The National Export Initiative goal of doubling exports in five years is laudable, but the question is whether the plan to achieve the goal will work.
In 2009, the U. S. exported $1.57 trillion worth of goods and services, while importing $1.95 trillion. Imports of crude oil totaled $189 billion, which was equal to about half of the trade deficit. Manufactured products only represented 31 percent of U. S. exports, while services represented 69 percent. The overall annual trade deficit for 2010 is estimated at $502 billion, up 34 percent from the $374.9 billion for 2009.
The biggest problem is that the United States is no longer the manufacturing source for consumer and household goods and commodities that it once was. American brands such as IBM, General Electric, and Maytag were known worldwide for their quality and innovation. These types of products are now being made in Asia, mostly in China, and imported by the United States and other countries for their consumers to buy rather than being manufactured in the United States for export worldwide.
The last time the United States ran a trade surplus was in 1975 when President Gerald Ford was in the White House. Most presidents since then have tried to increase exports and get us back to at least a trade balance, but they haven’t succeeded, and the trade deficit has gone from bad to worse, especially with China. Can the U. S. get other countries to go along with our plan to double exports?
Roger Simmermaker, author of How Americans Can Buy American, doesn’t think so. In his “Buy American Mention of the Week” of April 14, 2010, he said, “We cannot expect other countries to surrender their markets to us simply because we have stupidly surrendered our market to them…We’ve been giving foreign producers production-cost advantages over our own producers for at least 35 years now, and we can’t expect them to start ‘playing nice’ with us and let us invade their markets to the tune of doubling our exports.”
Ian Fletcher, author of Free Trade Doesn’t Work, What Should Replace it and Why, comments, “The fraudulence of the administration’s initiative is obvious from its proposal that America improve its trade position by signing yet more trade agreements. America’s past trade agreements, from NAFTA on down, have produced larger deficits for the U. S. not smaller ones. These agreements are really offshoring agreements designed to make it easier for American corporations to produce abroad for the American market. As long as America persists in trying to play by free-trade rules (honored only on paper) while foreign nations play the 400-year old game of mercantilism, this will remain true. The administration is setting itself up for a huge embarrassment when the results of this initiative become visible a few years from now.”
In my article of June 2010, “Do Trade Agreement Create Manufacturing Jobs?” I pointed out that we lost about a half a million manufacturing jobs between 1994 (when NAFTA was ratified) and 1999. In addition, we lost another 5.5 million jobs since the year 2000 when China was granted Most Favored Nation status paving the way for China’s accession to the World Trade Organization in December 2000. My conclusion in this article was that trade agreements create manufacturing jobs, but not necessarily in the United States. They create higher-paying manufacturing jobs in the countries of our trading partners.
However, only one of the eight priorities of the National Export Initiative plan promotes free trade agreements. I believe that the other seven priorities have merit and are worth pursuing. Although I’m skeptical about the ability of the plan to double exports in five years when we are fighting against the predatory mercantilism of countries such as China, India, and Japan, it is well worth pursuing these other priorities to improve the ratio of exports to imports as much as possible.
The National Export Initiative report states that progress has been made in the first nine months towards the five-year goal. “Exports in the first six months of this year were 18 percent higher than exports in the first six months of 2009 … exports have contributed more than one percentage point to GDP growth (at an annual rate) in each of the four quarters of recovery and have contributed over 1.5 percentage points to growth in the last year.”
Some examples of contributions to this progress are:
- The Department of Commerce has coordinated and unprecedented advocacy on behalf of U. S. exporters by coordinating 20 trade missions I 25 countries with more than 250 companies participating.
- Commerce recruited nearly 8,800 foreign buyers to visit major U. S. trade shows in the United States, facilitating over $660 million in export successes since January 2010.
- The Small Business Administration has identified more than 2,000 potential exporters on the Central Contracting Registration to target for export promotion outreach.
- The Export-Import Bank increased its loan approvals by nearly 20 percent in fiscal 2010, from $18.3 billion to $21.5 billion.
Leila Aridi Afas, Director, Export Promotion, U. S. Trade and Development Agency, kindly provided me with some success stories from the U. S. Trade and Development Agency (USTDA) 2010 Annual Report. I was given permission to reprint a couple of the stories in this article:
USTDA Brings Broadband Access to Africa
As a direct result of USTDA’s investment in the visit of a ministerial-level delegation to the United States and a regional ICT conference, over $400 million in U.S. equipment and services exports were utilized by African project managers to bring broadband communications to Africa. Without an undersea fiber-optic cable system, countries in the region relied on costly and scarce satellite links, which could not meet increasing demand for broadband communications services.
USTDA’s multi-year effort to support the development of an undersea fiber-optic cable linking East Africa with communication hubs around the world proved successful when a group of African ministers visited the United States, as part of a USTDA-funded program, and convinced potential financiers, including Sithe Global and the Overseas Private Investment Corporation, that fiber-optic cable connecting East Africa to the rest of the world could be commercially attractive.
In June 2009, SEACOM became operational offering 1.2 terabytes per second of capacity to enable high definition TV, peer-to-peer networks, IPTV, and high-speed internet access. The 13,700 km cable links South Africa, Mozambique, Tanzania, Kenya and Djibouti with India and Egypt. “The system, which was designed and installed using Tyco Telecommunications’ state-of-the-art technology, will undoubtedly provide businesses and citizens in South and East Africa alike with the capabilities they need to communicate with the rest of the world and participate in the global marketplace,” said Debbie Brask, Managing Director of Project Management for Tyco Telecommunications.
As described by SEACOM’s Chief Executive Officer Brian Herlihy, USTDA’s multi-year effort was critical to SEACOM’s launch. “The impetus for the cable project is directly attributable to Sithe Global’s participation at the half-day briefing sponsored by the USTDA visit.”
Reverse Trade Mission Connects U.S. Companies with Sales Opportunities in Brazil’s Rail Sector
USTDA played a pivotal role in the sale of 55 General Electric locomotives, which were manufactured in Grove City and Erie, PA, to MRS Logística, a Brazilian rail company. By sponsoring a reverse trade mission for 10 delegates from the Brazilian rail sector to the United States, USTDA provided a forum for procurement decision makers to examine U.S. capabilities in the area of railroad rehabilitation and modernization.
The visit was prompted by the interest of Brazilian rail companies in making significant upgrades to their rolling stock, communications and signaling systems, track and other infrastructure. Based on these needs, the itinerary was structured to inform U.S. companies about export opportunities in the Brazilian rail sector and to facilitate direct contact with key decision makers.
During the reverse trade mission, the delegates traveled to Pennsylvania for site tours, including one to the GE Transportation diesel engine manufacturing plant in Grove City. GE’s transportation business recognized the importance of this initial contact leading up to its sales activity to MRS Logística. “The visit by the Brazilian rail officials helped us to establish the lasting contacts necessary to tap into an important emerging market. We look forward to building on these relationships for many years to come,” said Robert Parisi, General Manager of International Locomotives and Modernizations at GE Transportation.
The USTDA report states, “This past year, the Agency identified over $2 billion in U. S. exports that were directly attributable to USTDA-funded activities.” By following the priorities in the National Export Initiative, the successes of this Agency should be even greater in the next few years.
This topic will be continued in a Part Three article focusing on the stories of a few San Diego companies that export products and what could be done to help them be more successful. In the meantime, manufacturers should look at the Department of Commerce website (www.export.gov) to locate an Export Assistance Center to assist them with entering the global marketplace by exporting or contact the World Trade Centers Association to locate the nearest World Trade Center at http://world.wtca.org.
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