No Growth on Trade: U.S. Needs to Lead Again

By at 6 January, 2022, 1:51 pm

by Raymond J. Keating –

When a global pandemic hits, trade naturally is going to suffer. At the same time, trade remains vital to the well-being of American entrepreneurs, businesses, workers and consumers. So, we need a strong recovery and growth in both exports and imports. Unfortunately, that has not been the case so far.

No Growth

The latest monthly trade data from the U.S. Bureau of Economic Analysis shows that there was effectively no growth in U.S. exports in November 2021 (see chart following chart), and a decline after inflation is considered. By the way, goods exports actually declined in November in nominal terms, that is, before considering inflation. At the same time, imports experienced some solid growth.

Source: Federal Reserve Bank of St. Louis, FRED

Looking at the latest GDP data, it turns out that in the third quarter of 2020, real U.S. exports (annualized data) registered the same amount as was the case in the third quarter of 2013. That’s no real export growth for the past eight years (see following chart). On the import side, matters were at least better than the export story, with relative stagnation being the case since early 2019.

Source: Federal Reserve Bank of St. Louis, FRED

America’s Backsliding on Trade

Of course, this persistent pandemic and related supply chain challenges explain part of our trade problems. But other issues come into play as well, including U.S. abdication of its global leadership role in advancing free trade.

Trade stagnation began well before the pandemic struck. We saw traces of retreat on trade during the Obama years in the form of indifference, and then matters shifted to full-blown retreat with the protectionism of the Trump years, which has continued into the Biden administration.

As is the case with tax and regulatory policies, trade policy needs to be shifted to support economic recovery and expansion, and that means reducing costs and barriers impeding entrepreneurship, business and investment. Indeed, free trade is all about reducing taxes (tariffs) and regulations (such as quotas) so that trade and growth can flourish. That’s the direction into which U.S. trade policy needs to be turned, and thereby providing leadership for other nations to do the same.

Trade a Big Small Business Issue 

Finally, let’s keep in mind that this is a small business issue, given that, for example, nearly all U.S. imports are inputs to American businesses, with most being small businesses, and that, according to the U.S. Census Bureau, 91.4 percent of U.S. exporters have fewer than 100 employees.

Trade is about small business and U.S. economic growth, and the U.S. needs to fully lead on trade liberalization in order to see health and sustainable growth on both fronts.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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