The slowing economies of China and other emerging nations are stunting foreign demand for U.S. goods, jeopardizing one of the Obama administration's most ambitious economic initiatives.
In his 2010 State of the Union address, President Obama set a goal to double U.S. exports in five years — from $1.58 trillion in 2009 to $3.15 trillion by the end of 2014. With the world coming out of recession then, exports rebounded strongly at first — soaring 16.7% in 2010 and nearly 15% last year to $2.1 trillion, putting the U.S. ahead of schedule in meeting its goal.
A growing number of economists and trade experts say that performance is unlikely to be matched this year — or next — with much of Europe in a mild recession and two of the world's largest emerging economies, China and India, decelerating from a torrid pace of double-digit annual expansion.
The doubling of U.S. exports was an aspiration when it was disclosed, and now it seems an increasingly difficult objective to meet.
Exports are a key driver of the American economy, accounting for more than half its expansion last year. For every $1 billion of U.S. goods or services sold overseas, about 7,000 American jobs are created.
Driving exports is just one component of growing an even healthier economy. With 95% of the world's consumers outside the U.S., it would be a wasted opportunity not to promote our goods and services overseas.
Yet U.S. export growth could slow to 5% this year, and then climb to 7.5% or 8% for the next two years. To meet its goal, the U.S. needs about twice that growth rate — an average annual rise of 14.4% in exports — for each of the next three years.
U.S. exports to China, the largest export market outside of North America, have already decelerated from as high as 30% year-over-year growth rates in early 2011 to the single digits at the end of the year. They grew at a slower pace last year than U.S. exports to the rest of the globe as the world's second-largest economy grappled with high inflation and the threat of a housing bubble. U.S. exports of agricultural products, computer electronics and primary metals also fell sharply to China last year, after adjusting for price increases, according to an analysis by Brookings Institution, a Washington, D.C., think tank.
As China's growing demand for goods from elsewhere in the world slips as well, that could weigh on other countries' economies, and in turn, their desire for U.S. goods. China's voracious appetite for commodities such as iron and soy has fueled economic growth in countries including Australia, Chile and Brazil.
A Chinese slowdown would ripple through trade chains and put a squeeze on U.S. exporters, whether they ship directly to China or to other destinations. China has also lowered its 2012 economic growth target below 8% for the first time since 2005. Emerging nations such as India, Brazil and South Africa— which, along with China, are among the priority markets identified by the Obama administration because of their rising demand for U.S. goods — are also paring back expectations for expansion. And the developed world is grappling with a fresh recession in Europe, a slow Japanese recovery from last year's nuclear meltdown and sluggish growth elsewhere.
Mexico and Canada remain the U.S.' largest single export destinations, while the countries within the European Union account for roughly one-fifth of U.S. exports. Yet demand for American goods is rising fastest in emerging economies. Overall, 43% of U.S. exports now go to developing countries, compared with 32% a decade ago and 36% just five years ago, according to the International Monetary Fund.
The problem is, while the U.S. needs fast-growing emerging markets in order to meet its export target, there's little that the Obama administration can do to drive such growth in these markets.
With the outlook for the world economy constantly changing, it's understandable that there will be challenges ahead in meeting the ambitious goals. However, by striving to meet this goal, we're still helping U.S. companies to increase their presence overseas, export more products, and create more jobs here at home. Factory Audits and Qualifications Control is also needed to make sure that these exported products are of appropriate quality.
It's too early, to declare the export initiative to be successful or unsuccessful.
China's cooling growth chills U.S.
China's slowing growth is already starting to be felt across the U.S.
In Oregon, goods exported to China — the state's largest market — fell about a fifth last year. State exports of electronics, agricultural products and primary metals to the country also plunged, mirroring the national trend. Other states, from Nevada to Montana and Idaho, also saw merchandise exports to China drop in 2011.
Even so, the swelling middle class in China — as well as in other emerging markets in Asia and Latin America— holds huge opportunities for Oregon companies.
Portland is among a small group of cities forging ties with government officials and the corporate sector in fast-growing emerging markets such as China, Brazil, Vietnam and the Philippines. Portland's thinking is that, the more diversified the companies and the city, the less likely they are to lose employment.
That's also the hope for Portland shipbuilder Vigor Industrial, which has set its sights on Brazil, Chile and South Africa.
To capitalize on the boom in oil exploration, Vigor aims to export 200-foot-long vessels to Brazil that ferry people and equipment to offshore drilling platforms. It's already exporting to Chile filters that remove impurities from methane gas, which fuels generators used to make electricity. The company made the filters for a client and has looked at exporting them to South Africa as well. It also hopes to export ferries to Canada.
Had export relationships been established prior to the worldwide recession, the shipbuilding division may have done better. The need for Manufacturing Engineering Services and Logistics Services also could have been established to ensure that product exported was at a premium.
But as growth cools again in the global economy, so could demand for Vigor's vessels.
Trade disputes cause worry
Even in a roaring global economy, it can be highly challenging to sell American goods in emerging markets such as China.
For instance, the growing number of trade disputes between the U.S. and China over poultry, solar cells and other products is a source of uncertainty. The fear is that escalating tensions could ignite a trade war that hurts manufacturers in both countries.
The U.S. buys nearly four times more from China than it sells — $399 billion compared with $104 billion in 2011 — yet exports from the U.S. to China have been rising at a faster pace than the other way around.
Market access also remains a key issue for U.S. companies doing business in China, as do Logistics Services to aid in moving the exported product..
And Chinese companies are coming into their own, competing with American firms for business in emerging and developing markets.
But perhaps the biggest obstacle for U.S. companies trying to tap into China's ballooning middle class is that the economy's growth remains skewed toward investment rather than consumption of goods.
For more national and worldwide related business news, visit the Peak News Room blog.
For local and Michigan business related news, visit the Michigan Business News blog.
For healthcare and medical related news, visit the Healthcare and Medical blog.
For law related news, visit the Nation of Law blog.
For real estate and home related news, visit the Commercial and Residential Real Estate blog.
For technology and electronics related news, visit the Electronics America blog.
For organic SEO and web optimization related news, visit the SEO Done Right blog.
