Taking Initiative on Exports

Taking Initiative on Exports

There is no shortage of ideas for meeting President Obama’s goal of doubling exports in five years and creating 2 million new jobs. What’s needed now are some hard data policymakers can use to get the country moving in the right direction, according to Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers.

“If we don’t quantify, we’re going to end up with the usual — a little more promotion, a little more financing, more trade missions — and let it go. That won’t do it,” Vargo said. “We’re saying you’ve got to quantify the goals and quantify the approach, and have benchmarks and timelines to get there.”

Suggestions from sources as diverse as the Aerospace Industry Association and Capitol Hill are flowing into the Commerce Department. The President’s Export Promotion Cabinet, composed of members of the administration, and his Export Council — 20 industry leaders representing virtually all segments of the economy — are expected to boil the suggestions into a set of recommendations.

The first of those recommendations should come out in mid-September, Vargo said. Export promotion already has begun on the front lines. The Commerce Department in July forged a partnership with the U.S. Postal Service to promote exports among small businesses. Secretary Gary Locke also visited UPS’s Louisville, Ky., hub to promote the company’s efforts to identify new export markets.

Companies may be getting the message. Exports in May grew 26.8 percent in value from May 2009 totals, extending a rally that began last December, according to the Foreign Trade Division of the U.S. Census Bureau.

NAM recently published a white paper as a first step to quantifying what’s needed to bridge a $300 billion gap between the normal growth in exports in the next five years and the president’s goal of $1.8 trillion.

“We will be pushing the administration and the President’s Export Council to quantify. How big do you think the job is? How effective are the tools you have?” Vargo said.

While the government can do its best to promote and encourage, Vargo said the country should begin to think of itself as an exporting nation. “It’s going to take a change in attitude. We need a change in export orientation. In this country, exports are almost incidental,” he said. “Germany and Japan built exports into their business models from Day 1. Their domestic markets are too small. I’m hoping that the goal of doubling exports in five years will trigger a lot of discussion and thought on what we need to do.”

NAM’s white paper estimated that more than $100 billion could be added to total exports through free trade agreements. The U.S. has had a trade surplus in the past two years with the countries with which it has an FTA. Many trade groups are urging Congress to approve three Bush-era agreements with South Korea, Panama and Colombia.

Still, only 40 percent of U.S. exports benefit from FTAs. “Companies are not genetically imprinted that we have free trade agreements,” Vargo said. “They don’t automatically know what they have to do to qualify.”

All free trade agreements come with problems that must be overcome. The North American Free Trade Agreement’s rules-of-origin requirements, for example, are paper-intensive. One U.S. exporter to Mexico said it was simpler to just pay the tariff, Vargo said.

And the competition keeps moving ahead. The European Union just completed a free trade agreement with South Korea, and is negotiating with Vietnam, Indonesia, Brazil and Argentina.

“This hurts,” Vargo said. “The rest of the world is not standing still.” Without its own South Korea FTA, U.S. exporters will be at a price disadvantage of 7 to 8 percent.

“It’s not as if we don’t do an FTA, we don’t gain, but we don’t lose,” Vargo said. “No! We lose!”

Vargo believes it’s not too late, and the country can meet the president’s goal. “We’re still a huge exporter. We have enormous resources,” he said. “As we turn more to wanting to export, and looking at what we have to do for the export infrastructure, I’m optimistic. But we’ve got to have the national will to do it.”

Contact R.G. Edmonson at bedmonson@joc.com.