Austerity Measurement: Exporting Our Imports

—by , September 29, 2010

It is to wonder which of President Obama’s former financial advisor’s fuzzy aspiration it was to double the U.S. export market in five years. Most likely, the honor goes to the outgoing Larry Summers, but in the declining domestic marketplace, advancing exports is key.

How will America do it? Four ways, according to the Obama administration.

Promote, promote, promote and promote.

Seriously, that’s their plan. With the enthusiasm of a freshman year essay, sweeping bullet points such as “Increasing U.S. trade missions abroad” and “Bringing more international buyers to U.S. trade shows and boosting participation of U.S. companies in international trade shows” serve as the underpinning to adding over $1 trillion to U.S. exports in half a decade.

The stunning report, 8 months in the making, points to no specific industry, to no restriction of imports to balance the trade deficit, and to no specific deals (though it hints at the stalled South Korean free trade agreement). Specific markets of target are Columbia, Indonesia, Saudi Arabia, South Africa, Turkey and Vietnam.

I’m still unsure why Columbia is at the top of that list. Maybe it was for alphabetical reasons.

Here’s another zinger: “An ‘outreach campaign’ to raise awareness among small and medium sized companies about export opportunities and available government assistance.” Which is basically saying, “Hey companies, you don’t have to sell everything to Americans.” Sounds almost un-American, doesn’t it?

I think if any company in a position to export still exists after the last few years, they’ve managed to figure out whether it’s worthwhile or not by now.

Okay, so America wants us to send our products abroad. But what do other countries want that we have?

More than you think. Among the top U.S. exports are commercial aircraft, semiconductors, cars and car parts, and pharmaceuticals (so other countries can have cheap drugs). Industrial machinery is still high, as is oil, chemicals, telecommunications and plastics. We still export quite a bit of grain (in demand as the dearth of exportable wheat in Russia and Pakistan is sure to drive up world prices), and believe it or not, China loves our soybeans.

Truth is, we make all kinds of stuff. Despite the declines in manufacturing over the last several decades, it still makes up as solid fifth of the American workforce. But seven of the top 10 U.S. exports (over 30 percent of the U.S. export market) are created with raw materials or parts that originate the U.S. Planes, semiconductors, cars, telecommunications, etc. Sure, we’re putting them together, but we’re importing the raw materials.

Rare earth minerals, for example, which are used extensively in cellphones and other portable electronic status symbols, powerful magnets, superconductors, hybrid car batteries, renewable energy technologies, etc, are mined almost exclusively in China. Estimates range from 94-99 percent of the market. All the growth in the hardware technology market requires rare earth minerals, which are actually relatively abundant despite their name. Up until recently, the only U.S. mine to produce rare earth minerals was shuttered due to Chinese competition, but national security was raised as an issue in Congress as many defense applications require rare earth materials. Not a moment too soon, as the Chinese government just threatened an embargo of rare earth materials to Japan regarding a naval dispute. So it’s assumed the mine is planning to reopen next year.

We’ll see how quickly that happens. The investment money might be there, but the brain drain in rare earth mining has been severe.

Boosting U.S. exports means boosting U.S. imports, to a large degree. That isn’t necessarily bad, but when the 2009 percentage declines in exports comes into focus (44 percent for passenger cars, for instance), the picture becomes gloomier, and the artificial exchange rate with our largest supplier of raw materials, China, makes the prospect of increasing exports a possibly losing scenario.

Will we double exports? The short answer is no, and the long answer is no fucking way. We’re not even linguistically equipped for it. The rest of the world learned English to sell to us. Only the savviest among us will pick up Mandarin, Hindi or Portuguese to sell abroad. Beyond that, we’ve got about a decade or more of stagnant wages to keep pace in terms of manufacturing costs abroad.

The kicker is that the overseas market is what U.S. multinationals are all focused on. They’re well aware that the growth isn’t in the States, but because of their international presence, their goods aren’t treated as exports, necessarily. Some of it falls under the “services” umbrella of the goods and services marriage, but it makes much less of an impact on real growth at home.

Still, the goose that kept on giving, consumer spending, cannot create the growth that kept the American economy cooking through the ’80s and ’90s. Baby boomer spending is going back into savings and personal wealth while skyrocketing education costs have kept the children of baby boomers out of good jobs for a decade.

Conclusion? Argue about the deficit.

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  2. Trackbacks
  3. Foreign trade in 2010: A year of recovery – Arab News
  4. Currency reform bill may jeopardize US economy (Rep. Ron Paul) – The Hill (blog)
  5. China’s foreign trade in 2010: A year of recovery – Walta Information Center (blog)
  6. Austerity Measurement: Exporting Our Imports – Aquarian Weekly


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