It’s been two years since President Obama signed an executive order launching the National Export Initiative, the ambitious program to double exports in two years. So how does the NEI grade out? After a strong start that put the goal right on track, doubt has crept in as momentum has slowed, weighed down largely by Europe’s sovereign debt crisis.
“When the National Export Initiative came out, it was music to my ears. We were really going to change things,” said Frank Vargo, vice president for international affairs for the National Association of Manufacturers. By January, year-over-year growth had slowed to less than 10 percent. “That’s nothing to be sneezed at, but you’re not going to double exports at that rate,” Vargo said. “We were on target, 15 percent year-over-year. Toward the end of the year, it became increasingly obvious we were falling below that target.
“The world has slowed down. We don’t have the robust growth in exports that we had earlier,” Vargo said. “We need an extra oomph at a time when everybody else is concerned about their exports, too.”
After Canada and Mexico, the European Union is the biggest U.S. export market, and the debt crisis there has been in the headlines for months. “A lot of countries in Europe have had excessive growth of government debt. As governments cut back, it has a negative effect on economic growth,” Vargo said. “If you strip away everything, economists will tell you that the two most factors driving exports are the exchange rate and the rate of economic growth overseas. The dollar is competitive overseas; that’s in our favor. Economic growth is not so competitive.”
Some 63 percent of the goods made for export come from metropolitan areas, according to a study by Emilia Istrate, senior research analyst with the Brookings Institution’s Metropolitan Policy Program. “Exports have been growing rapidly in the first year of recovery, and they have contributed significantly to the U.S. economic recovery,” she said.
Most of the top 10 cities on Brookings’ list, which is based on goods manufactured in the region, also are seaports or air cargo hubs. The Los Angeles-Long Beach metropolitan area was at the top, totaling $79.8 billion in export goods.
Exports grew 11 percent from 2009 to 2010, while the U.S. economy grew 3 percent, Istrate noted. “It’s clear that U.S. companies made a conscious decision to go after the growth abroad,” she said.
Although the EU was a mainstay, companies began seeking markets in developing countries, especially Brazil, India and China. Before the 2008 recession, exports to those countries totaled about 3 percent of all exports. By 2010, they accounted for 5 percent of all U.S. goods shipped overseas.
“This shows us there had been an acceleration of the long-term trend of U.S. exporters reorienting themselves to the growth market in the developing nations,” Istrate said. “The growth of the global market and the growth of exports is not a zero-sum game. Growth in China and Brazil markets could also prove beneficial to U.S. exporters.”
Istrate said exporters will capture a part of developing nations’ growth even as competition increases from the country’s domestic manufacturers. U.S. exporters would improve their competitiveness if the United States does what it can to help companies face the competition. That includes further pursuit of free trade agreements, especially the Trans-Pacific Partnership, enforcement of intellectual property rights and reform of the antiquated U.S. export control regime.
Manufacturers in metropolitan areas that don’t have direct access to ports or air cargo hubs also will benefit from improved transportation infrastructure, Istrate said. Her report calls for the creation of a national freight strategy that focuses on freight corridors, urban freight and the so-called last mile between intermodal facilities and seaports.
“First and foremost, we should talk about transportation policy,” she said. “Infrastructure is essential for the movement of goods internally and abroad. It is very important to provide more strategic funding for the maintenance and development of the U.S. transportation system.”