Increasing Net Exports: A Key to U.S. Economic Stabilization

The subject of international trade is that of a multifaceted and complex nature. The international trade balance and the current account are considered to be similar concepts. The current account encapsulates a detailed record of a particular country’s overseas transactions. This account includes all goods and services that are both imported and exported, and all net unilateral transfer payments, as well as net income from abroad. The international trade balance is the same as a nation’s difference amongst imports and exports (NX). Also the international trade balance is one component’s of the “twin deficits,’ along with the government budget or balance of government savings. The so called “twin deficits,” is an equilibrium condition in economics meaning that the international trade balance (NX) is equal to the government budget (T-G) so long as domestic saving is equal to domestic investment. Another key determinant of international trade to be duly noted is that imports decrease a national total GDP and exports add to a nations total GDP.

Figure 1. U.S Unemployment Rate (2007-2010)

Recently President Obama said in his recent state of the union address in the video clip below that he felt that increasing our exports will be a crucial component in our ongoing economic recovery and stabilization process. Unsure of how this would aid our ailing economy I decided to investigate this matter further. What I found was that by devoting more resources to increasing our exports first we could create a significant amount of domestic jobs. The substantial increase in jobs that this initiative offers could drastically diminish our unemployment rate which was last recorded at 9.5% in June of 2010 (Figure 1.U.S. Bureau of Labor Statistics). Decreasing our ever expanding international foreign trade deficit proves to be another benefit that would be created from Obama’s plan. Another major upside to Obama’s proposal is that as we learned earlier this would cause exports to go up significantly causing a similar rise in our country’s GDP level.

President Obama Talks About Trade in the 2010 State of the Union from U.S. Trade Representative on Vimeo.

Figure 1: http://www.economicpopulist.org/category/topic-meta-tags /unemployment-rate