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Exports
Lead the Way
Peter T. Leach | Jan 9, 2012 The Journal of Commerce Magazine -
News Story
With the help of President
Obama’s National Export Initiative and the weak dollar, exports
are closing the gap in a trade marked by billion-dollar deficits
Housing can’t do it.
Technology is strong, but not strong enough to act as the
economic driver. And, with consumer demand weak, don’t count on
a big retail buying binge. So where is the U.S. economy to turn
for the push it needs to pull out of the doldrums? The answer:
overseas, where strong demand for everything the U.S. makes —
from agriculture to manufacturing — is driving an export renaissance.
Those who say the days of U.S.
manufacturing have been relegated to the history books overlook
one simple fact: The United States still has the world’s largest
manufacturing economy. It is a major supplier of grains,
soybeans and corn to the global marketplace. Its products help
power the industrial sectors of Europe, Japan and, increasingly,
the rapidly growing emerging markets of Asia and South America.
Its agricultural exports feed and clothe the growing middle
classes in those emerging markets.
“Orders for U.S. capital equipment
are strong, and orderbooks are filled out for the next two
years,” said Walter Kemmsies, chief economist of port design and
engineering consultant Moffatt & Nichol.
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Kemmsies thinks U.S. exports of
oilseeds and grains, already the largest export commodity to
China by value, also could act as the driver for the next U.S.
economic cycle. “As people move from rural to urban areas to
take higher-paying jobs,” he said, “their diets tend to become
more protein-oriented, in particular, beef, and they want better
clothing.”
Kemmsies forecasts the value of all
U.S. exports will grow at twice the rate of GDP next year, which
he estimates at 2.5 to 3 percent, meaning exports will grow 5 to
6 percent.
The strong U.S. export growth of the
last few years is misleading, however, because the country has a
long way to go before exports could swing more into balance with
imports and start to cut its huge trade deficit. The U.S.
incurred a $500 billion deficit in trade in goods and services
in 2010 and had racked up a $558 billion deficit in the first
three quarters of 2011. The last time the U.S. had a surplus in
its trade in goods and services was 1975, when it recorded a $12
billion surplus.
It’s that imbalance, of course, that
makes the inbound leg of the transportation market the
head-haul, with strong utilization rates among ocean carriers
clearly outpacing those on the outbound leg. Finding a balance,
be it through the National Export Initiative, further weakness
in the dollar or federal reform, while elusive, certainly isn’t
unattainable.
“The U.S. exports only 40 percent as
much of its manufacturing production as the world average,” said
Frank Vargo, vice president of international economic affairs at
the National Association of Manufacturers. U.S. manufactured
goods account for approximately 60 percent of all U.S. exports
of goods and services, but in relation to the size of its
economy, the U.S. lags, ranking 13th among manufacturing
countries in terms of the proportion of manufacturing production
it exports, just ahead of Russia and Brazil.
The U.S. share of the global market
for manufactured goods has dropped from just under 14 percent in
2000 to less than 10 percent in 2010, a share loss that now
costs the country $450 billion a year. “Our trade deficit is due
more to under-exporting than to over-importing,” Vargo said.
President Obama’s National Export
Initiative targets a doubling of U.S. exports in the five years
to 2015. It’s off to a good start, because exports have been
growing sharply since the 2008-09 downturn. Exports jumped 20.5
percent in 2010 and were up 17.1 percent in the first 10 months
of 2011 over the same period a year earlier, according to the
U.S. Commerce Department. The $1.2 trillion in exported goods in
the January-October period of 2011 was 42.3 percent ahead of the
same period in 2009.
Vargo worries the strong export
growth over the last two years will create a sense of
complacency that will slow further efforts to increase exports.
It might not be a bad thing, he said, if export growth slows
this year, because it might spur the government into making
greater efforts to dismantle barriers to exports.
U.S. export controls were last
updated in 1970 at the height of the Cold War. They need to be
adapted to current conditions, because they are barriers to a
lot of high-tech exports, Vargo said. The Obama administration,
as part of the NEI, has started reform efforts, but the highly
charged issue certainly could stall in this election year.
Other export barriers are the
various security measures installed at ports because of
terrorist threats, but Vargo said many of these measures should
not apply to export shipments.
The outlook for exports in 2012
depends on external factors beyond the control of the U.S. “If
Europe doesn’t get its act together, exports could actually
shrink because no one will be able to get letters of credit,”
Kemmsies said. “But if Europe does what it needs to do, export
growth could exceed 5 to 6 percent.”
Ironically, the growth of U.S.
exports of manufactured goods also depends on the health of the
U.S. economy, as well as Europe’s, because so much of the value
of U.S. exports to China, the third-largest U.S. export market
after its North American Free Trade Agreement partners and
Europe,
consists of engineering products and machine tools used in
Chinese factories that produce consumer goods for export back to
those developed markets.
The
second-largest U.S. export commodity to China by value after
oilseeds and grains is waste and scrap, shipped in containers
and also used in the production or packaging of consumer goods
for export. They, too, are vulnerable to consumer demand in
developed markets.
Semiconductors and other electronic components, the
third-largest U.S. export commodity to China by value, are
usually transported by air and used in the Chinese manufacturing
of computers and smartphones that are also bound for export.
Negotiating free trade agreements with major trading partners
was NAM’s No. 1 priority targeted in its “Blueprint to Double
Exports in Five Years,” which it issued in 2010. Since then,
however, other real-world events have intruded, namely the debt
crisis in several European countries, including Greece, Spain
and Ireland, and the lackluster growth in developed economies.
“Now
the biggest priority is to see that the financial instability in
Europe does not result in such a flood of money into the U.S.
that the dollar gets overvalued,” Vargo said.
NAM’s
No. 2 priority is for the U.S. to work closely with Europe and
Japan to orchestrate faster growth, because, Vargo said, “If
those economies don’t grow, our exports won’t grow.”
NAM
also puts major stock in free trade agreements and wants the
U.S. to negotiate more. It’s something the administration is
pushing, as well, as part of its NEI. “The U.S. runs a trade
surplus in manufactured goods with every one of the 14 countries
it has FTAs with, and that creates more jobs here,” Vargo said.
Excluding oil imports, the U.S. has an overall trade surplus
with its NAFTA partners, its single biggest export market. The
strongest interest among NAM members is for FTAs with Brazil and
India.
The
U.S. also should be prepared to undertake more bilateral trade
talks to overcome trade barriers with specific trading partners,
because the World Trade Organization, launched with the best
intentions in 1995 as the successor to the General Agreement on
Tariffs and Trade, has proved ineffective in mitigating trade
disputes, Vargo said. For example, although China has emerged as
the third-largest U.S. export market after NAFTA and Europe,
many U.S. companies are reluctant to start exporting to China
because they fear their technology will be copied and used to
manufacture competing products.
The
U.S. also needs to convince China to allow the yuan to revalue
instead of keeping its exchange rate artificially low to spur
exports. NAM has not taken a position on possible legislation
aimed at penalizing China for keeping the yuan’s value low. “Our
members are divided on this,” Vargo said. “Some think it could
only help, while others think it would start a trade war with
China.”
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Exporters Urge Congress to
Increase Ex-Im Bank Lending
R.G.
Edmonson, Associate Editor | Jan 6, 2012 The Journal of Commerce
Online - News Story
Bank can only lend up to $100
billion, has outstanding loans of about $93 billion
U.S. exporters say they
may have trouble financing projects unless Congress lifts the
lending cap of the Export-Import Bank of the United States.
Congress recently gave the bank a
six-month extension but failed to increase the financial
institution’s lending cap. The bank can only lend up to $100
billion and has outstanding loans of roughly $93 billion.
“The gap in the cap is getting
smaller,” said John Hardy, president of the Coalition for
Employment through Exports. “The bank may have to start
rationing its capacity.”
The sooner Congress acts, the
smaller the effect will be on the bank’s lending ability, he
said
The Ex-Im bank figures prominently
in the government’s drive to double exports in by 2015,
considering the bank underwrites up to 90 percent of a company’s
export transaction.
Handy said that lawmakers negotiated
Ex-Im reauthorization terms before the end of the session, and
it was expected to be included in a year-end omnibus
appropriations bill. But the full extension was dropped
unexpectedly and given a short-term continuation instead.
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The
U.S.—Colombia Trade Promotion Agreement:
New Opportunities for Wisconsin Exporters
The U.S.-Colombia Trade Promotion Agreement (CTPA)
is an integral part of the President’s efforts to increase
opportunities for U.S. businesses, farmers, and workers through
improved access for their products and services in foreign
markets.
The U.S. International Trade Commission
estimates that the elimination of tariffs and related barriers
in Colombia will increase U.S. Gross Domestic Product by nearly
$2.5 billion and U.S. merchandise exports by $1.1 billion. The
agreement will support thousands of American jobs.
The CTPA would also open Colombia’s $134
billion services market to highly competitive American
companies, supporting jobs for American workers in sectors
ranging from delivery and telecommunications services to
education and health care services.
The CTPA was passed by the U.S. Congress in
October, along with new free trade agreements with South Korea
and Panama.
For additional information about the CTPA,
visit
http://www.trade.gov/fta/colombia and
http://www.ustr.gov/uscolombiatpa.
For details about the agreement’s specific
impact on Wisconsin:
http://trade.gov/fta/colombia/wisconsin.pdf.
For additional information about Colombia
from the U.S. Commercial Service:
http://export.gov/colombia/
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