Obama facing uphill battle to fulfil trade mission
Source: Agencies |
May 6, 2013, Monday
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Print Edition
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US President Barack Obama has recently reminded the world of the lofty goal set early in his presidency to double American exports over five years. It looks like he won't deliver.
Latest trade data underscored the uphill battle faced by the administration. Weakness in the global economy is knocking down demand for US exports, which rose just 3 percent in the 12 months to the end of March.
At that pace, Obama's mission won't be accomplished until around 2024.
"The president's export-doubling goal seems less achievable than ever," said Alan Tonelson, a research fellow at the US Business and Industry Council, a group that represents small American manufacturers.
Unveiling his nominations of Mike Froman to be US trade representative and Penny Pritzker to be commerce secretary, Obama said one of their key tasks would be meeting the goal of raking in US$3.14 trillion from sales abroad in 2015 - twice the 2009 level.
That seemed more plausible a year ago when exports were growing at about four times the current rate.
Now the global economy has taken a turn for the worse, with the eurozone mired in recession and even China posting slower rates of economic growth. In the first quarter of 2013, US exports to the European Union fell 8 percent from a year earlier.
Also weighing against Obama's mission, other nations are ramping up efforts to print money in order to re-inflate their economies, which has put upward pressure on the US dollar.
Japan launched a bold monetary stimulus program in April to double its money supply, while the European Central Bank has lowered interest rates.
So far this year, the dollar has gained about 1.5 percent on a trade-weighted basis, which could cut into the competitiveness of US exports.
Still, there are a number of factors that might boost exports over the long term. Persistently large US trade deficits could return the dollar to the long-term weakening trend which began around 2002. A boom in the US energy industry could eventually lead to more exports of natural gas, and potentially even crude oil.
But analysts point out that the world's biggest economies are pressing forward with policies that tend to weaken their currencies, and it is not clear where that process will end. It also would take years to build the infrastructure and political will needed to significantly ramp up energy exports. The Obama administration has shied away, so far, from allowing unfettered exports of natural gas.
Add lackluster global economic growth, and all this suggests Obama will be hard pressed to meet his 2015 deadline.
"Unfortunately, I don't think we are going to make it," said Thomas Duesterberg, a manufacturing researcher at the Aspen Institute in Washington.
A White House official acknowledged there was "more work to be done."
Obama set the export goal in 2010 when the US was emerging from its worst recession since the Great Depression. It wasn't the only ambitious target set early in his presidency. A month after taking office in 2009, Obama promised to halve the federal deficit in four years. That goal was frustrated by a persistently weak domestic economy.
As part of its trade push, the White House has stepped up efforts to open up overseas markets. The administration notified Congress in April it will start free trade talks with Japan, part of America's efforts to push a major free-trade deal with Asian and Pacific nations. The US and the European Union are also preparing to launch talks on a free trade pact.
Yet even if Obama strikes these deals to help US exporters, it could be many more years before Americans notice a big jump in exports.
Because Obama's target to double exports is measured in nominal terms and doesn't take inflation into account, stronger growth would be needed for companies and workers to feel twice as better off.
Duesterberg calculated in March that even if the Asia-Pacific and European trade deals go through, as well as a number of export-boosting scenarios like a reduction in corporate tax rates and a depreciation of the dollar, inflation-adjusted exports would probably not double until 2020.
Latest trade data underscored the uphill battle faced by the administration. Weakness in the global economy is knocking down demand for US exports, which rose just 3 percent in the 12 months to the end of March.
At that pace, Obama's mission won't be accomplished until around 2024.
"The president's export-doubling goal seems less achievable than ever," said Alan Tonelson, a research fellow at the US Business and Industry Council, a group that represents small American manufacturers.
Unveiling his nominations of Mike Froman to be US trade representative and Penny Pritzker to be commerce secretary, Obama said one of their key tasks would be meeting the goal of raking in US$3.14 trillion from sales abroad in 2015 - twice the 2009 level.
That seemed more plausible a year ago when exports were growing at about four times the current rate.
Now the global economy has taken a turn for the worse, with the eurozone mired in recession and even China posting slower rates of economic growth. In the first quarter of 2013, US exports to the European Union fell 8 percent from a year earlier.
Also weighing against Obama's mission, other nations are ramping up efforts to print money in order to re-inflate their economies, which has put upward pressure on the US dollar.
Japan launched a bold monetary stimulus program in April to double its money supply, while the European Central Bank has lowered interest rates.
So far this year, the dollar has gained about 1.5 percent on a trade-weighted basis, which could cut into the competitiveness of US exports.
Still, there are a number of factors that might boost exports over the long term. Persistently large US trade deficits could return the dollar to the long-term weakening trend which began around 2002. A boom in the US energy industry could eventually lead to more exports of natural gas, and potentially even crude oil.
But analysts point out that the world's biggest economies are pressing forward with policies that tend to weaken their currencies, and it is not clear where that process will end. It also would take years to build the infrastructure and political will needed to significantly ramp up energy exports. The Obama administration has shied away, so far, from allowing unfettered exports of natural gas.
Add lackluster global economic growth, and all this suggests Obama will be hard pressed to meet his 2015 deadline.
"Unfortunately, I don't think we are going to make it," said Thomas Duesterberg, a manufacturing researcher at the Aspen Institute in Washington.
A White House official acknowledged there was "more work to be done."
Obama set the export goal in 2010 when the US was emerging from its worst recession since the Great Depression. It wasn't the only ambitious target set early in his presidency. A month after taking office in 2009, Obama promised to halve the federal deficit in four years. That goal was frustrated by a persistently weak domestic economy.
As part of its trade push, the White House has stepped up efforts to open up overseas markets. The administration notified Congress in April it will start free trade talks with Japan, part of America's efforts to push a major free-trade deal with Asian and Pacific nations. The US and the European Union are also preparing to launch talks on a free trade pact.
Yet even if Obama strikes these deals to help US exporters, it could be many more years before Americans notice a big jump in exports.
Because Obama's target to double exports is measured in nominal terms and doesn't take inflation into account, stronger growth would be needed for companies and workers to feel twice as better off.
Duesterberg calculated in March that even if the Asia-Pacific and European trade deals go through, as well as a number of export-boosting scenarios like a reduction in corporate tax rates and a depreciation of the dollar, inflation-adjusted exports would probably not double until 2020.
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