Obama’s Goal to Double Exports – Pie in the Sky?

The President recently expressed a desire to increase US exports to the world by 100% between 2010 and 2015. This seems to be another one of those hopeful goals that doesn’t have much basis in reality. Part of the reason is simple business. The other part is history. Let’s start with history.

The US exported $1.564 trillion of goods and services in 2009. Two-thirds or about $1.038 of the 2009 total were sales of goods and the remaining $526 billion were services. We don’t know what exports will be in 2010 – the benchmark year for the doubling of exports since we barely have first quarter 2010 results. So let’s just use the 2009 number. President Obama is asking the nation to increase exports by another $1.564 trillion in five years. Is that possible?

How much did exports grow during the previous five year period between 2004 and 2009? Answer -- $384 billion. Hmm, that’s only one-fourth of what he is hoping for in the next five years. Keep in mind that between 1995 and 2009 – a fourteen year period – exports only grew by 93%. He wants them to grow by 100% in the next five years. It isn’t like US firms were intentionally slowing things down. Exports grew by double-digit rates in each of the past five years except for 2009 – 10.6%, 12.7%, 12.6%, 10.6%, and -14.6%.

These statistics are based on current prices. They are nominal figures. Luckily the government calculates real counterparts for exports like they do for all parts of Gross Domestic Product. I mention this because the above numbers include price change – something firms and the government have little control over. Global competition will determine prices of international transitions in the next five years. Furthermore, the President’s goal only makes sense in real terms. Meeting the goal by simply raising prices does little to heal the recession or unemployment.

So let’s look at the numbers that are more based on something the President would like to see – more units of output sold – presumably more cars, electronics, and ears of corn.

Real US exports of goods increased by 72% over the last 14 years and by about 17% in the last five years. While exports based on current prices averaged low double-digit increases in most of the last five years, the average annual growth of real exports of goods was more like 8% per year. It would take something more like 18% per year to achieve the President’s goal of a doubling in five years. Over the last 14 years real exports of goods and services increased by 12% one time (1997) but then increased by 2% in the following year.

It might be surprising to you that exports of services have been growing faster than exports of goods. Usually when we think of exports and export goals, we think of goods like auto parts, equipment or food products. Over the last 14 years the category food, feeds and beverages increased by only 31%. Durable goods exports increased by 58%. The real stars of export growth were found in services – Royalties and license fees (116%) and Other private services (197%).

In short, history implies that if the President’s export goal was translated into basketball, he would be asking our Olympic squad to score 200 points per game while holding each opponent to about 45 points.

This brings us to the business side. Our Olympic players have not exactly been sleeping on the job – nor have our exporters. You might not know this but strong export sales has been a goal of federal and state governments for a long time. There are government officials and programs ready with a full slate of assistance to companies large and small who desire to export. While there might be a few new bells and whistles in the way of assistance in Obama’s goal, a company could always go to something like the following web site for federal assistance http://www.export.gov/ If Washington DC is too far from the location of the exporter, they can go to the federal or state office nearest them for help. The Indiana office is in Indianapolis. Every state has a similar federal office. Most states also have state government offices devoted to export assistance. Senator Lugar has a web site for Hooisers which lists many services -- http://lugar.senate.gov/services/links/pdf/Trade_Assistance_Fact_Sheet.pdf Go to the next link and you will find links to export assistance for US firms in almost any country in the world. These are organizations whose feet are planted on foreign soil who are paid by the US or state governments to help US companies export. http://www.buyusa.gov/home/worldwide_us.html

My point is that we are not new to this. There is a ton of really good help out there for companies that want to export. If a company is NOT now exporting it is because its managers don’t see the need to.

So here’s my question to the President – how do you plan to get our players to score 200 points per game? Where’s the meat?

Are you really going to sign free trade agreements? Hmmm – it seems to me that many of your strongest supporters are quite happy that we do not have a conclusion to the Doha Round or the Korea FTA. Are you really going to sign these accords? Your supporters don’t mind the extra US exports that might arise but they have definite strong feelings against opening up the US economy to more foreign competition at home. Sugar – did someone say sugar? Will you stop protecting sugar-growers in America so that South Americans will open their markets to other US goods?

And what are our friends at the WTO going to say about your plan to increase by 100% the exports of the largest economy in the world – the country that still is among the top exporters in the world? Will you abide by WTO rules governing exports? Can you increase US exports by 100% by not disturbing competitive shares of world sales going to Europe, Brazil, China, etc? Will they sign the Doha Round while you are conjuring up a 100% increase in exports to their countries?

Are you going to apply massive pressure on China to buy more US goods? How has that been working so far? What new tricks do you have up your sleeve?

Clearly I think this is a big mistake to try to manipulate exports. So how are we going to get the US back on its feet? The answer is something I have been preaching over and over in my other posts. What we need is the most competitive and dynamic economy in the world. We need firms that are hungry to succeed and are justly rewarded when they do so whether they sell their goods at home or abroad. We don’t need firms saddled with unnecessary regulations and costs. We don’t need firms who hold back because they are uncertain about the future course of regulations and costs. We don’t need firms who are considered the enemy of the worker, investor, and consumer. Firms have their part to play – but the rest of us do too. Let’s quit waving our flags at silly unattainable goals and do something that we will all be proud of when our grandkids start paying taxes. Okay—I am done. Whew. Where did Betty hide the gin?