President Obama’s National Export Initiative


President Obama in his State of the Union address announced a National Export Initiative to double exports in the next five years. That was somewhat of a surprise as the President was negative towards trade during the election campaign in 2008 and said little positive on trade during his first year in office. The goal is not as wildly optimistic as it may first appear and is consistent with his focus on creating jobs, but most countries are also pursuing similar strategies to increase exports.

The U.S. Chamber of Commerce has been pushing the doubling of exports, estimated at $1.54 trillion for 2009, down from $1.83 trillion in 2008, as part of its larger effort to create 20 million new jobs over the next ten years to replace the seven million full time jobs lost in the current recession and the 13 million additional jobs needed to achieve full employment in 2020. According to Howard Rosen of the Peterson Institute for International Economics (IIE), growth in U.S. exports of goods and services averaged 10 percent per year over the past 50 years, compared to the 15 percent per year growth needed to double exports in five years. U.S. Census data show that the real value of goods exports increased 35 percent from 2000 to 2008. Exports are 11 percent of U.S. GDP compared to 40 percent for Europe and China, 36 percent in Canada, 22 percent in India and 16 percent in Japan. The average for high-income countries is 24 percent.

President Obama’s interest in exports is related to creating 2 million new jobs. Rosen of IIE testified to the Senate Finance Committee Subcommittee on International Trade in December 2009 on the benefits of increased trade,
“Exports enable firms to sell beyond their domestic market, thereby enabling them to increase production, sales, and jobs. Exporting firms, on average, employ almost twice as many workers and produce twice as much as non-exporting firms.
Exporting firms pay their workers more than non-exporting firms and they are more likely to provide health insurance and pension coverage to their workers. Exporting firms have higher productivity, making them more competitive and prosperous.”

Rosen further noted that despite these outcomes from exports, “Only 4 percent of US companies export. Five hundred companies account for 60 percent of US exports. Companies with more than 500 employees, which constitute only 3 percent of our exporting companies, account for 70 percent of US exports. Less than 0.5 percent of US companies operate in more than one country. Fifty-eight percent of exporting companies trade with only one country.”

In addition to the National Export Initiative to help farmers and small businesses who want to sell their goods abroad, the Administration will work to change export control laws that limit sales of technology with military uses and push ahead on both the Doha Round of WTO trade policy negotiations and regional and bilateral free trade agreements (FTA). A recent report for the National Association of Manufacturers estimates that modernizing export control laws could increase GDP by $64 billion by 2019 and create 160,000 manufacturing jobs.

The President is establishing an Export Promotion Cabinet which will include the Secretaries of Commerce, State and Agriculture, the U.S. Trade Representative, the Small Business Administration and the U.S. Export-Import Bank. The Trade Promotion Coordinating Committee led by the Department of Commerce has been revitalized to bring together 20 federal agencies and departments on export issues. The President’s 2011 budget proposes a 20 percent increase in the budget for the Commerce Department’s International Trade Administration to fund the export initiative. The USDA budget also includes $54 million extra for foreign market promotion and work to remove trade barriers. The Export-Import Bank’s budget authority would be increased to $93 million in FY2011, which would support financing of $19.4 billion of exports, an increase from $16.1 billion. The Bank plans to spend $13.5 million to expand export development efforts for small businesses.

In his speech the President promised to “strengthen” trade ties with Columbia, Panama and South Korea, but did not commit to support the Bush FTAs. Secretary of the Treasury Timothy Geithner responded to a question at a House of Representative’s hearing that the President wants the agreements passed this year. The issue was clarified by Geithner’s office that trade officials must resolve issues with the three countries before sending the FTAs to Congress. The Chairman of the Senate Agriculture Committee, Blanche Lincoln (D-AR), and 17 other senators have written to President Obama urging him to submit the agreements to Congress.

Devaluing of the dollar to increase exports has already been raised as an issue. Secretary of Commerce Gary Locke has been quoted saying that the Administration is not counting on a lower-valued dollar to help increase exports.

Agriculture is not included in the industries expected to double export in five years, even though agricultural exports did more than double from $50.8 billion in fiscal year (FY) 2000 to a record $115.3 billion in FY2008. Volumes and prices were both high in FY2008. Exports declined to $96.6 billion in FY2009 and are projected for FY2010 at $98 billion, almost double the 2000 level.

The President recognizing the link between exports and job creation and directing more money and government employees to export development will not automatically translate into more exports of goods and services. Recovering economies around the world will likely provide some opportunities to regain exports lost in 2009. Finishing up the three pending free trade agreements would open new markets and confirm that the Obama Administration has a new perspective on trade. Removing outdated export controls will add market opportunities.

Those efforts will be helpful, but U.S. firms must be competitive in world markets. Goods and services exports will likely be high-value, high-wage products from firms and industries that are world leaders and have a culture that supports exports as a regular part of business activity. Increased exports will be mostly the result of private market activities, not government ones.

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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