No Way to Treat the Customers

Suppose you work for a company experiencing phenomenal revenue growth. Most of that growth is attributable to rapidly increasing sales to new customers with potentially limitless demand for your products.

Then the CEO unveils next year's strategic plan, which includes actions likely to offend and financially injure those new customers, causing them to take their business elsewhere and jeopardizing your company’s future.

If you work in almost any goods-producing industry in Indiana or North Carolina, the above is not hypothetical. It is precisely what you confront if either Senator Clinton or Senator Obama becomes the next president.

You see, both candidates profess deep skepticism about international trade. Both plan to halt new trade agreements and to force our partners to renegotiate existing deals. Both support provocative, unilateral actions that would ultimately hurt American producers, consumers, and investors. And both insinuate that our trade partners are untrustworthy adversaries.

But Indianans and North Carolinians should recognize those trade partners as something different – like their fastest-growing customers.

Indiana’s producers shipped $26 billion worth of goods to foreign customers in 2007, which was 14 percent more than the year before and 80 percent more than in 2001. Since 2001, the state’s exports have grown at a rate one-third faster than U.S. exports overall.

North Carolina’s producers shipped $23 billion worth of goods to foreign customers in 2007, which was 10 percent more than the year before and 59 percent more than five years ago.

In 2007, exports accounted for 20 percent of U.S. manufacturers’ total sales revenues -— the highest percentage in modern history. And nowhere in America is manufacturing more important to the economy than it is in Indiana, where the sector accounts for over 30 percent of the state’s gross domestic product. Manufacturing accounts for 22 percent of North Carolina’s economy, ranking it fifth in that measure.

In China, Canada, and Mexico – the primary villains in the candidates’ antitrade narratives – Indiana’s and North Carolina’s producers are building relationships that are yielding extraordinary returns. Exports from Indiana to China increased by a whopping 36 percent between 2006 and 2007 (twice the rate of total U.S. export growth to China) and nearly quadruple Indiana’s exports to China in 2001. Indiana’s exports to our NAFTA partners (Canada and Mexico) grew 9 percent from 2006 and 67 percent from 2001, eclipsing overall U.S. export growth to NAFTA in both periods.

Exports from North Carolina to China increased a spectacular 32 percent between 2006 and 2007 (nearly twice the rate of total U.S. export growth to China), and its exports to NAFTA customers grew 46 percent to $7.4 billion over the past five years.

This export growth is not concentrated is one or two industries either. Out of 32 broad industry groupings, 28 in Indiana experienced export growth between 2006 and 2007 and 30 experienced growth between 2001 and 2007. Of the 28 industries showing export growth between 2006 and 2007, 23 experienced double- or triple-digit percentage growth.

In North Carolina, 25 of 32 industries experienced export growth between 2002 and 2007 and the growth rates were at least double-digit for each industry. Over the past year, 23 industries in North Carolina experienced double-digit export growth rates.

From the largest goods-producing industries to the smallest, in Indiana, North Carolina, and, indeed, throughout the country, strong export growth is evident. A study just published by the U.S.-China Business Council found that 406 of 435 congressional districts experienced triple-digit export growth to China between 2000 and 2007. Those figures and other facts from the study were highlighted in a Wall Street Journal editorial today.

Blaming trade for all that ails is a time-honored political tradition. Acting on that impulse by imposing trade barriers or otherwise retreating from the global economy is never the proper course, but it would be particularly foolish in the current environment, where industry after industry is experiencing and benefiting from an export boom.

That boom couldn’t be happening at a better time. In the past, when the U.S. economy slowed, the world economy slowed along with it. But with the recent awakening of demand in long-slumbering developing economies, growth remains strong in many parts of the world. The U.S. economic slow down might therefore be short-lived, as export growth keeps the economy moving ahead. That is unless policymakers do something to risk U.S. access to foreign markets.

Treating the customers with disdain and hostility just might be the plan that kills the golden goose.