Today's New York Times is running an op-ed (An Order of Prosperity, to Go: Exports of Services Can Save Our Economy) that shows how hard it is to get it right on export promotion. The author asserts -- and I would agree -- that exports of services have dramatically grown in recent years and that the US has a competitive edge in many services exports. Unfortunately, the idea touted in the headline that services exports can solve our trade and economic problems is just nonsense. As I have demonstrated earlier, our services surplus is too small to overcome our goods deficit. And while we are currently competitive in services trade, most other nations are rapidly beefing up their capabilities. According to one report, over 30 countries have active programs to promote services exports (although I don't know how many of these are really travel and tourism promotion activities - travel and tourism being a major part of our services trade).
What is really troubling with this op-ed, however, is its complete laissez faire economic view. The only thing the author argues for is more trade agreements: "the best thing the administration can do is reduce impediments to trade and then get out of the way." Such a policy is guaranteed to result in one outcome -- the loss of our current competitive position in services trade and an ultimate switch from a surplus to a deficit.
We have seen the movie before starring "Advanced Technology Products". The US once had a small, but meaningful surplus in these high-tech areas. It was touted that this surplus would overcome our deficit in our low-tech goods. One can almost recall the headline: "High-tech exports will save the economy." The reality turned out very differently. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
We need an active government policy of promoting all types of exports. Service exports are important and contribute to reducing the deficit. That part of the argument the op-ed got right. But services are not enough. And simply "get the government out of the way" of services exports is a recipe for decline -- just like it worked in high-tech. Why would we ever want to go down that road again?
What is really troubling with this op-ed, however, is its complete laissez faire economic view. The only thing the author argues for is more trade agreements: "the best thing the administration can do is reduce impediments to trade and then get out of the way." Such a policy is guaranteed to result in one outcome -- the loss of our current competitive position in services trade and an ultimate switch from a surplus to a deficit.
We have seen the movie before starring "Advanced Technology Products". The US once had a small, but meaningful surplus in these high-tech areas. It was touted that this surplus would overcome our deficit in our low-tech goods. One can almost recall the headline: "High-tech exports will save the economy." The reality turned out very differently. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
We need an active government policy of promoting all types of exports. Service exports are important and contribute to reducing the deficit. That part of the argument the op-ed got right. But services are not enough. And simply "get the government out of the way" of services exports is a recipe for decline -- just like it worked in high-tech. Why would we ever want to go down that road again?
Leave a comment