Why PIGS Must Fly
In his State of the Union address in January, President Obama announced a goal of doubling the country’s exports over the next five years to support two million jobs. Making the link between exports and jobs isn’t rocket science. In the president’s simple language, “The more products we make and sell to other countries, the more jobs we support right here in America.”
Once the announcement became policy, Agriculture Secretary Tom Vilsak elaborated, albeit in politicalese: “The National Export Initiative’s coordinated effort to increase American exports will not only generate important income opportunities for farmers and ranchers, but also create off-farm jobs, furthering the Obama administration’s work to strengthen and revitalize America’s rural communities.
This renewed emphasis on trade will help America’s agricultural producers, who are the most productive in the world, further expand the United States’ agriculture trade surplus and contribute to the continued growth of our economy.”
Doubling exports by 2015 is certainly doable, given trends in U.S. exports over the last two decades. U.S. exports of goods and services nearly doubled in the 1990s and nearly doubled again more recently, going from about $1 trillion in 2003 to more than $1.8 trillion in 2008, according to the Census Bureau’s Foreign Trade Division. Between 2003 and 2008, our exports to Europe, our biggest trading partner, grew by almost 90 percent to some $325 billion from $173.1 billion.
We sell the Europeans everything, from big-ticket items from our aerospace, automotive, energy and power generation industries to environmental, information and communication technologies, medical and pharmaceutical equipment, and safety and security. And let’s not forget the millions of dollars that European tourists are quick to drop into our national till when their currency is strong. Together, the United States and Europe transact more than $1.5 trillion a year in trade and investment.
True, the figures declined somewhat in 2009 after Wall Street’s financial meltdown sucked the air out of the global economy and left less money to spend all round. But just as some of that air was beginning to seep back, Greece found itself on the brink of bankruptcy, unable to make payments on a $419 billion government debt. Much of that debt came from its spending spree to host the Olympics in 2004.
To keep that country from toppling over, European Union governments and the International Monetary Fund scrambled together $145 billion in rescue loans and guarantees. Within days, the package had swelled to nearly a trillion dollars as EU and IMF officials also fought to keep the other highly indebted countries — Portugal, Ireland/Italy and Spain — from succumbing to a similar fate. European taxpayers are now saddled with a bailout bill for the countries known as the PIGS. Austerity looms large for everyone, including the major European banks that are holding billions of dollars in PIGS debt. The banks may well tighten credit to conserve cash, a move that would cause Europe’s economy to slow and the euro to further weaken.
A weak euro against the dollar makes U.S. goods more expensive for buyers holding euros. A weak European economy means high unemployment, which means less consumer spending. Put all that together and President Obama may have to kiss goodbye his goal of doubling exports within the next five years.
It’s therefore understandable if the Obama administration tosses a few billion to Europe to help out the PIGS. For the administration to meet its export goal, the PIGS can’t stay stuck in debt muck. Those PIGS must fly.