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Can the US double exports within five years?

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President Obama made a bold declaration during his State of the Union address: He said the US will double exports over the next five years. That’s a lofty goal, but can it be done? The World’s Jason Margolis visited Western Michigan to explore just how realistic the president’s goal may be. (photo: Jason Margolis)

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MARCO WERMAN:  I’m Marco Werman and this is The World.  President Obama made this bold declaration during his State of the Union Address in January.

PRESIDENT BARACK OBAMA:  So tonight we set a new goal.  We will double our exports over the next five years, an increase that will support two millions jobs in America.

WERMAN:  That’s what you call and applause line.  But doubling U.S. exports by 2015 will take more than a good speech or two.  The World’s Jason Margolis visited western Michigan to find out how and whether the President might achieve his goal.

JASON MARGOLIS:  Germany, Argentina and Russia doubled their exports between 2002 and 2007.  China tripled them.  Doubling our exports will require a much faster pace of growth than anything we’ve seen over the past 30 years.  But President Obama has a plan to help small and medium size businesses sell their products abroad.

PRESIDENT OBAMA:  Many businesses want to export their products, but just don’t have the resources required identifying new markets or setting up shop overseas and that’s where we can help.

MARGOLIS: The U.S. government can help companies like BEI in South Haven, Michigan.  The company makes harvesting machines.  Co-owner Jeff McKibben shows me a blueberry and raspberry harvester.  This machine can replace between 100 and 150 workers.  Average price, $150,000.00.  McKibben doesn’t sell many machines to foreign markets, but he’s confident that will change.

JEFF MCKIBBEN:  The berry business in South America has always been all manual labor and prices it in the supermarkets in the United States and in Europe are declining, obviously, and their labor supply is getting more expensive year by year, so they’re really looking to move to mechanical harvesting in that.

MARGOLIS: But McKibben’s whole company is all of 21 people.  No international sales staff to tap into new markets, so McKibben turned to the U.S. commercial service and trade specialist Tom Maguire in Grand Rapids.

TOM MAGUIRE:  We give them the market research on the X, Y, Z country that he’s interested in; Mexico, Honduras, this is where he was interested in.  We talked with him extensively about how you ship the product.  And he says what if they want a demo, I ship the product over there, I want to bring it back in, oh well then, you’ve got to make sure that machine is clean when it comes back in.  We’re not going to pollute here.  And then now, are you ready to go visit some buyers we can find for you, hopefully?  Yes, okay.

MARGOLIS: That’s how it’s supposed to work.  And the President’s plan calls for hiring 325 more trade specialists like Maguire.  But things get more complicated if you’re a bigger company, like Armstrong International in the Michigan town of Three Rivers.  It has more than 1,000 employees worldwide, including international sales specialists like Ray Masnari.  Workers’ here are building steam vents, the kind of plumbing product that Armstrong sells in over 100 countries.

RAY MASNARI:  Most places in the world, chance are you could find an Armstrong product.

MARGOLIS: So the company doesn’t need help breaking into new markets.  Masnari says they need help selling their products overseas at a competitive price.

MASNARI: Level the playing field.  Often times in some of the other countries there are hidden restrictions to us being able to do business in those countries.  It is very hard to break into those markets with our traditional products because I believe that strong favoritism is given to the locally manufactured products.

MARGOLIS: The problem there is other country’s tariffs.  In effect, taxes added by a foreign government that make the product more expensive.  Masnari wants the U.S. government to enforce more free trade agreements which would lower, or eliminate tariffs.  That’s something most medium and large companies want.  And the President is pledging to do it.  But economist Michael Ryan at Western Michigan University reminds us that trade goes both directions.

MICHAEL RYAN:  We want other countries to play fair and allow more American goods into their markets.  Well, they’re asking us the same question.

MARGOLIS: For example, many countries complain that U.S. agricultural subsidies give American farmers an unfair trading advantage.  So to truly have free trade, Ryan says the Obama administration and Congress would have to take the good with the bad.

RYAN:  Industries here in the United States, especially in west Michigan, that maybe are lesser competitive, maybe a less competitive advantage or comparative advantage as economists like to talk about, we may see more imports in these industries which may mean more job loss in industries that are declining.  At the same time, we would see more job gains in industries that are expanding.

MARGOLIS: That’s what makes free trade a double edged sword for any country, the U.S. included.  But even if you focus on U.S. exports only, a lot depends on what’s happening in other nations.  Exchange rates could be a big factor, says economist Lee Branstetter of Carnegie Mellon University.  And then there’s this.

MALE VOICE 1:  Consumers and farms overseas will only purchase increasing amounts of our good and services if their own incomes are growing over time.  So one of the most important factors determining whether or not the President’s goal is met is something over which he has next to no control.

MARGOLIS: So if there’s no cash overseas, all the best efforts of the Obama administration won’t help Michigan companies sell any more blueberry harvesters.  For The World, I’m Jason Margolis, South Haven, Michigan.

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