Return to normal?

Today's press coverage of international trade news had an interesting take. For example, look at these excerpts from two stories in the New York Times:
Trade Deficit Widened in December

Rising demand for foreign goods in the United States caused the trade deficit to widen more than expected in December, the government said Wednesday, suggesting that American businesses and consumers were growing more confident about spending.

Healthy Jump in Chinese Exports Points to Recovery in World Trade:

China said Wednesday that its exports climbed 21 percent in January from a year earlier, while imports surged 85.5 percent, the latest sign that world trade is starting to recover from the global financial crisis.
. . .
Imports in January rose impressively, in line with economists' expectations, because imports a year ago were so weak. Many Chinese export factories nearly stopped buying raw materials then as their orders dried up, but they have been restocking since late spring.

In other words, a return to the "old normal" of Chinese production for US consumers as the engine of economic activity. Where is the evidence of the so-called "new normal" of sustainable economic growth?

As Kelly Evan in the Wall Street Journal (U.S. Losing Edge on Export-Led Growth) points out, "U.S. export growth is running up against a Big Fat Greek Problem."

The widening reflects faster growth in imports than exports at year-end, an unwelcome side effect of the U.S. economic recovery. It also is a reminder that export-led growth, which nations are pursuing as a path out of recession, is easier said than done.
President Barack Obama has called for a doubling of U.S. exports over the next five years to help narrow the trade deficit and spur economic growth. The quickest way of doing so is a weaker dollar, which makes U.S. goods and services cheaper in the global market.
But lately, the dollar is moving in the other direction. Worries over the fiscal health of Greece and other nations have dogged the rival euro currency, which hit an eight-month low on Tuesday before closing a few cents higher.

In the 1980's, America - with public and private sectors working together - confronted our economic competitiveness issues. A number of programs and activities were started, such as the Manufacturing Extension Partnership, that continue to this day. But it was recognized that any of these sectoral and micro-economic policies needed to be anchored in a sound macroeconomic base. For the past few decades, one key component of that base have been out of whack: currencies.

Confronting the current issues -- specifically the US-China currency issue -- is one of the toughest tasks ahead. There are many reasons why China will resist these efforts -- based on legitimate over its own economic prosperity. And there are many reasons why some in the US are reluctant to confront the problem.

But unless and until we do, there will be no "new normal." The old normal will reassert itself -- at a lower level of prosperity. And we will all be in the position of just waiting for the next economic crisis. That is a situation which benefits no one: neither the US or China. Which is why will we need to working together to solve the problem.