Did someone say ‘balanced trade’?

April 29, 2010
Singapore Democrats

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Singapore Democrats

President Barack Obama recently went through a bruising fight with the Republicans over health care reform in the United States. He ended up like Rocky Balboa, walloped black and blue all over (figuratively speaking, that is) but smiling from ear to ear (this part is real) in triumph.

His poll numbers were down in the dumps during the fight. They still are. Several weeks after his health care victory, a majority of Americans still find the President’s performance unsatisfactory.

And all this has got to do with Singapore, how?
The reason for Mr Obama’s languishing popularity numbers is that Americans’ number one concern is still over the economy. The slow pace of job creation is not winning the President any plaudits.

If this trend keeps up in the months ahead the Democrats, of which the President is the leader, will be in for a pasting at the Congressional elections come end of this year.

This is why folks in Mr Obama’s camp is screaming for the President to do something fast – and preferably big too. Mr Mark Penn, a political strategist who has advised prominent Bills like Clinton, Gates and Ford, calls on the US President

to make the economy and improving America’s economic future his exclusive focus. In the short-term, America needs jobs; in the long term, it will take stronger educational, trade, infrastructure and immigration policies to keep us competitive on a global scale.

In case you missed it, it’s in the second sentence – America needs jobs. Which is where it starts getting a little worrying for us here on this island. Listen to what New York University Professor Ralph Gomory recently said:

Ralph Gomory

Today our companies are motivated to take innovations abroad, produce there and import the goods into the United States…While other countries roll out a welcome mat of tax breaks and subsidies for our companies because their common sense tells them that their people being employed in productive work is the road to being a rich country, we provide no incentive for U.S. companies to produce here.


Uh-oh
.

America, the professor says, cannot just pretend that being creative and innovative will create jobs for Americans, at least not in the numbers that will keep unemployment at a sustainable level. He wants to see not just innovation but also production of goods to take place on American soil:

We must produce here in the USA, to employ the people of this country, and we must keep their activities effective by a steady stream of innovations in design and production.

In case you think that Mr Gomory is just one of those ivory tower type academics who engage in cerebral pursuits for the sheer heck of it, the man was the senior vice-president of science and technology at IBM. So how does the professor propose that innovation and production shifts back to the US?

We must move to balanced trade. With balanced trade every dollar of imports is matched by a dollar of exports of goods or services produced here in the USA.

Warren Buffet

Prof Gomory is essentially reviving the idea of Import Certificates (ICs) first mooted by investment towkay Mr Warren Buffet several years back. In simple (maybe even over-simplified) terms, ICs would require all US businesses to export as much, or in some proportion thereof, as they import. The idea is to get as many jobs back to America as possible.

This may sound suspiciously protectionistic. But at the rate the US is buying stuff from everyone else and selling precious little, such talk is likely to grow. And if President Obama’s political fortunes continue to tank, he is likely to listen.

If this idea takes hold in America, we don’t have to spell out how things are going to affect Singapore. The US will do everything – entice, plead, threaten (probably all three) – to get its global companies to return home.

If the US does decide to do this, that is, emphasize on balanced trade instead of just free trade, we will be in for an economic shelacking because we are so addicted to foreign MNCs that any withdrawal of these corporations will result in cold turkey treatment for us, the consequences so severe from which we may never recover.

And here we are merrily going about continuing to roll out the red carpet for multinationals with nary any attention paid to developing our own entrepreneurial class.

We, in the SDP, have been calling repeatedly over the years that we must wean ourselves off our dependence on multinationals and put our resources to fostering an innovative culture. This, of course, necessitates a concomitant opening up of the political culture. (Please read here, especially those in and around the PAP who keep accusing us of not being constructive.)

But is anyone paying attention? Hands up those who think that our rulers at the Istana are listening. None? Didn’t think so.