A Free-market '5-Year Plan' to Boost U.S. Exports

by Daniel Griswold

To promote jobs and economic growth, President Obama has launched an ambitious "National Export Initiative." In his State of the Union address in January, the president committed his administration to double U.S. exports in the next five years to create 2 million well-paying jobs.

On April 15, the U.S. Commerce Department provided intellectual ammunition with a white paper titled, "Exports Support American Jobs." The paper concluded that in 2008 exports supported 10.3 million jobs in the United States, including more than one out of every four manufacturing jobs. The paper touts exports as one way to bring down the high unemployment rate.

Promoting exports is one trade-policy goal that can win bipartisan support in Washington. Everybody loves exports, and with good reason. Selling abroad helps U.S. companies ramp up production, lower per-unit costs, and reach new and growing markets. But the Obama administration's goal of doubling exports by 2015 will be difficult to achieve and faces a few hurdles of the administration's own making.

Daniel Griswold is director of the Center for Trade Policy Studies at the Cato Institute and author of the 2009 Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization.

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To achieve the goal, exports will need to grow by 15 percent per year. That's an annual rate of growth that has been achieved in only one year in the past three decades (never mind five years running). The closest we've come to doubling exports over five years since the inflation-plagued 1970s was 1986-91, when exports of goods and services rose 85 percent, and the last five years of the George W. Bush presidency, 2003-08, when exports jumped 78 percent.

With inflation subdued, rapid growth of exports will depend primarily on robust growth abroad — something beyond the control of even this president. If the administration hopes to achieve its goal, it will need to embrace certain policies and reverse others. Here's an agenda to maximize U.S. export growth in the next half-decade:

One, persuade Congress to enact already negotiated trade agreements with South Korea, Colombia and Panama. All three agreements would reduce or eliminate significant barriers to U.S. exports. They would deliver the "level playing field" that members of Congress are always demanding. The U.S. International Trade Commission predicts the Colombia agreement would boost U.S. exports by $1.2 billion a year, and the Korean agreement by $10 billion.

Two, end the trade embargo against Cuba. When the ban was lifted on the sale of farm goods to Cuba in 2000, it quickly became one of our top customers in Latin America. Cuba has long ceased to be any kind of national security threat to the United States. If U.S. companies can export manufactured goods to Venezuela, Russia and China, they should be able to sell to Cuba.

Three, quickly resolve outstanding trade disputes against the United States. The U.S. government's stubborn refusal to allow safety-certified Mexican trucks on U.S. roads, in violation of our North American Free Trade Agreement commitments, has spurred Mexico to impose sanctions on $2.4 billion in U.S. exports. An additional $800 million in exports are in jeopardy because of the damage our cotton subsidies inflict on farmers in Brazil. The European Union and Japan are weighing a further $500 million in sanctions over the biased and World Trade Organization-illegal formula the U.S. Commerce Department employs for anti-dumping calculations.

Four, modernize our regime of export controls. In the name of national security, we make it hard to export "dual-use" (military and civilian) goods to China and other non-democracies, even when such technology is generally available in global markets and poses no real threat to U.S. security.

Five, dial down tensions with China over its currency. Congressional critics claim an undervalued yuan poses an "insurmountable" barrier to U.S. exports to China. Nonsense. Since China joined the World Trade Organization in 2001, U.S. exports have grown at an annual rate of 17 percent, more than three times faster than export growth to the rest of the world. China is now the fourth-largest market for U.S. exports, and the only major market where U.S. exports really are doubling every five years. A trade fight with China would put those gains in jeopardy.

Last, but perhaps most important, keep the U.S. market open to imports. If we make it harder for global producers to sell in our market, by raising barriers against imports from China or other countries, fewer dollars will be available in global currency markets to buy U.S. exports. A tax on imports will quickly become a tax on exports. Avoiding protectionism sets a good example for other countries while enhancing U.S. influence in trade negotiations.

Now that is a "five-year plan" that can unite Democrats and Republicans to promote a more open and prosperous American economy.