It’s been a year since President Obama issued his National Export Initiative, aimed at doubling U.S. exports in five years. So how are we doing? After only one year, we’re already behind schedule, and analysts are starting to wonder if the goal is even achievable. The outlooks for global growth and the dollar, while supportive, may not be helpful enough, and the current policy framework may not be sufficient.
No one doubts the urgency of the president’s initiative, and even partial success would be a plus for the economy. For a country that must begin to live within its means while also creating new jobs, U.S. output will have to speed up relative to U.S. consumption, with more production targeted for overseas markets. Last year, with the global economy growing a strong 5 percent and the dollar low enough for U.S. products to be generally competitive in overseas markets, real exports of goods and services managed to grow just 11.8 percent. Reaching Obama’s goal requires a yearly pace of 15 percent. “Doubling exports in five years may not be impossible,” says Wells Fargo economist Jay Bryson, “but it may be rather difficult to achieve.”
To measure success, Bryson and other economists believe the focus should be on real exports, which are adjusted for price changes to reveal the actual volume of goods traveling abroad, as opposed to export values, where higher prices can inflate actual trade flows. The value of shipments rose 16.5 percent last year, puffed up by a 4.7 percent rise in prices. If the objective is to generate more production and boost payrolls, real exports have a tighter relationship with export-related jobs over the long run.
The U.S. is already under-performing the rest of the world
as an exporter of manufactured goods.
Against that benchmark, history is not encouraging. Real exports have doubled in five years only once in U.S. history, following World War II and the Marshall Plan, when U.S. shipments tripled. Export values accomplished the feat in the 1970s, only with the help of double-digit inflation rates. Plus, given that real exports rose only 11.8 percent in the first year, growth in the final four years would have to average 17 percent per year to reach the five-year target. Wells Fargo’s analysis suggests that even at a continued solid pace of global growth, the dollar would need to fall sharply, a combination they say looks implausible.
Progress will have to come mostly from exports of goods, which comprise 70 percent of all U.S. overseas shipments while services account for the rest. Real export of goods rose 14.7 percent last year, and perennially slower-growing services increased 5.8 percent. However, the U.S. is already under-performing the rest of the world as an exporter of manufactured goods. It ships abroad only 45 percent as much of its manufacturing output compared to the average of all other countries, according to an analysis by the National Association of Manufacturers (NAM). Although U.S. factories account for about 20 percent of world manufacturing, the most for any country, it ranks 13th globally in the proportion of its manufacturing output that it exports, says NAM. The top three nations are Taiwan, Germany and Korea.