An “Exports Live!” seminar in Richmond, Virginia, on Monday showed just how keen the US government is to boost sales abroad. A dozen arms of the US government exhorted local makers of everything from portable sawmills to biosafe laboratories to export.
“Ninety-five per cent of all the world’s consumers are not in America,” Senator Mark Warner told the crowd. “Three and a half per cent of our jobs [in Virginia] are export-related . . . and that is still a pittance,” he said.
The message had a receptive audience. “We basically have our eyes turned towards overseas – that’s where the opportunity is,” said Ryan Burnette, director of Alliance Biosciences, a Richmond company that has recently started to export its expertise in designing labs that handle infectious biological material.
It is likely to take US consumers many years of saving to rebuild their household balance sheets in the wake of the financial crisis. That will slow the growth of domestic consumption – hence the attraction of exports as an alternative source of demand.
The Obama administration will on Thursday report on the progress of its National Export Initiative, which promises to double US exports from their 2009 level of $1,571bn within five years. The administration will trumpet early success as exports bounce back from their recessionary lows but, with many other nations also determined to export their way to growth, there are doubts about how much exports can truly contribute to the recovery.
Simple accounting shows how hard the goal will be to achieve. To double in five years, exports must grow at about 15 per cent a year. Nominal growth in world trade has been about 10 per cent in good years, so the US would have to increase its share of global exports. The US economy may manage nominal economic growth of 30 per cent over the next five years, so, to double, exports would have to expand from 11 to 17 per cent of total output.
Orbital Sciences, in the northern Virginia suburb of Dulles, shows why exports are so prized but also reveals their limits as fuel for the economy. In its spotless factory “high-tech craftsmen” labour to build communications satellites. A single export sale will keep 400 well-paid workers busy for the best part of two years and earn enough foreign exchange to bring 250,000 flat-panel televisions the other way, said David Thompson, Orbital’s chairman and chief executive.
But in the niche of small communications satellites, Orbital already has 50 per cent of the global market. It competes against US rivals such as Boeing and two French companies: Thales and the Astrium division of EADS. Orbital is looking to move into larger satellites but, short of a huge depreciation in the US dollar, it will struggle to increase sales much faster than the market.
That situation is common: in high-tech industries where the US is strong, it already has large market shares. Japan’s intervention to weaken the yen, meanwhile, shows that few other exporters around the world will sit back and let the US enjoy a weaker currency.
There are not many other policy levers that the administration can pull. The one instrument that does boost trade is reducing tariffs but Congress seems to be in no hurry to ratify free trade agreements with Colombia, South Korea and Panama, and nor does it seem ready to push for a resuscitation of the Doha trade round.
An expansion of export credit guarantees through the Export-Import Bank worked well in replacing banks that abandoned trade finance during the credit crunch. Orbital Sciences said a satellite sale last year, its biggest yet, would have fallen through without an Ex-Im guarantee.
“We grew 50 per cent last year to $21bn in financings. That was the largest year in 75 years and we’ve already exceeded that number this year,” said Fred Hochberg, the chairman and president of Ex-Im Bank. Mr Hochberg said that booming use of private finance to fund infrastructure in developing countries increases the scope for Ex-Im to boost US exporters.
But other countries also provide export credit guarantees – and trade missions and advice on exporting – none of which can create demand where it does not exist.
For Mr Burnette, the array of government advisers in Richmond is helpful but also confusing. “I think what is lacking is a one-stop shop for exporters. Where is that?” he says.