Tsunami and earthquake in Japan, armed rebellion in Libya, civil unrest in Egypt, Yemen and Tunisia – these calamities impact millions and occur just as the United States struggles to overcome the most severe economic contraction in recent memory.
For U.S. businesses to rebuild and thrive, they must take advantages of new opportunities often found under their noses. Opportunities for growth of export of services and manufactured goods have been woefully neglected, yet they are a well-established and effective way of rejuvenating economic health.
About a year ago, President Obama unveiled an export initiative that called for the doubling of our country’s exports in five years. This initiative has already shown early signs of resounding success despite a disturbing figure from the Small Business Administration: only one percent of all U.S. companies currently export.
CRUNCHING THE NUMBERS
Let’s look at some figures.
In 2010 the total American exports of goods and services was $1.834 trillion – $1.289 trillion in products, $545 billion in services. Those numbers represent an impressive growth of 21 percent and 8.6 percent respectively over the previous 12-month period.
Financing of exports also grew significantly, with the Export-Import Bank of the United States (U.S. Exim), the Federal agency charged with financing U.S. made goods and services exported out of the country, having completed a record fiscal year. The U.S. Exim financed $24.5 billion, an 11.7-percent increase over 2009, which had been a record year. Those numbers are on track to hit the President’s goal of doubling U.S. exports by 2014. But more must be done.
Although the recovery is projected to continue for the next several years and the U.S. dollar is likely to remain low for some time – which is a stimulus for others to buy our goods and services – our country will not be among the global export leaders, as measured by the percentage of total exports to GDP. Instead, we will need to fight for a greater market share among the world’s exporters. The way I see it, the United States must make cardinal changes, not only to how we think about exporting but also to our basic approach. We must make exports a strategic priority to our nation’s businesses, learning to approach exports more strategically and cultivating exporters as a recognized part of our economic landscape.
FOUR FUTURE CORNERSTONES
I believe that our next wave of national export expansion must be built on four cornerstones:
- Comprehensive education of exporters
- Enhanced export infrastructure
- Increased national focus on exports
- “Securities” market approach to exports
Let’s consider each.
Education – The United States must establish an educational system where exports and international business are taught not as a byproduct, but as a core economic discipline at all levels starting with middle school. In our country talented people who shape industries and professions such as science, sports, music, law, art and architecture are allowed to develop their skills, starting early in childhood.
Existing infrastructure helps weed out both promising and weak candidates. In sports, farm team systems exist and thousands of hours are invested in training and practice. Commitment by families, coaches and teachers to produce a travel team athlete or a budding marching band member often borders on fanatical. Debate teams exist to shape lawyers, and terrific science camps and competitions exist to spur innovation and identify our best and brightest scientific minds. We identify stars in these fields by training and preparing millions of students who are better prepared to succeed in certain aspects of life. Yet, when it comes to exporters with potential to create long-term financially rewarding benefits that will produce for decades, we simply leave things to chance. We offer our support late in the game, after mistakes have been made. As a nation, we do offer export advice and some training, but we don’t cultivate exporters through intensive training or formal education. Also, we have no system for measuring and standardizing the quality of export organizations.
If we are to succeed in exports, education is key.
Enhanced Export Infrastructure – To stand a chance at reaffirming our global position, we must refine and enhance our export infrastructure to better focus our formidable resources on assisting and preparing promising companies to export effectively. We must seriously consider expanding the reach of small federal agencies such as the U.S. Trade and Development Agency (USTDA), which delivers $47 in exports for every dollar it spends in funding project feasibility studies and reverse trade missions. We should explore leveraging government resources with Private Public Partnerships, wherein selected private non-profits are charged by U.S. government agencies with developing and funding nothing but export-related projects, transactions and initiatives. We must involve more banks and private finance companies in funding exports. Currently, only a handful of large banks finance export transactions guaranteed by the U.S. government through the U.S. Exim Bank.
Increased National Focus on Exports – Exports must become an important part of our national focus, on par with issues such as healthcare, housing, real estate and education. Media reporting and advertising, direct outreach by the U.S. Government and NGOs, grass roots outreach, union outreach – in short, every possible opportunity – should be utilized to preach the economic benefits and need for exports. This should be done not only during bad economic times when our domestic output shrinks, but at all times, on a consistent and sustainable basis.
If asked to name the top three initiatives that are going to improve our economy, the majority of Americans should be able to name exports as one of them.
“Securities” Market Approach to Exports – To attain the next level of economic growth, the U.S. export machine might have to borrow some pointers from the way the securities industry is structured. Specifically, I refer to information and analysis, which provide almost real-time updates as to how changes in the world affect given securities, alter opportunities and highlight changing risks.
Think about how well our export industry could be served if, for example, in the wake of Japan’s nuclear crisis, an export analyst covering the nuclear sector could highlight new opportunities to U.S. exporters for the sudden need of containment materials. Export opportunities opened up, as Japan called on Ukraine nuclear specialists after the devastating tsunami. But these specialists in Ukraine did not have the necessary equipment, worth tens or hundreds of millions of dollars, to effectively provide services to the Japanese. American providers of these required goods needed a way to quickly be apprised of the opportunities.
Another example of coverage would be a broader dissemination of pending project opportunities, which have export potential, such as those developed with USTDA’s funding. Overseas Private Investment Corporation or private developers could reveal export opportunities to U.S. providers of goods and services early, thereby allowing them the chance to respond quicker.
Having an actionable analytical/informational platform for the industry vs. the current platform for reporting past deals and transactions will provide a strong forward-looking base of transaction flows for U.S. exporters. Such a “securities type” platform can be developed on the basis of information from banks and insurance companies currently financing exports, EMCs (export management companies) and independent private analytical services. Self-policing and self-regulation should probably be the model for such a platform. Yet regardless of the model, the need for immediate and current information and analysis is critical to help exporters in their decision-making and business development.
As a nation trying to combat economic conundrum and to rebuild its prosperity, the United States has started on the correct path to growing its exports. With improved education of exporters, enhanced export infrastructure, increased focus on exports as a national priority, and the addition of a forward-looking information and analytical platform to aid exporters in growing their business, the country is certain to secure its rightful place among the leading exporter nations in the world.
Alexander Gordin is co-founder and managing director of the New York-based Broad Street Capitol Group. He is also a trustee with the Princeton Council on World Affairs and the author of “Fluent in Foreign Business.”