Obama outlines strategy to boost US exports -- and jobs

Obama is ordering the creation of an ‘export promotion cabinet’ – one of several things he described in a speech Thursday in an effort to double US exports. The goal is to create 2 million jobs within the next five years.

President Barack Obama speaks at the Export-Import Bank's Annual Conference in Washington, Thursday. He ordered the creation of a high-level team to promote US exports, with the goal of creating 2 million jobs.
(Charles Dharapak/AP)

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By Mark Trumbull Staff writer
posted March 11, 2010 at 3:17 pm EST

President Obama moved Thursday to create a high-level team to promote US exports, with the goal of creating 2 million jobs within the next five years.

The project will span from efforts to reduce hurdles for companies in shipping goods overseas, to adjusting trade policy with a blend of carrots (a push for new free-trade agreements) and sticks (tougher enforcement of trade rules). The near-term goal is to double US exports within five years.

"For the first time, the United States of America is launching a single, comprehensive strategy to promote American exports," Mr. Obama told the annual conference of the Export-Import Bank, an institution in Washington designed to promote US trade.

Getting that many more jobs from exports won't be easy, but new efforts on trade are very much needed, economists say. The most obvious reason is that America needs more jobs, at a time when consumer demand at home remains tepid. A second reason is that the world economy continues to become more competitive, which means that the US can't rest on its laurels as the world’s leading exporter of goods and services.

"Ninety-five percent of the world’s customers and the world’s fastest-growing markets are outside our borders. We need to compete for those customers. Because other nations are," Obama said. "We need to up our game."

Obama outlined a multipart "national export initiative":

• He signed an executive order "instructing the federal government to use every available federal resource" to boost exports. The order created an "export promotion cabinet," made up of the secretaries of State, Treasury, Agriculture, Commerce, and Labor, plus the US trade representative and other officials.

• He revived a separate body, called the President’s Export Council, and named Boeing CEO Jim McNerney and Xerox CEO Ursula Burns as co-chairs. The panel will make recommendations on trade policy.

• Multiple cabinet departments will help create a "one-stop shop" for small employers that want help identifying opportunities and setting up operations overseas. The effort would include embassies and consulates abroad, as well as agencies like the Departments of Agriculture and Commerce.

• Obama pledged to promote new free-trade agreements while also enforcing laws on the books, such as intellectual-property rights. "China moving to a more market-oriented exchange rate would make an essential contribution" to a more-balanced global economy, he said. That move could also help narrow the large gap by which US imports exceed exports.

• The administration will increase access to trade financing. Obama commended efforts by the Export-Import Bank over the past year to step up its activities when US credit markets were impaired.

In addition, Obama pledged to be a kind of salesman in chief for US companies, with him and his cabinet members plugging the virtues of "made in America" when they travel overseas. Next week, the president will take his export evangelism to Indonesia and Australia.

The announcement about export strategy came as a government report showed a narrower-than-expected trade deficit for the US in January. Imports exceeded exports by $37.3 billion, with the volume of oil and automobile imports falling for the month.

Obama first announced the goal of doubling exports within five years during his State of the Union address to Congress in January.

Some economists, running the numbers, have said it's a difficult objective to reach.

"During the last 25 years nominal exports never grew this quickly in five years; it took an average of 11 years for exports to double," economist Sven Jari Stehn wrote in an analysis for Goldman Sachs.

Hitting the goal, he estimated, would require a combination of strong global economic growth and an adjustment of the dollar's value relative to currencies such as China's yuan.

"If global real GDP grew by an above-consensus 4.5 percent during the next five years, the dollar would still need to depreciate by about 30 percent, slightly more than the largest 5-year real depreciation on record during the last 25 years," Mr. Stehn concluded.

This doesn't mean that Obama's target is unreachable, however. And efforts to boost exports and achieve a more-balanced global economy could bring benefits even if his goal isn't reached.

Burma Isn’t Broke

By SEAN TURNELL

The drawn-out show trial of democracy icon Aung San Suu Kyi has once again focused attention on Burma and sparked discussion on how to engage the regime. U.S. Secretary of State Hillary Clinton recently suggested development aid as a carrot to coax the generals to talk. But contrary to popular belief, the junta isn’t as poor as it claims to be.

Burma has emerged as a major regional supplier of natural gas in Asia-Pacific. At present, most of this gas is sold to Thailand, but new fields will shortly provide for vast sales to China. Rising gas prices and increasing demand have caused the value of Burma’s gas exports to soar, driving a projected balance-of-payments surplus for this fiscal year of around $2.5 billion. Burma’s international reserves will rise to over $5 billion-worth by the end of the year.

These revenues make next to no impact on the country’s official fiscal accounts, however. The reason is simple: Burma’s U.S. dollar gas earnings are recorded in the government’s published accounts at the local currency’s “official” exchange rate of around six kyat to a dollar. This rate overvalues the currency by nearly 200 times its market value and undervalues the local-currency value of Burma’s gas earnings by an equivalent amount. Recorded at the official rate, Burma’s gas earnings translate into less than 1% of budget receipts. By contrast, if the same gas earnings are recorded at the market exchange rate, their contribution would more than double total state receipts, and largely eliminate Burma’s fiscal deficit.

The motivation for this sleight of hand is probably to “quarantine” Burma’s foreign exchange earnings from the country’s public accounts, thereby making them available to the regime and its cronies. This accounting is facilitated by Burma’s state-owned Foreign Trade Bank and some willing offshore banks.

Flush with these funds, Burma’s military rulers have embarked upon a spending binge of epic proportions, including indulging themselves in the creation of a new administrative capital named Naypyidaw, or “abode of kings.” They are also buying nuclear technologies of uncertain use from Russia and possibly from North Korea.

This kind of behavior is par for the course in Burma. The military junta took power in a 1962 coup and has consistently expropriated the country’s output while dismantling its basic market institutions. There are no effective property rights in Burma, and the rule of law is weak. Macroeconomic policy making is capricious, unpredictable and ill-informed. The regime spends greatly in excess of its revenue and resorts to the printing presses to finance its spending, creating inflation. Most of Burma’s prominent corporations are owned by the military, and the country is judged by Transparency International as the second most corrupt in the world.

Burma’s fall from grace has been incredible to watch. The country was once one of the richest in Southeast Asia and the world’s largest rice exporter. Today, Burma can barely feed itself. In 1950, the per capita of GDP of Burma and its neighbor, Thailand, were virtually identical. Today, Thailand’s GDP is seven times that of its former peer, despite very similar religious, cultural and physical endowments.

The people of Burma are poor, but the regime that oppresses them is not. Changing this equation is the true key to economic development in Burma, and the outcome to which the efforts of the rest of the world should be directed.

—Mr. Turnell is the editor of Burma Economic Watch and an associate professor in economics at Macquarie University in Sydney.

Recession in the West Cuts Off An Economic Pipeline in Ghana

By Karin Brulliard
Washington Post Foreign Service
Wednesday, August 5, 2009

ADUASE, Ghana -- When the U.S. housing crash triggered economic chain reactions around the world, one ended in a lush forest near this village, where on a recent day Emmanuel Awatey was tapping his machete on a log that he very much wanted to chop up.

In previous years, Awatey would have done just that, and then carried the wood on his head to the red dirt road nearby. A truck there would have ferried it three hours to the Tekura handicrafts workshop in Accra, Ghana's capital, where it might have been carved into a stool by an artisan, then shipped duty-free to the United States, then sold at Cost Plus World Market for display in an American home.

But the U.S. housing market and the global economy collapsed. And so has work for Awatey, the carvers and others working what had been a thriving pipeline from Ghanaian rainforest to American retail.

"If work comes tomorrow, we will head to the forest," said Awatey, 44, a sinewy subsistence farmer who, like others in his village, used to make as much as $25 a week chopping and carrying cedrela wood for Tekura. "But it all depends on the ones who bring the work."

'Wiping Out' the Vulnerable

The financial crisis has checked demand for African commodities, slowing the continent's economies. Less visibly, however, it has also stunted small African exporters who had become fledgling trade success stories -- and micro-level poverty busters -- in a region often associated with gloom.

In many cases, these exporters were lifted by a decade-old U.S. program meant to promote economic development through duty-free access to American markets. Now a U.S.-triggered meltdown is erasing many of the gains.

"We had small- and medium-sized businesses that had so much hope. They invested capital, they took loans. And the rug has been pulled out from under them," said Rosa Whitaker, a former assistant U.S. trade representative for Africa and architect of the program, the African Growth and Opportunity Act, or AGOA. "It's wiping out some of the world's most vulnerable people."

In the first quarter of this year, AGOA exports from sub-Saharan Africa to the United States, including oil, plummeted 59 percent, while non-oil exports such as textiles and agricultural products dropped 22 percent.

Secretary of State Hillary Rodham Clinton is set to discuss the program, which expires in 2015, at a forum Wednesday in Kenya as part of her seven-country trip to Africa.

Ghana's overall economy has remained steady because of strong prices for its cocoa and gold. But exports under AGOA dropped by more than one-third in 2008, and fell 86 percent, to $5.2 million, in the first five months of this year. While much of the plunge came from a fall in exports of foreign oil processed in Ghana, it also reverberated through particleboard factories, mango farms and jewelry studios.

As in many sub-Saharan countries, Ghanaian textile and apparel exporters have been particularly hard-hit, including some that U.S. officials once touted as AGOA poster children. Among them is Prosper Adabla's formerly humming factory near Accra, which manufactured tube socks for export.

An end to worldwide quotas on Chinese apparel exports in 2005 brought stiff competition. Two years later, Adabla's U.S. partner went bankrupt. Adabla shut his factory last summer, leaving $1 million worth of socks unsold and 1,000 workers jobless.

"The demand has dried up, number one. Number two, the partners have either gone bankrupt or are no longer in business or have decided to buy from China," Adabla said. "AGOA gave us an option . . . but if you can't sell your product, it's useless."

Few Ready for Tough Times

Ghana's small handicrafts industry, which was already expanding because of free-market reforms meant to grow nontraditional exports, got an additional boost from the program and then another from a booming U.S. housing and consumer market.

Earlier this decade, big American retailers such as Pier 1, World Market and TJ Maxx were snatching up handmade candleholders and baskets from Ghana. When Target ordered hundreds of thousands of dollars worth of goods from Tekura and other enterprises in 2004, hundreds of rural carvers won work chiseling African art for American abodes.

But most of the orders dried up by the end of 2007. Spokesmen for Pier 1, TJ Maxx and World Market did not respond to or declined requests for comment, but retail analysts say the explanation is evident.

In an era when retailers are trimming inventories, cutting price points and closing stores, African accessories count as luxuries, said Nick McCoy, an analyst with RetailForward in Ohio.

Robert Ellis, whose Fritete African Art Works was the forerunner of Ghana's handicrafts exporters, said cracks in the industry began showing before U.S. and world financial woes. Asian factories were making cheaper copies. Ghanaian artisans were not updating their work often enough. And when demand fell, he said, few had built a foundation to get them through tough times.

Ellis, who proudly shows off a 2005 Target ad touting "AFRICAN DESIGNS 14.99 -- 79.99" that includes his rustic wood table, watched his export sales drop from $305,000 in 2007 to $70,000 in 2008. Six muscular carvers now toil in his wood-strewn workshop, down from 150 in December.

He has sold property and paid off debts, and he says he thinks he can survive the crash. Smaller Ghanaian producers, he said, "will need a miracle."

AGOA has never become a silver bullet for micro-enterprise in Africa, whose share of global trade is just 2 percent. Ninety percent of exports under the program still come from oil, though non-oil exports have tripled since 2001.

Small businesses complain about the program's byzantine guidelines and say U.S.-provided training is not tailored enough. While some African governments saw the program as an opportunity and created export-friendly policies, others ignored it. More generally, poor roads and power supplies hinder commerce, and little companies cannot afford the 30 percent interest rates that African banks typically slap on long-term business loans.

In Tekura's quiet offices on the muddy outskirts of Accra, Josephine and Kweku Forson said they are waiting out the storm. Their sleek stools and masks -- all made from trees cut as part of government reforestation programs -- are gathering dust. Sales fell in half from 2007 to 2008 and are on track to fall another 60 percent this year.

In the sawdust-filled workshop on a recent day, Kwabena Appiah, 25, was one of just 10 artisans on duty. He was lucky: The Forsons said that they had regretfully let go more than 100 workers, and that they were especially worried about the woodcutters in the forest.

Out in Aduase, a tiny settlement where goats scurry about, those 20 or so woodcutters were once again getting by on their cassava and plantains. The clothes, haircuts and even rat poison they purchased with the extra income were on hold, Awatey said.

The woodcutters said they had no idea where the trees they chopped ended up after they left Ghana. But they said they knew why the wood was staying put for now.

"Because of the recession," said 32-year-old Paulina Ohenewaa, "there are economic problems everywhere in the world."

Asian Nations Revisit Safety Net in Effort to Bolster Spending

By PATRICK BARTA

Bangkok

Asian countries are beginning to build extensive social-welfare programs like those that long have existed in the West, a move they hope will encourage their people to save less, spend more and help put the region -- and the world -- on a stronger economic footing in the years ahead.

But creating a reliable social safety net is hard work, and it may be a long time, perhaps decades, before Asia sees results.

Analysts have long worried that Asians lack sufficient health, unemployment and other benefits to tide them over when downturns or emergencies occur, or to prepare for old age. Only about 30% of Asia's elderly receive a pension, according to the United Nations. Just 20% of its unemployed have access to unemployment benefits or other work-related social programs.

Partly as a result, Asians tend to save more and spend less of their income than their counterparts in the West. That contributed to the global imbalances that are one cause of the current world recession: U.S. consumers went deep into debt to finance consumption while Asians socked away money and relied on exports to Western consumers.

Social-welfare programs are one way of addressing those imbalances. The idea is that if Asian consumers have more confidence in their governments to take care of them in times of trouble, they will be more willing to spend today, igniting new demand for consumer goods and leaving the world economy less dependent on Western shoppers.

China recently said it will invest $120 billion to improve health care by building clinics and extending basic medical coverage to 90% of its 1.3 billion people within three years. Vietnam is implementing a national unemployment-benefits system. India has unveiled a voluntary pension system for up to several hundred million people who work at small companies, and is developing a nationwide identification database to better provide health care and other benefits.

Those programs build on efforts undertaken in recent years. Thailand launched a national health-care program in 2001 that offers basic medical care for just 30 Thai baht, about $1, to most citizens. India's latest national budget expands a program begun in 2005 that guarantees 100 days of work per year for rural laborers.

Public health expenditure* as a percentage of GDP in 2006

India	0.9
Indonesia	1.3
Philippines	1.3
Cambodia	1.5
Malaysia	1.9
China	1.9
Vietnam	2.1
Thailand	2.3
Australia	5.9
Japan	6.6
United States	7.0
High-income OECD	7.0
New Zealand	7.2

*Includes recurrent and capital spending from government, borrowings, grants and social insurance funds

Source: World Bank

The expansion of Asia's safety net "is happening, and it will help" wean Asia from an over-reliance on exports, says Robert Subbaraman, chief Asia economist at Nomura International in Hong Kong.

But many governments, including India, suffer from large budget deficits or lax tax collection, and may find it hard to finance expanded welfare programs.

In addition, a stronger safety net is no guarantee Asians will consume more. Europeans enjoy one of the world's most robust safety nets, and they tend to save more than Americans.

And it can take years, maybe decades, before consumers build up enough trust in welfare programs to modify spending behavior. In many Asian countries, such as Indonesia, services provided by social programs are dismal, with many residents avoiding government medical clinics altogether.

"The credibility of the systems has to be tested, and people have to be comfortable" that they still will be around after changes in government or economic crises, says Joseph Zveglich, an Asian Development Bank economist. Although he supports efforts to expand social safety nets, he says, "it's going to take time for people's activities to change."

Agence France-Presse

Consumer spending has fueled growth in South Korea, which reported its best quarterly performance in more than five years.

Some analysts say a better way to wean Asia off exports and encourage domestic consumer spending would be to let Asian currencies appreciate. That would make Asian exports less attractive to foreign consumers, give local consumers more spending power to buy imported goods, and force Asian business to diversify beyond exports. But Asian authorities may be unlikely to risk putting exporters in jeopardy by allowing their currencies to rise.

Those countries that have expanded their safety nets over the past decade have seen mixed results. In Thailand, residents were quick to take advantage of the country's new national health-care program. More than 45 million people registered to participate by mid-2003. Consumer spending shot up soon after the program was introduced, but economists believe the surge was driven more by an expansion of consumer credit and a sharp uptick in growth that occurred as Thailand's economy rebounded from the 1997-98 Asian financial crisis.

Growth in consumer spending later slowed, and in recent years Thailand's savings rate has begun climbing again after several years of declines, according to the Asian Development Bank. Most other major Asian countries have likewise seen their savings rates increase or stay about the same since the late 1990s, including Vietnam, where savings climbed to about 32% of gross domestic product in recent years from roughly 18% in 1995. Those trends could intensify in the future as the region struggles to fully recover from the current recession.

"In this economy, I'm trying to save as much as I can," says Banyen Sriwongrak, a 43-year-old vendor in central Bangkok who makes about $12 a day selling jasmine garlands near a religious shrine. She says she used Thailand's 30-baht health-care program to have a lump removed two years ago in a surgery that normally would have cost 16,000 Thai baht, or about $475. Having that protection was helpful, she says, but it hasn't fundamentally changed her spending, which includes squirreling away two or more days' worth of income each month and sending an additional $60 or so to support her mother in rural Thailand. "We don't know what the future will bring," she says.

None of that means Asian governments should stop investing in welfare programs. Such programs can greatly improve residents' lives even if they don't ultimately affect spending patterns. And the benefits in terms of changed consumer behavior may show up later.

Upgrading safety nets "isn't something that's going to get us out of the [current financial] crisis," says Mr. Zveglich, the Asian Development Bank economist. But if investments in the social safety net are made now, it may help the next time.

Write to Patrick Barta at patrick.barta@wsj.com