Obama's export plan won't necessarily create jobs

By Howard Schneider
Washington Post Foreign Service
Wednesday, March 24, 2010

The Obama administration's effort to boost employment by promoting U.S. exports may be undercut as business owners find ways to increase production without new hiring and as trade disputes threaten to crimp American sales abroad.

Administration officials have crisscrossed the country this week touting President Obama's recently announced initiative to double exports in five years, a jump that would push U.S. overseas sales to $3 trillion annually and, the White House says, create 2 million jobs.

But economists, business officials and others say that companies emerging from the recession may have ways to meet new export orders without adding new employees -- by accelerating underused production lines, restoring full workweeks to employees or improving worker productivity, for example.

"We are going to be very careful about hiring," said Jim Dugan, a spokesman for heavy-equipment maker Caterpillar. The company responded to a 37 percent drop in sales last year by cutting 19,000 workers, reducing others' workweeks to four days and idling facilities one week per month. The company is a successful exporter, with about a third of its U.S.-based production sold overseas.

"What we don't want to do is bring someone back and then lay them off again," Dugan said, adding that there are "ways to raise capacity without boosting head count."

Michael Montgomery, a senior economist at the IHS Global Insight consulting firm, said, "The 'miracle jobs' component may not be as big as it would appear."

With U.S. unemployment near 10 percent, the debate over foreign trade has become more pointed as administration officials advance their export-promotion strategy, contemplate a renewal of free-trade talks and face heightened economic tensions with China. Treasury Secretary Timothy F. Geithner is set to issue a semiannual report April 15 on China's currency policy, and pressure is growing for him to declare the country a "currency manipulator," helping trigger penalties on imported Chinese goods.

Without action on China's exchange rate or the negotiation of more open markets in countries such as Brazil and South Korea, some analysts argue, exports are not likely to grow as fast as Obama hopes. Others say any employment gained from exports will be more than offset if steps are not taken to stem the loss of jobs from America's appetite for imports.

In Dublin, Ohio, on Monday, Commerce Secretary Gary Locke acknowledged that the export goals are "aggressive" but said they are based on a recognition that other sources of economic growth -- domestic consumer spending, for example, and business investment -- are likely to remain weak. "This initiative was designed with one overriding goal in mind: to get people back to work," Locke said.

A senior Commerce Department official acknowledged that it may take time for an increase in exports to affect hiring but said that makes the administration's effort all the more important.

"To get this 'play' out of the system, we have to push demand," said the official, who was not authorized to talk for the record and so spoke on the condition of anonymity.

In developing the target of 2 million jobs, a Commerce Department official said, the administration used conservative estimates on several fronts -- higher-than-expected numbers for increases in productivity and inflation, for example, both of which would reduce the number of jobs created. It was also assumed that exports would rise faster in areas, such as some high-technology products, that create fewer jobs for each dollar of goods.

According to Commerce Department statistics, an extra $1.5 trillion in overseas sales should support anywhere from 6 million to more than 13 million additional jobs, depending on whether the increase comes mainly in services, manufacturing or agriculture. Based on the data used by the department, the biggest job impact would come in agriculture -- where, officials said, every $1 billion in overseas sales supports about 9,000 jobs on farms and in related industries such as packaging, petrochemicals and shipping. The Agriculture Department is being given an extra $50 million for export promotion.

The service sector, which generates an estimated 4,000 jobs per $1 billion of exports, is also getting a push. Foreign tourism to the United States, for example, is classified as an export because it brings money into the country, and part of Obama's program will funnel money into tourism promotion.

The administration also has made clear that the initiative is not mainly about selling soybeans and filling theme parks, but stemming the decades-long decline in U.S. manufacturing employment.

Competing ambitions may collide: The government of Brazil recently proposed a broad set of punitive tariffs against U.S. goods in response to a long-running disagreement over the subsidies paid to American cotton growers. This month, the U.S. Chamber of Commerce and the National Association of Manufacturers wrote a letter urging Obama to negotiate a compromise with Brazil so that the long-standing agricultural support program does not threaten "nearly $1 billion worth of U.S. exports and tens of thousands of American jobs."

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