In the first progress report on its ambitious National Export Initiative, the Obama administration rapped a solid base hit, but business leaders are looking for home runs.
The report, produced by the administration’s high-level Export Promotion Cabinet and unveiled Sept. 16, was the first detailed outline of what steps Commerce and other federal departments and agencies will take toward the goal Obama set in his State of the Union address in January: double exports by 2014 and create 2 million jobs. U.S. exports to the world fell to just more than $1.05 trillion during last year’s trade and economic recession from $1.29 trillion a year earlier.
The report lists items officials announced previously: The Commerce Department will invest more in trade promotion, and will be a commercial advocate for U.S. firms competing for international contracts and work to break down barriers to trade.
The government already is working on ways to modernize export controls, a top priority in the business community. Small and medium-sized enterprises will benefit from more liberal terms for export financing from the Export-Import Bank of the United States.
It’s a good start, according to Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, but the export cabinet’s progress report was short on specific steps, and lacked ways to measure progress.
|“They’re going to use the resources they have more effectively and efficiently,” Vargo said. “That’s good, but our view is you’ve got to throw a lot more at it. You can’t do just a little bit better and double exports. You have to have a fundamental change.”
Export promotion is an investment of taxpayers’ money, but it returns $40 for every dollar spent, Vargo said. The Ex-Im Bank provided $20 billion in export loans last year; the Canadian equivalent loaned $80 billion.
“It’s entirely appropriate to think of ways for the Ex-Im Bank to be more ambitious. It’s actually one of the world’s smaller export credit agencies,” said John Murphy, vice president for international policy for the U.S. Chamber of Commerce. “The Canadian equivalent lends out five or 10 times as much money in any given year, for an economy that’s one-tenth of ours.”
Business is not waiting for the government to take the next step, he said. “American business and agriculture are out pushing export sales on their own account,” Murphy said. “We’ve had 18 percent growth in exports over the past 12 months, but we’re measuring against a very low bar in 2008.”
Free trade agreements with South Korea, Panama and Colombia, left over from the Bush administration but languishing in Congress, are a good place to start, but the U.S. must move aggressively to reach agreements with emerging nations such as Brazil, India and China that have economies growing 7 percent or more, Murphy said.
Obama in July announced he would sign the South Korea free trade agreement when the G-20 nations meet in Seoul on Nov. 11-12, but the trade groups are concerned the export cabinet report omitted mention of the other pending agreements.
“What you always hear from the business community is that you’re never going to be able to double exports in five years if you don’t have a laser-like focus on opening foreign markets,” Murphy said. “We almost doubled exports in the five years ending in 2008, but that was a period in which we entered into free trade agreements with more than a half-dozen countries. We consistently try to bring the focus back to opening foreign markets — not just passing pending free trade agreements, but negotiating more of them.”
New free trade agreements could add $100 billion to the president’s five-year goal, NAM estimates, and the U.S. will pay a high price if it doesn’t act, Vargo warns.
“We know we’ve got to get Brazil, we’ve got to get India. And what’s troublesome, as we speak, the European Union is negotiating with India, Brazil, Argentina, the United Arab Emirates . . . all these markets,” Vargo said. “If you get there first, then you have duty-free access while your competition is paying the duties. You get there first, you get your choice of marketing channels. When the Americans arrive two or three years later, you’re entrenched.”
Murphy said the U.S. has lost 85 percent of the wheat market in Colombia because of a new free trade agreement between that country and Argentina. “We stand to lose ground just by standing still,” he said.
The administration, Murphy and Vargo said, does not yet have a strategy for breaking down trade barriers but is beginning to understand the consequences of doing nothing.
“They understand that the domestic economy is not going to give us the growth we need,” he said.
Contact R.G. Edmonson at email@example.com.