The following article features a comment by Michael Stumo, CEO of CPA
[Reposted from Inside US Trade | David Thomas | January 8, 2015]
The National Export Initiative’s (NEI) failure to double exports from 2009 levels by the end of this year is due to a number of factors, some outside the Obama administration’s control and others that it could have potentially addressed with targeted policy changes, according to trade policy experts.
U.S. exports of goods and services have increased by 44 percent, from $1.583 trillion in 2009 to $2.28 trillion in 2013, which is the latest available annual data that is available. In order to have doubled exports from 2009 to 2014, the U.S. would have had to export $885 billion more than it did.
Some states have doubled their exports in that time period, said Ed Gresser, the executive director of Progressive Economy. He said New Mexico, Texas, Louisiana and North Dakota did so between 2009 and 2014, and petroleum products were a top export for them. In most instances, exports of petroleum products doubled between 2010 and 2013, according to data available from the Commerce Department.
But Gresser noted that, as a share of gross domestic product (GDP), exports had grown from 12.5 percent of GDP to 13.5 percent, while imports have declined from 17.4 percent to 16.5 percent of GDP. Gresser said this was the highest share of GDP exports have had in modern U.S. history. “We didn’t get to doubling, but it’s a pretty good record,” he said.
Experts agreed that it was important to take GDP into account when looking at the U.S. export and import balances. This is because those numbers will always rise in an economy with a growing population, Gresser said.
But Rob Scott, director of trade and manufacturing policy research at Economic Policy Institute, said exports and imports are taken into account when calculating GDP, and that a high import balance can slow down economic growth. “I think the trade deficit is the most important measure of international trade on the economy. Exports in isolation doesn’t give you a full picture,” he said.
Similarly, Michael Stumo, chief executive officer of the Coalition for a Prosperous America, said export growth on its own is not a good indicator of economic growth. Moreover, the drag created by imports in a country’s GDP can accumulate over time and represent lost progress, he added.
Both Gresser and Caroline Freund, a senior fellow at the Peterson Institute of International Economics, said they felt the administration’s goal of doubling exports in five years was probably not realistic. This is because the only times U.S. exports have doubled in a five-year period were in “extraordinary circumstances” as Gresser put it — World War I, World War II, and a period of high inflation during the 1970s.
In addition, some major trading partners, such as the European Union and Japan, recovered slower than other nations from the 2008-2009 economic crisis, which affected the level of U.S. exports there, Gresser said. He noted that the U.S. also experienced a major drop in imports as a result of the economic crisis, without any policy changes. Imports between 2008 and 2009 dropped from $2.55 trillion to $1.966 trillion, which is “the biggest drop we had since 1938,” he said.
Freund criticized the Obama administration for not seeking more trade agreements that could have boosted exports by opening foreign markets. She noted that the U.S. has not completed either of its major trade initiatives, the Trans-Pacific Partnership or the Transatlantic Trade and Investment Partnership.
But Gresser also cautioned that the effects of trade agreements can be difficult to parse out from other events. “You can’t entirely separate out things happening in the world from U.S. policy,” he said.
For instance, U.S. exports of goods and services to Peru have grown by 105.3 percent since 2009, the year the free trade agreement went into effect. But Peru has also been flush with cash as a result of China buying many natural resources from the country during this time period. It’s hard to discern whether exports have increased because of the increased market access, or if Peru has more money to import products from the U.S., Gresser said.
Gresser also highlighted financing from the Export-Import Bank, although he cautioned that the administration’s ability to use that is hampered as a result of the political environment in Congress. House Republicans and prominent conservative groups have called for the bank to expire, and have prevented legislation authorizing a long-term extension of the Ex-Im from gaining traction.
Gresser said the administration could also take more steps to make it easier for businesses to export from the U.S. He noted that there are 48 different government agencies that have some kind of jurisdiction over exporting certain goods, but there is no central location for accessing all of the forms that might be needed.
In February, President Obama signed an executive order creating a single window that exporters will be able to use to find out what forms and steps they need to complete before shipping, Gresser said.
But other economists also faulted the administration for not fighting harder against currency manipulation by U.S. trading partners like China. Had the administration offset the unfair advantage currency manipulation gives to those countries, the U.S. could have reached its goal — or been very close, Scott said.
Likewise, Stumo highlighted the administration’s unwillingness to address the use of currency manipulation — as well as border taxes, industrial subsidies and state-owned enterprises operated by U.S. trading partners — as the reasons why the U.S. did not make its NEI goal.
To press countries like China on currency manipulation, the Obama administration should have named it as a currency manipulator in the Treasury Department’s semiannual report on currency, according to Scott, Stumo and Scott Paul, president of the Alliance for American Manufacturing.
But Paul acknowledged that this step alone does not remedy the problem; Treasury is required by law to consult with countries who are named currency manipulators, but it does not guarantee an outcome.
“When you do have the designation — it sets you on a path of resolution. It makes pretty clear what our bottom line is,” Paul said.
But Freund expressed doubts that naming China a currency manipulator — or having the U.S. go on the offensive in the currency market — would be entirely beneficial for the U.S. “Is that a fight we really want to pick right now?” she said.
In general, Freund believes the administration’s efforts are better spent opening markets through trade agreements and bolstering its domestic industries by investing in manufacturing and infrastructure. She said attacking other governments for their programs is best left to venues like the World Trade Organization, but the U.S. taking unilateral action will not lead to a guaranteed success.
Both Scott and Freund were critical of the fact that the NEI was more bent on export promotion rather than actual changes to policy.
Imports of goods and services also increased at the same time during the first phase of the NEI. After tumbling to $1.966 trillion in 2009, imports of goods and services grew by 40 percent to $2.756 trillion in 2013.
The NEI was originally launched in 2010 by Obama in his State of the Union speech. The initiative uses 2009 as the base year for exports, which many experts noted were quite low as a result of the 2008-2009 global economic crisis.
Obama administration officials have not directly acknowledged that the NEI will not make its goal of doubling exports, but have highlighted the increase in U.S. exports in the past five years.
The administration in a Dec. 18 fact sheet touted the fact that exports will increase for a fifth consecutive year, although they did not mention the NEI goal of doubling. According to the fact sheet, U.S. exports have grown in sectors like automotive vehicles and parts, petroleum products and consumer goods. It also emphasized the continued surplus in services exports like travel, tourism and financial services.
Commerce Secretary Penny Pritzker expressed similar sentiments in her remarks during a Dec. 11 meeting of the President’s Export Council. “Through this effort, for the very first time, we’ve brought the full suite of federal resources to bear to help U.S. businesses drive exports…The NEI has produced remarkable results. We’re on track for the fifth straight year of record-breaking exports,” she said.