Three years ago US President Obama set as one of his economic goals the doubling of exports from the US within five years. Will the US make that goal? Possibly, but unlikely without the right strategies to promote and facilitate international trade.
US exports increased just 3% in the twelve months ended March 31st and, at this rate, the stated goal will not be reached until 2024, nearly a decade later than hoped for. In 2009, annual worldwide exports from the US were about $1.5 trillion and getting to $3.14 trillion by 2015 in the face of the global economic slowdown seems an impossible goal.
To be sure, there are factors at play over which the US has little control. No doubt the global economy has taken a turn for the worse, the Euro zone seems mired in a recession from which it is having difficulty extricating itself and even China is reporting slower economic growth. In the first quarter of this year alone US exports to Europe fell 8% from a year earlier.
Adding to the problem, Japan instituted a daring monetary stimulus program in April in an effort to double its money supply, while the European Central Bank lowered interest rates last week. The dollar, this year, has gained about 1.5% on a trade-weighted basis, which could cut further into the competitiveness of US exports.
But does this mean the export goal is unreachable? Is it possible for the federal government to be the catalyst for change that will make the goal achievable in a timely manner? I think so.
Based on our experience as “practitioners” in assisting US companies to export to the Middle East, we see other, equally serious factors that tend to inhibit increasing export sales. More and more we find US exporters drawing inward, reducing their export development efforts, wary of overseas travel to meet customers in their markets and reluctant to invest their limited capital in exploring new overseas markets. From our vantage point, this is counter intuitive to what must be done to increase sales. One would think that in tough times people would expand their sales and marketing efforts, not reduce them. Yet we regularly meet with such resistance on the part of US companies.
To counter such resistance it would seem to make sense for the US Government to continue and even to expandthe State Trade & Export Promotion (STEP) program which was instituted two years ago to assist US companies, through state trade and commerce agencies, to cover a portion of their export promotion costs. That program is due to expire this year and, given the state of the US economy, Congress seems loathe extending it. Yet a good case can be made for extending the program particularly as it assists small to medium size companies (SMEs) to fund the cost of their overseas travel to meet new customers. Even in these days of advanced electronics and communications systems, selling internationally remains a first person experience, and no sales vehicle functions better than a face-to-face meeting with a prospective client, preferably in his/her facility abroad.
The original program allocated $60 million of federal funds, parceled out on a proportionate basis to each state in response to individual program suggestions. Even in this time of US budget sequestering, this remains less than a minute percentage of the total federal budget and, of course, new export sales create jobs and jobs generate tax revenue which comes back to state and federal coffers. So while the money is seen as a grant, it is really an investment in creating new business, which in turn creates new jobs and additional tax revenue.
The US government would be making a mistake to let the STEP program die, while its continuance could be a significant factor in assisting America to reach its export goal earlier than what now seems likely.