If you haven't heard the news, the United States is "on track" to double its exports by 2014, just as President Obama promised to achieve with his National Export Initiative.
Launched in his State of the Union address in January 2010, the NEI is the centerpiece of the president's trade policy. His stated goal is to double U.S. exports of goods and services from $1.57 trillion 2009 to $3.14 trillion in 2014, creating an estimated 2 million well-paying jobs in the process.
So far, so good. Since the trough of the recession in 2009, U.S. exports have been growing at a robust annual rate of 17 percent, faster than the compound rate of 15 percent needed to reach the goal. From the secretary of commerce to the Council of Economic Advisers, the president's team has been on message that exports are so far "on track" to meet the 2014 target.
Strong export growth is good news in anybody's book, but it is unlikely that the current pace of export growth will continue much longer, never mind for the next four years.
The exponential export growth of 2010 was more of a one-time phenomenon than a policy achievement of the administration. Exports were bound to grow rapidly after plunging 18 percent in 2009. All the growth in 2010 achieved was to return exports to their pre-recession level. Exports in 2011 will now be compared to the more normal levels of 2010, rather than the depressed levels of 2009, making a 15 percent growth rate far more difficult to maintain.
A recent report from Wells Fargo Securities, titled Can America Double Its Exports in Five Years? threw some needed cold water on the administration's heady talk. "The global economy was recovering from its deepest recession in decades in 2010, so rapid export growth from a relatively low base was not a particularly impressive achievement," the report concluded.
The recent Economic Report of the President made clear that success would be judged by the nominal value, not the actual volume, of U.S. exports. Here again, the Wells Fargo report offers a more sober assessment:
"Although government officials may declare 'victory' regarding the export goal, an increase in prices alone would do little to create new jobs, which seems to be the ultimate aim of most economic policies at present. Therefore, we think it is more relevant to focus on real exports of goods and services, which tend to be more highly correlated with employment growth, than on the dollar value of exports."
If exports are measured in real terms, the mountain of doubling exports in five years just became an even steeper climb. Real U.S. exports have not doubled in a five-year period since immediately after World War II. The best real growth in more recent decades, according to the Wells Fargo study, was a 70 percent increase in the last half of the 1980s, and a 48 percent jump during the recent expansion from 2003 to 2008.
Measured in actual volume, U.S. export growth in 2010 was 11.8 percent, somewhat below the pace needed to double by 2014, and that was largely a one-time rebound from the recession.
The NEI is still a valuable exercise. It has provided a framework for progress on trade policy for an administration under pressure from its union base to resist trade liberalization. In the name of promoting exports, the Obama administration has embraced the free-trade agreement with South Korea and, it is hoped, soon the agreements with Colombia and Panama. It has reached a tentative agreement with Mexico to restore safety-certified cross-border trucking, which will remove sanctions on $2.4 billion in U.S. exports.
Those are all good steps, but doubling exports by 2014 will remain an elusive and overly ambitious goal. I predict that as 2011 rolls on, fewer and fewer members of the president's economic team will describe U.S. export growth as being "on track."