March 26, 2010 Expanding Exports

Volume 13 | Issue 2

To double exports, start with trade agreements.

In announcing his administration’s new, aggressive goal for expanding U.S. exports, President Barack Obama took to a stage that ensured the attention of the American public – his 2010 State of the Union Address.

The president launched his National Export Initiative in a speech attended by both chambers of Congress and his cabinet and watched by a national television audience. Manufacturers were closely watching, too.

“We need to export more of our goods, because the more products we make and sell to other countries, the more jobs we support right here in America,” the president declared to applause. “So, tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America.”

Manufacturers are already acting to make the goal a reality. Manufacturers account for two-thirds of U.S. exports of goods and services, and exports of manufactured goods have already emerged as a powerful force helping to bring the U.S. economy out of recession. Yet the key question remains: Will the Obama administration and Congress enact the policies necessary to double U.S. exports? So far, the action has fallen short of the rhetoric.

The broad strategies outlined by the President in the State of the Union are certainly the right ones: “We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules. And that’s why we’ll continue to shape a Doha trade agreement that opens global markets, and why we will strengthen our trade relations in Asia and with key partners like South Korea and Panama and Colombia.”

President Obama also highlighted the importance of modernizing export controls as a necessary measure to achieve a doubling of U.S. exports, an issue the National Association of Manufacturers (NAM) has made a policy priority.

The goal is achievable. Trade declined sharply in the United States and around the world during the recession, down 12 percent globally in 2009, the World Trade Organization (WTO) reported. But with the recovery, trade has also recovered. The WTO estimates trade will rise 9.5 percent globally in 2010.

U.S. manufacturers are taking part in that trade revival, as well. Two-thirds of the manufacturing production gain in February 2010 was in durable goods, which are more export-intensive than non-durable goods sectors. The increase in durable goods production signals that a rebound in developing economies is providing support for U.S. manufacturing sectors.

Indeed, exports of U.S. manufactured goods were 14 percent higher in February 2010 than in February 2009. That’s right on target to meet the President’s goal, which requires export growth of 15 percent annually over five years. Continued rapid growth in exporting will require policy and programmatic changes that enable U.S. companies to penetrate foreign markets more deeply.

We know what works. When America negotiates free trade agreements (FTA) that reduce other countries’ barriers to U.S. products, exports grow. U.S. manufactured goods exports to countries in the North American Free Trade Agreement, the Central American Free Trade Agreement and our bilateral FTAs exceeded imports by $21 billion in 2008 and $26 billion in 2009. This two-year trade surplus shines brightly when compared to the distressing $1.4 trillion deficit for U.S. overall trade in goods and services for that same period.

On his trip last November to Asia, President Obama outlined plans to negotiate a Trans-Pacific Partnership – a multilateral agreement to start with Singapore, Chile, New Zealand, Brunei, Australia, Peru and Vietnam. It’s a promising plan that manufacturers fully support, but we need to be concentrating on today’s game as well as looking forward to the next one. FTAs have already been negotiated with Colombia, Panama and South Korea; the completed agreements were even reopened to include environmental and labor standards insisted upon by Democratic trade critics in the U.S. Congress.

Administration officials have repeatedly praised the agreements (Colombia and Panama more strongly than Korea). In a recent trip to Bogota, Defense Secretary Bill Gates declared of the pending FTA, “It’s a good deal for Colombia, and it’s a good deal for the United States.”

The obvious next step is to submit the agreements to Congress for their enactment. Most observers believe there is sufficient political support for their passage.

In March, President Obama fleshed out his National Export Initiative by emphasizing the value of export promotion – expanding federal programs such as the Export-Import Bank to provide financial, marketing and technical assistance to companies that can be doing more to export. He reinstated the President’s Export Council, naming two manufacturers to lead it: Chief Executive Officers Jim McNerney of Boeing Corporation and Ursula Burns of the Xerox Corporation.

The President also set the stage for serious work on the nation’s outdated system of export controls. Our export control system has not been significantly updated in more than 30 years. Its modernization will improve national security by allowing the government to focus its enforcement resources on the most critical goods and technologies. At the same time, it will enhance U.S. companies’ competitiveness by providing a clearer and more efficient licensing system.

Indeed, a study conducted by the Milken Institute and included in the report, “Jobs for America,” found that modernizing U.S. export controls could increase exports in high-value areas and create 160,000 manufacturing jobs in the next decade. To reach the goal of doubling exports, we need to make it possible to export.

John Engler is president of the National Association of Manufacturers, whose mission is to enhance the competitiveness of manufacturers.

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