US Counts on Rising Trade
Bush administration sees rebounding export business as key to ending recession
WHEN the Bush administration declared the past week World Trade Week, it underscored a policy that counts on increased export earnings as the way to combat recession in the United States. "Growth in the US economy is dominated by exports," asserts Export-Import Bank chairman John Macomber, whose federal institution spends roughly $7 billion annually to finance American exports abroad. Mr. Macomber joins White House economists in their forecast that a domestic economic rebound is imminent. Exports, he says, could account for some 80 percent of future US economic growth.
Macomber says he's busy traveling domestically to inform small- and medium-sized firms about overseas markets, and just how to reach them. "US exporters are experiencing an extraordinary sea-change. The dollar is well-priced [a low dollar makes US goods abroad cheaper] and the quality of US goods is dramatically better. Exporters are more conscious of export markets and better poised to take advantage of them."
Kent Hughes, president of the Washington-based Council on Competitiveness, says he's "less sanguine about the US export performance." There is no question that manufacturing productivity improved dramatically in the 1980s, he says, and that "a quality revolution is in the making." But as the dollar begins to appreciate, the costs of American goods abroad rise, cutting into US competitiveness.
"As we bounce back from recession, there will be an increased demand for imports," Mr. Hughes adds.
US Secretary of Commerce Robert Mosbacher says he is encouraged by recent trade statistics. February's drop in the nation's trade deficit to $5.3 billion - from January's $7.2 billion - is part of a longer-term improved export performance, he says.
But a senior US Treasury Department official counters that slackened demand at home, slowed by recession and coupled with lower oil-import bills, accounts for the sharp decline. "Eighty percent export-driven growth doesn't necessarily measure heightened export levels; what it does mean is a failure of other parts of the economy to grow, such as investment and consumption," the official says.
The US exports 7 percent of its gross national product. Britain, Canada, Germany, and Japan export roughly 19 percent of their respective GNPs.
"We're the only industrial nation, until recently, that was not export driven," says Macomber. "Our real leverage is with the medium-sized companies, especially in the machinery sector.... Those exports could increase by as much as 10 percent this year."
Macomber sees the East European marketplace as a strong prospect for US exporters. European and Japanese export credit agencies already have a combined $42 billion portfolio there, while the Export-Import Bank has roughly $800 million. An added European competitive edge is a European Community plan to establish a European-wide export credit agency.
US industry also lags behind these leading competitors in research and development for new technology and funding to advance production techniques now in danger of becoming obsolete.
"We need to update traditional industries with high-tech. One area where we've had great success is in chemical production. We're world leaders because chemical producers such as Dow and Dupont are responding to increasing demands for more energy-efficient and environmentally sound products," says the Treasury official.
By contrast, he points to the antiquated US steel industry, fast losing ground to international competitors. "Our steel mills could be much more efficient and competitive if we spent the money to update them with new technology and really focused on mini-mills."
While commemorating World Trade Week, the Bush administration also assumed a strong position on multiple trade fronts, emblematic of its priority on exports.
President Bush declared his intention to renew China's most-favored-nation status, a move that elicits strong opposition from members of Congress who want China to address its poor human rights record and burgeoning trade surplus with the US before Washington extends it preferential status.
Bush says increased trade is "a means of bringing the influence of the outside world to bear on China."
The president also won "fast track" trade negotiating authority from Congress, enabling the administration to enter into a US-Mexico free trade agreement that will not be subject to congressional amendments, but will have to be acted upon through a simple up or down vote.
US Trade Representative Carla Hills, who earlier warned that failure to approve the fast track would result in a collapse in the world trade system, now plans a vigorous attempt to conclude the stalled Uruguay Round of world trade talks. Protectionism, she says, limits trade and hampers economic recovery. She also interprets the extension of fast-track authority as a mandate to negotiate a free-trade agreement with Mexico and Canada.
"Trade is important to the US national interest," says Macomber. "A strong trade position is the single most powerful locomotive to haul our economic and strategic interests around the globe."