentative signs of life in global trade are emerging" and "to some U.S. companies struggling through the recession, overseas markets have been a lifeline despite global weakness".

With export numbers up in May and the US trade deficit declining, might there be hope for an overall economic rebound later this year? Perhaps, though I'd argue a better way of looking at the situation is that without global trade, the US would be in the midst of an even darker recession, a true deep depression. What are the implications of an increase in exports? The Journal notes "the narrowing of the U.S. trade deficit means the U.S. needs to borrow less from abroad". And at the same time, US exports are helping to strengthen our currency. "The dollar strengthened against the euro Friday on the news, and is now in positive territory against the European currency for the year," the story notes.

Protecting trade should be the goal of all politicians and economists looking to put us on the road to economic recovery. But given the strong protectionist tendencies of Congress -- and to a lesser degree the Obama administration -- procurement organizations should continue to create back-up plans to put into effect if the costs of certain imports rise as the result of punitive trade tariffs or anti-dumping cases. For strategic offshore suppliers, this might mean helping trading partners locate new production or distribution facilities in countries that are unlikely to be hit as hard by import curbs and tariffs.

I know of one case where a Chinese company in the metals / mattress inner spring industry set-up a new organization in a different Asian country to get around a ridiculous anti-dumping situation. In this case, the anti-dumping complaint was brought on by Leggett and Platt and others, organizations in the domestic mattress spring industry that were seeking to preserve their own book of business and a few domestic jobs at the expense of higher costs for consumers and far more job losses at other areas in the manufacturing supply chain. Which is precisely why eternal trade vigilance is the price of spend liberty for all (versus the chosen few protected by restrictive trade policy).

Jason Busch

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