The US Must Increase Export Volume AND Dollar Value
They say that numbers don’t lie. To know the whole truth, however, you need the right numbers.
That’s why we should treat President Obama’s latest boasts about exports with skepticism.
“Two years ago, I set a goal of doubling U.S. exports over five years,” said President Obama in his State of the Union address last month. “With the bipartisan trade agreements we signed into law, we’re on track to meet that goal ahead of schedule.”
In two senses, he’s correct. In a third sense–a very important one–he’s misleading.
Let’s start by giving the president credit where he deserves it. President Obama rightly praised those three bipartisan trade agreements, approved by Congress in the fall. The deals with Colombia, Panama, and South Korea will create new export opportunities for American farmers and manufacturers. That means more jobs here in the United States.
If President Obama can add to this positive momentum by completing the Trans-Pacific Partnership–a multilateral agreement involving the United States and Pacific Rim nations, possibly including the big prize of Japan–then he will go down in history as a champion of free trade. He’ll also make it easier for Americans to boost exports not just during the five-year timeframe of his promise, but for a long time into the future.
The dollar value of U.S. exports also is rising–and for this, the administration deserves praise as well.
But let’s not trick ourselves into thinking this is a world-beating achievement. President Obama made his pledge in 2010, meaning that when he promised to double exports, he was looking at numbers from 2009. That’s his baseline.
The President enjoys a big advantage by starting with those 2009 figures. Due to the global recession, U.S. exports dipped in 2009. They were worth $2.09 trillion, less than they were worth in both 2007 ($2.14 trillion) and 2008 ($2.38 trillion). So a portion of any increase above the 2009 figure was simply a recovery.
Perhaps this is nothing to take for granted. No iron law says the value of exports must rise all the time, no matter what. Yet a certain amount of the progress we’ve seen since that State of the Union pledge has involved a return to normality, not the breaking of new ground. We must understand this fact clearly.
As it happens, the value of exports in 2010 was about the same as in 2008. So 2009 was an abnormally bad year that defied a general upward trend–and an unusually good starting point for the President to make a promise. Between 2009 and 2010, exports jumped about 16 percent. They’ll jump again in 2011, thanks in some measure to a record-setting year for farm exports. (This year may be different: Secretary of Agriculture Tom Vilsack recently warned that farm exports in 2012 probably won’t match the mark they set in 2011.)
We don’t have complete data for last year yet, but it looks like the rise in the value of exports between 2009 and 2011 will approach 40 percent. So, despite all of these caveats, President Obama has every right to say he’s “on track” to meeting his promise of two years ago.
There’s just one problem: The Obama administration is using the wrong measurement.
The dollar value of exports is important and we should applaud its rise. But even more critical is the volume of exports–the amount of raw stuff that we’re selling to customers in other countries. This is what really counts.
On this measure, unfortunately, we aren’t keeping pace. Agriculture has boomed in value. Between the crop years ending in August 2009 and August 2011, however, the volume of our corn exports actually declined. In 2009, the U.S. exported over 47 million metric tons (MMT)) of corn, with a value of $9.3 billion all over the world. In 2011, the dollar value of corn exports rose to $12.9 billion but we sold just over 45 MMT. By the time we finish 2012, estimates suggest that the volume of corn we sold to our overseas customers will have decreased by 14 percent since 2009.
We still lack adequate data from other industries to draw firm conclusions about the real health of our exports, but initial signs suggest that we’re nowhere near doubling our volume by 2015.
Dollar value is a reflection of many factors, including fluctuations in commodity markets and inflation. Volume is simply a better indicator of true economic health.
President Obama wants us to think our exports are doing fine–but the truth is that we can and must do better.
Bill Horan grows corn, soybeans and other grains with his brother on a family farm based in North Central Iowa. Bill volunteers as a board member for Truth About Trade & Technology www.truthabouttrade.org