By Michael R. Czinkota and Charles J. Skuba
In his January 2010, State of the Union address, President Obama set a goal of doubling U.S. exports over the next five years, supporting two million new American jobs through trade with international partners. At the terminus of that timeline, our analysis indicates the completion of less than half of that 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 pursuing 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 was there a failure to reach the export growth predicted in 2010? In 2009, total global trade decreased by 12 percent while U.S. exports decreased by 14 percent. 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 percent that year and 14 percent in 2011. However, growth of only 4 percent in 2012 and 2.9 percent in both 2013 and 2014 did not help, since doubling exports requires annual growth of more than 15 percent.
President Obama’s export goals 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 percent of the U.S. economy, up from only 5 percent in 1990. Yet, the U.S. is still behind on a global scale. Exports represent half of Germany’s economy, 30 percent 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.
Opponents of free trade agreements often claim that previous accords such as 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 and will collaborate on international trade. President Obama has 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 will allow U.S. trade negotiators to deliver meaningful industry and regional commitments. TPA is a crucial negotiating tool which the Republican Leadership supports.
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 global partnerships in science, technology, research and development.
It is time for Congress and the administration to develop and share credit for progress in international trade. Past failures and shortcomings demonstrate the need for collaboration in achieving trade agreements that deliver significant economic results. This year offers an excellent opportunity for the President and Congress to achieve a new beginning. The United States and the world will benefit from such joint leadership.
Michael Czinkota (czinkotm@georgetown.edu) researches international marketing issues at Georgetown University. He served in trade policy positions in the administrations of Presidents Reagan and G.H.W. Bush. Charles Skuba (cjs29@georgetown.edu) teaches international business and marketing at Georgetown University. He served in the George W. Bush administration in trade policy positions in the U.S. Department of Commerce.