Jewish World Review June 22, 2004 / 3 Tamuz, 5764

Lou Dobbs

JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Losing our advantage | The U.S. trade deficit exploded to another staggering record last month of more than $48 billion. New trade data from the Commerce Department also confirmed two alarming trends: This country has lost its edge in technology exports and is rapidly losing its edge in the services sector as well.

The trade report is especially disturbing since technology is one area where the United States has long been thought to have supremacy over other nations. Unfortunately, the data tells another story. The United States actually ran a $3 billion deficit in April in what the government calls advanced technology products.

"The United States has lost its advantage in many of our traditionally strong export sectors: automobiles, computers, information technology," said Charles McMillion, president of MBG Information Services, a business information, analysis and forecasting firm based in Washington, D.C. As a result, the United States is now a net importer of high-tech products such as VCRs, televisions and magnetic equipment. Most of the goods that the United States is a net exporter of are very low-tech, like wheat, cotton and corn.

According to the economic theory of competitive advantage, lower-wage nations should be the ones specializing in low-tech goods while leaving the high-tech production to higher-wage nations. But as American multinationals shifted operations to low-wage nations such as China, they also shipped American technology, production capability and expertise abroad.

Consequently, the share of China's exports consisting of machinery, electronics and transport equipment increased to 43 percent in 2003 from 18 percent in 1994. Meanwhile, the U.S. balance of trade in high-tech products fell to a deficit of $27 billion in 2003 from its high of $32 billion in 1997.

Advocates of free trade at all costs have argued that the United States does not have to be concerned about the exports of high-tech or low-tech goods, since we are transitioning into a service economy. Revised trade data released last week, however, illustrates that our nation's surplus in services deteriorated by 21 percent between 2001 and 2003, a much larger decline than was originally estimated.

Donate to JWR

Additionally, some experts say that the services surplus may actually be much smaller than the government figures suggest.

"I actually think if it had been measured accurately it would be even more than that," said Dean Baker, co-director of the Center for Economic and Policy Research. "If you look at the data from India . what they think they're producing for the United States is a lot more than what is showing up in our trade figures."

North America is, in fact, the largest destination for Indian tech services, accounting for 70 percent of the country's $8.9 billion in annual tech service exports. Official U.S. data, on the other hand, suggests that we only import about $300 million a year in services from India.

While many nations appear to have decreased motivation and need to purchase goods and services from the United States, foreigners continue to be interested in purchasing our assets. This is, perhaps, the most dangerous aspect of our ballooning trade deficit. Since the U.S. trade deficit has reached nearly a half-trillion dollars, we have no choice but to borrow from other nations in order to finance the debt. We do this by selling our assets, stocks and bonds to foreigners.

Ernest Preeg, senior fellow in trade and productivity at the Manufacturers Alliance, an executive development and business research organization in Arlington, Va., cautions that by allowing so much foreign ownership of American assets, the United States has left itself vulnerable to outside influences. "Surely when China has $400 billion of foreign exchange reserves, almost all in dollars, there is potential leverage," he says.

Foreigners and foreign nations have far too much potential leverage against the United States. We have given away not only our manufacturing base, but also our advantage in technology and services as well. And we have left ourselves dangerously dependent on foreign capital to fund our out-of-control trade deficit. America is, quite simply, losing its advantage. Comparative or not.

Every weekday publishes what many in Washington and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.

Lou Dobbs is the anchor and managing editor of CNN's "Lou Dobbs Moneyline." Comment by clicking here.

06/14/04: Mexican trucking issue underscores flaws of NAFTA
06/07/04: Patriot games
06/01/04: Our first line of defense still needs attention
05/17/04: Wasting minds
05/11/04: Outsourcing of jobs leads to information leaks
05/04/04: Labor issues getting some much-needed attention
04/27/04: Outsourcing the jobs debate
04/20/04: Revisiting the final frontier
04/11/04: The source of terror
03/22/04: Our new consumer economy
03/15/04: Finding a balance between free trade and protecting our national interest
03/09/04: Choice between Bush and Kerry isn't much of a choice
03/02/04: Election stakes are getting higher
02/24/04: Help wanted: Free trade policies hurt working Americans
02/17/04: All the news that's fit
02/04/04: American jobs must be protected
01/03/04: Dangerously dependent
01/27/04: Who's working for working Americans?
01/20/04: U.S. selling itself short with "free" trade
01/12/04: Bush on the wrong track with immigration idea
01/05/04: Business leaders should resolve to lead by example in 2004
12/29/03: Immigration needs stricter, not looser, controls
12/11/03: Trade deficit with China a big problem
12/09/03: Let our children be children
12/01/03: Broken borders pose a serious health risk
11/25/03: Free trade costs plenty
11/18/03: European Union is playing a dangerous game
11/10/03: This time, it's not the economy
11/04/03: Overseas outsourcing is an alarming trend
10/28/03: Spending so much time 'making a living', we don't live
10/21/03: As population soars, U.S. faces tough choices
10/14/03: Schools need to re-emphasize math and science
10/07/03: It's lonely at the top
09/30/03: Is America over-medicating?
09/23/03: Corporate execs need to stop selling out U.S. workers
09/16/03: The scandals just keep on coming
09/09/03: Let's get real on energy
09/02/03: Is free enterprise the answer to education woes?
08/26/03: Building the road to recovery
08/12/03: War on drugs is still a war worth fighting
08/06/03: An attack on progressive thought
07/29/03: Prosperity begins at home
07/22/03: Real earnings, or really creative earnings?
07/15/03: Flirting with disaster
07/08/03: It's good to be the king
07/01/03: Border disorder
06/24/03: Prairie dogs and mosquito bogs
06/17/03: Bullish on America
06/10/03: Retirement realities: we need new solutions — soon
06/03/03: Curing what ails us
05/27/03: America's export problem
05/21/03: Wall Street's new imperative: Integrity
/13/03: Losing sight of the dangers in creating further fiscal stimulus
05/06/03: Optimism is unfashionable, but here's some anyway
04/29/03: Nuclear nightmare
04/22/03: Naysayers ignore signs of economic recovery
04/15/03: Game over--but for whom?
04/08/03: No more fool's games
03/31/03: United States must seriously review foreign economic and political relationships
03/24/03: Delusional Chirac may be a thorn in coalition's side, but new alliances are forming in response to 21st-Century threats without him and UN
03/18/03: Bush critics offer little more than hyperbole
03/11/03: Geopolitical visibility
03/04/03: Freedom: Our best export
02/27/03: Guns, butter and greasing the way
02/18/03: Looking for a silver lining
02/10/03: Space program remains a valuable investment
02/04/03: Hi pal, come back
01/28/03: Bush address a chance to bolster confidence
01/22/03: Here we go again!
01/14/03: Bush's bold bid
01/07/03: The only thing certain is uncertainty
12/30/02: No need to be so negative as new year approaches
12/23/02: NY's AG deserves credit for settlement
12/18/02: Critics of Bush nominees should tone down rhetoric
12/09/02: A lot rides on prez's Treasury pick
12/04/02: A fast fix for corporate credibility?
11/26/02: Urge to merge is hard to resist
11/19/02: Are we really so bad off?
11/12/02: Bush's lucky week bodes well for recovery
11/05/02: Wall Street firms treat investors as fools
10/29/02: Earnings estimates offer some hope
10/22/02: Economy's strength tied to national security
10/17/02: Harvey Pitt, get real!
10/08/02:Are we experiencing the fall before the rise?
10/01/02: Concerns about earnings are justified
09/24/02: Business leaders must abandon stall tactics
09/17/02: Wall Street's reality check
09/12/02: There's no better time for leaders to show resolve


© 2003, TMS