By Michael R. Czinkota and Charles J. Skuba
In his 2010 State of the Union address, President Obama set the goals of doubling U.S. exports over the next five years, supporting two million new American jobs. As we approach the terminus of that timeline, our analysis expects the completion of less than half the goal with exports of goods and services at approximately $2,350 billion in 2014, compared to $1,571 billion in 2009.
Although he did not hit the numbers, we credit President Obama for an ambitious trade agenda, including completion of previously negotiated free trade agreements with South Korea, Colombia, and Panama, and the pursuit of new trade agreements like the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), and Trade in Services Agreement (TISA).
But why the failure in export growth? In 2009, total global trade decreased by 12%, while U.S. exports decreased by 14%. At the time it seemed reasonable to project stronger growth from 2010 forward. U.S. exports did grow at a robust annual rate of nearly 17% that year and 14% in 2011. Growth of only 4% in 2012 and 2.9% in both 2013 and 2014, however, did not help, since doubling exports requires annual growth of more than 15%.
President Obama’s export goal hinged on the strength of U.S. production, but even the best products require customer spending to generate sales. Europe has experienced disappointing economic growth while major emerging markets like China, India, and Brazil, all sharply declined. A strong U.S. dollar makes American products more expensive, further affecting demand.
One encouraging note is the transition of President Obama from a relatively protectionist U.S. Senator, in favor of trade barriers and subsidies for domestic industries, to a strong advocate of trade agreements.
Where are we now and where do we go from here? Jobs supported by exports now represent 13% of the U.S. economy, up from only 5% in 1990. Yet, the US is still behind on a global scale. Exports represent half of Germany’s economy, 30% of Canada’s, and one quarter of China’s. These key trading partners export more than twice the value per capita than the United States.
U.S. free trade agreements can play an important role in lowering trade barriers, boosting exports, and creating jobs. In 2014 exports to the 20 countries with which the United States has a free trade agreement received almost half of U.S. exports and grew by almost twice the overall rate. Free trade agreements allow U.S. companies to compete on a more even playing field. The Trans Pacific Partnership does that in the strategically important Pacific Basin. It also will include labor and environmental provisions crafted to the highest standards in the world.
Opponents of free trade agreements often claim that previous accords like NAFTA sent American manufacturing jobs abroad. We disagree. A global economy imposes competitive pressures and requirements on all industries. American manufacturing and services companies cannot escape from the competitive realities of globalization but they can benefit from free trade agreements.
Our outlook for 2015 trade policy and politics: the Administration and Republican majorities on Capitol Hill must collaborate on International Trade. In his 2014 State of the Union address, President Obama asked for bipartisan support for Trade Promotion Authority (TPA) allowing Congress to vote yeah or nay on trade bills, but not on individual provisions. This would allow U.S. trade negotiators to deliver meaningful industry and regional commitments. TPA is a crucial negotiating tool and deserves bipartisan support.
There should also be strong domestic support for free trade agreements like TPP and TTIP, which can restore and perhaps even kick start further global progress in the World Trade Organization.
For both Republicans and Democrats, the key trade policy objective of increasing jobs requires policy assessments of the jobs affected by new laws, regulations, and executive orders. It also means linkages between investment and job outcomes, and specific rewards for employment success and help for those hurt by trade. A successful economy requires new measures in technology oriented education availability, and greater international awareness through global outreach and language training for students.
It is time for Congress and the Administration to develop and share credit for progress in international trade. Past failures and shortcomings prove the need for collaboration in the seeking of success. The State of the Union address of 2015 offers an excellent opportunity for the President and Congress to showcase such a new beginning. The United States and the world will benefit from such joint leadership.