Grow Exports! But Do It the Right Way.

President Obama’s announcement this week to more rigorously pursue international trade as an engine of economic growth sounds great! Yet it rings hollow.

The President assumes rising American exports would not only benefit the United States – but much of the world as well.

That in the area of job quality, export-related ones are historically better paying.

And, increased exports allow companies to expand into new markets and build greater market share in existing ones.

In theory, he is right.

But there is an underlying reality needed to make this all happen: that the companies who will lead the charge and benefit from the government’s actions will do it the right way.

For most of our history, American firms vertically-integrated themselves not just at home, but also abroad. By controlling all aspects of their company’s activities (i.e. R&D, production, marketing, sales, distribution), US. manufacturers were able to sustain themselves, and the greater economy with quality paying-jobs.

Now, because of the tectonic shift from vertically integrated firms to “flat” ones- where more and more activities are outsourced to cheaper places- the benefits of exporting are much smaller than before.

If the Obama Administration is serious about exports, then they need to reward vertically-integrated manufacturers.

To simply implement new trade agreements in the name of “growing exports” is bad for America. All it would do is give “flat” companies like Wal-Mart greater flexibility to outsource more and more. And, ultimately, harm the companies who do it the right way.