Obama's ambitious export plan may rekindle free-trade battle

U.S. exports declined last year as the world economy slowed, falling to $1.5 trillion from a peak of more than $1.8 trillion in 2008.
U.S. exports declined last year as the world economy slowed, falling to $1.5 trillion from a peak of more than $1.8 trillion in 2008. (Jim R. Bounds/bloomberg)
By Howard Schneider
Washington Post Foreign Service
Friday, March 12, 2010

President Obama unveiled plans Thursday to double U.S. exports over the next five years in hopes of spurring job growth, an ambitious goal that may rekindle the battle over free-trade policy.

The president acknowledged the formidable barriers to his goal: doubts in Congress over new free-trade agreements, misaligned currencies that make Chinese products cheaper on global markets, and continued weakness in global demand, all problems that could dwarf efforts to promote U.S. products and services abroad.

But, Obama said in a speech, "in a time when millions of Americans are out of work, boosting our exports is a short-term imperative."

"We are at a moment where it is absolutely necessary for us to get beyond those old debates. . . . Those who once would oppose any trade agreement now understand that there are new markets and new sectors out there that we need to break into if we want our workers to get ahead," he said.

The U.S. economy has gone through spurts in which exports have doubled -- or nearly so -- within five years, most recently from 2002 to 2007, when a cheap dollar gave American products and services a competitive edge. But a repeat may be tougher in the current global climate, with the dollar strengthening against some key currencies.

The president may also face domestic opposition over a renewed emphasis on free-trade policies that some argue have helped shift U.S. manufacturing jobs overseas -- a sensitive issue at a time when unemployment remains at nearly 10 percent. Predicting such an argument, Obama said Thursday that although he sympathized with communities that have lost factories and livelihoods to overseas labor, the country needs to recommit to free trade in a way that ensures Americans benefit through the opening of new markets for their goods and services.

"There is no question that as we compete in that global marketplace, we've got to look out for our workers," Obama said. "But to look out for our workers, we've got to be able to compete in the global marketplace."

Designed to deliver on a pledge he made in his State of the Union speech, Obama's plan includes $2 billion in new export financing through the Export-Import Bank, which helps U.S. companies finance overseas sales; establishment of a Cabinet group to promote U.S. goods and services abroad; and an expanded role for the Nixon-era President's Export Council, to be chaired by W. James McNerney, Boeing's president and chief executive. Restrictions on the overseas sale of some high-end technology goods may also be eased.

If successful, the president said, the program would create 2 million jobs. Experts said the viability of that figure would depend on the type of exports that are expanded.

As the world economy slowed last year, U.S. exports fell to $1.5 trillion from a peak of more than $1.8 trillion in 2008. They began to rebound in the latter half of 2009, but trade analysts said Obama's goal could prove difficult absent the opening of new markets.

The goal of doubling exports in five years "is useful, and it is achievable," said John Murphy, the U.S. Chamber of Commerce's vice president for international affairs. "But he needs a laserlike focus on tearing down foreign access barriers."

An expansion of exports could also be made more difficult by the strengthening of the dollar, which has gained recently against key currencies, including the euro. A stronger dollar makes U.S. goods more expensive.

Without favorable exchange rates and progress negotiating more open markets worldwide, "the things you can do around the edges will get overwhelmed," said Scott Paul, executive director of the Alliance for American Manufacturing.

In his remarks, made at the Export-Import Bank's annual conference in Washington, Obama singled out China, saying that a change in the value of its currency was a central step in "rebalancing" a situation in which the United States "served as the consumer engine for the entire world," racking up large trade deficits as a result. China, by contrast, accumulated large trade surpluses that Obama said should now be used to expand domestic consumption -- and increase the products it imports from countries such as the United States. The U.S. trade deficit fell slightly in January, to $37.3 billion, largely because of a decline in petroleum imports.

Obama also promised a fresh push on an issue that could prove divisive in the Democratic Party -- pending free-trade agreements with South Korea, Panama, Colombia and a group of Pacific countries -- as well as on the broader round of world trade talks in Doha, Qatar. The migration of U.S. manufacturing jobs overseas has stoked opposition to free-trade agreements, which some say have given developing economies access to U.S. consumers without offsetting benefits for American workers.

"Moving forward with leftover Bush-negotiated free trade agreements is a nonstarter with many members of Congress," Rep. Michael H. Michaud (D-Maine), chairman of the House Trade Working Group, said in a written statement.

U.S. Trade Representative Ron Kirk, who met with Michaud and other members of Congress on Wednesday, said the administration was approaching the trade deals intent on seeing that they also create jobs.

"We don't pick up everything as it was but will take a real strategic look at trade policy," Kirk said. The pending agreements with South Korea, Colombia and Panama, in particular, "have value, and when we are fighting for every job on the table, we need to get these right so we can reap the benefit."

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