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U.S. Exports

Obama’s American Jobs Act – What it means for U.S. Exports

President Obama plans to create 2 million new jobs within five years by doubling U.S. Exports.

By Ray Hays, http://www.rayhays.com

Good news on the economy? Actually, yes, for U.S. Trade. Yesterday, the Department of Commerce released the following update based on July’s numbers: Today’s report showed that U.S. exports of goods and services in July increased 3.6 percent from June to $178.0 billion. The value of exports in July, as well as the individual export values for goods and services, was the highest on record. 

In his speech last night, President Obama put a spotlight on America’s competitiveness on the world stage. American technology innovation. American manufacturing. American infrastructure development. American education… And, yes, American exports.

Obama proclaimed his vision is that “Made in America” must continue to be a worldwide brand leader. He received a bi-partisan ovation for that part of his  plan. Little to argue on that point, but is it possible in a world where U.S. businesses cannot compete with cheap overseas labor?

I’ll leave the political views to the pundits… Politics aside, Republicans and Democrats both have good ideas on how to increase exports. However, in the real business world, shareholders generally don’t care how you make profits; it’s the financial results that matter.

Yesterday’s report from the Department of Commerce suggests that the U.S. is heading in the right direction.

Can the U.S. double exports and grow jobs over the next five years? The short answer is yes, we can succeed, and we must succeed in growing exports.

First, the U.S. cannot afford to become a second-rate exporter. We have too much vested in the global economy to allow us to fail.

Second, the global economy wants the U.S. to succeed, because the U.S. economy is too big to fail. An unstable U.S. economy means an unstable global economy. That’s why the IMF, the EU and other global players are pleading with Washington to get our economic house in-order.

In a nutshell, U.S. exports equals U.S. jobs. Exports represent 11% of the U.S. gross domestic product. Exports support 10 million U.S. jobs. If the U.S. could double exports in the next five years, we would put millions of Americans back to work. (I will leave the exact calculation to the economist gurus.)

Impossible? Absolutely not. The U.S. achieved this rate of export growth in the 1970s, and with the right focus, we can achieve it again.

Why can I say that confidently? Because I’ve worked with companies that have doubled or tripled their exports in a few years, especially small businesses. My professional opinion is that a focus on helping small businesses to export can make a significant impact on U.S. exports and U.S. jobs.

According to the latest figures from the SBA, small businesses are a big part of U.S. exports. For example, 97.5% of U.S. exporters are small businesses, and they represent 31% of U.S. export value. Small businesses also provide half of the private sector jobs in the U.S. I believe that small businesses have considerable opportunity for improvement and growth in export revenues and export-related jobs.

Many small businesses in the U.S. are willing to export, but they just don’t know how to do it. We need to recruit these potential exporters, train them and assist them in launching into foreign markets.

The advantage of small businesses, it they can make quick decisions and implement an international export strategy, with a tangible revenue impact usually within 3 to 6 months. The only thing they need is some guidance… Their entrepreneurial spirit will take if from there.

If we focus on helping current U.S. small business exporters and identify new small business exporters, here is what I believe the U.S. can realistically achieve:

  • Within three years:
    • Double the number of new small business exporters.
    • Increase small business revenues by 50%
  • Within five years:
    • Triple the number of new small business exporters
    • Double small business export revenues.

Combining small business export support with the organic growth of large business exports, (helped by a weak U.S. dollar), the goal of doubling U.S. exports in five years is quite achievable.

How much is this going to cost U.S. taxpayers? Nothing. Currently, the U.S. has thousands of volunteer executives working with small businesses to help them export. These volunteers are members of the U.S. District Export Council, state trade promotion programs, local chambers of commerce and other non-profit organizations. This volunteer initiative can be expanded with zero tax dollars.

What about the tax dollars spent on export promotion? The fact is that U.S. export promotion is run on a shoestring budget, with the collaboration of the U.S. Commercial Service, International Trade Administration, SBA and others agencies. As a business executive, I have used the services of these export programs to generate revenues for U.S. companies and more jobs for U.S. workers.

Export promotion has a multiplier effect because it is a collaborative effort among government agencies, business and individual volunteers. By my estimate (which could be debated), for every tax dollar spent on export promotion generates five to ten times their value in direct and indirect revenue. Export growth results in more business revenues, more U.S. jobs and a healthier economy.

My personal opinion is that export promotion provides a significant return on investment because it is a revenue generator, which very few government programs can claim. I would feel 100% confident in putting more tax money toward export promotion.

That said, I also understand and respect the view that government programs need to run more efficiently, and throwing money at a problem is not the best solution. Perhaps with better measurement of return-on-tax dollars, these programs will merit their fair share of federal and state budgets.

It is good that the issue of export promotion is in the spotlight. Let’s hope that Washington can agree on a strategy that will produce tangible results. Meanwhile, I will continue to do my part, working with like-minded international executives, to help small businesses grow their export revenues and put America back to work.

For more information on the District Export Council and other exporting resources, please see the links on my blog.

Watch for my future articles:

  • Is China eating away at American brand equity?
  • The National Export Initiative – What’s the plan to grow U.S. exports and U.S. jobs?
Copyright 2011, Ray Hays. All rights reserved
www.rayhays.com
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About rayhays

Ray Hays is an international executive and Member of the District Export Council of Arizona. Ray has over 20 years experience in franchising management, international business development and small business growth. He has field experience in over 50 countries, working for global market leaders in the service sector. He holds an MBA from the Thunderbird School of Global Management and a BS from Georgetown University.

Discussion

7 thoughts on “Obama’s American Jobs Act – What it means for U.S. Exports

  1. Hon Prez Obama is great and he has sympathy with common men

    Mohammed Ali BAIG Parsaiyan
    Economist
    Turkish Translator
    Hockey Player

    Posted by Ronaldo David | September 10, 2011, 6:37 am
  2. Thanks for your comment. Differing opinions on Obama are welcome, but this article not about Obama. I would like to focus on the issue of U.S. jobs, U.S. exports and how American small businesses might play a major role in both.

    Posted by rayhays | September 10, 2011, 9:42 am
  3. We have the creativity to compete around the world – however, we can’t tie the businesses hands behind their backs and expect them to make up that difference in addition to wage differences. We need to reduce regulations. Not suggesting we go to zero – but too many regulations do nothing but add cost. The Fed reduces interest rates, but the regulations imposed on the banks increase the cost of borrowing. When banks attempt to help people with problem loans they are punished. For example, someone whose loan is totally current but lost their job but managed to finds a new job at less income goes to the bank for help in refinancing. the bank says sure we can help and lowers the rate. But now the bank must get the property reappraised and since the house dropped in value the bank must take a loss on the drop even though the customer is making the payments. This kind of stuff is crazy. this is just an example of the crazy rules that are killing loans, especially to small businesses. So if small businesses can’t get loans they can’t grow. If they don’t grow they aren’t going to increase exports.

    then there are taxes – the highest corporate taxes in the developed world. Drucker points out that for companies to grow they need capital. There is only two ways to get it – borrow it or make it. If they borrow it they must make it to pay it back, but when we have people claiming that business makes too much profit – how can they grow. If corporations are making huge profits they grow and when they grow they create jobs.

    When you hire someone at $30,000 and that person costs the company $45,000 a year and then if you try to get rid of that person there are all kinds of problems – business says I will wait until I absolutely can’t live without another person. They try to figure out how to do it with less people – the cost of people (not wages) but the other stuff is too great.

    We can increase our exports for sure and we need to – however, we need to create a fair environment for business so they can compete on a level playing field. Actually US business does an amazing job of competing with the deck stacked against them. Imagine what they could do if the field were leveled.

    Posted by Ted Garrison (@TedGarrison) | September 10, 2011, 2:56 pm
    • Just a note, Ted. I don’t disagree with your very, very valid call for a level playing field. I just think that we need to avoid using that as an excuse for inaction, regardless of how the deck is stacked.

      Posted by rayhays | September 10, 2011, 10:57 pm
  4. Yes, as a former small business employer in a sector subject to major Federal regulation, I agree with much of what you say. Regulations exist to protect the consumer and to avoid abuse by businesses. Some regulations go too far and make it difficult for U.S. companies to compete on the world stage.

    As a small business owner, I’m not a huge fan of union abuse of their power. In many cases, union political policies just don’t make business sense. Small businesses and employees suffer as a result. I believe that unions have their place, and they historically have good reasons to protect their members, which means the average blue collar worker.

    Right now, we need to focus on the problem at-hand, which is a very real economic crisis. On September 11, it didn’t matter if a first-responder was union or not.. if they were Republican or Democrat. We just worked as a nation to overcome a very difficult challenge to our country.

    The U.S. is not stupid. We are competitive. In terms of taxation and labor laws, and there is no excuse for the U.S. not being successful on the global stage. Just speak to any European worker about their tax rate. Talk to any European small business about their business taxes and labor laws. The U.S. is a cake walk for small businesses compared to Europe.

    What about China? Would you rather be a Chinese worker? Would you rather be a Chinese small business? I think not. Let’s embrace what we have and stop complaining about what we WISH we had. We are damned lucky to be Americans, and if we fail as a leader in the world economy… to quote Jimmy Buffet, “…it’s our own damn fault.”

    American small businesses can make this happen. No excuses. Let’s do it!

    Posted by rayhays | September 10, 2011, 10:48 pm
  5. I would like to offer a slightly different perspective regarding the notion that the U.S. can double exports in the next 5 years. It can’t and won’t.

    Having worked in international trade and investment sector for nearly 20 years (most recently as Director of the U.S. Commercial Service office in Houston, TX, the second largest exporting city in the U.S. and as a former member of the Houston District Export Council) and now as a consultant to several Houston SMEs and to two foreign governments, I believe that I have a unique perspective.

    While laudable, the notion that the U.S. can or will double exports in the next five years is doomed to failure for the following reasons:

    1. We are nearly three years into the National Export Initiative (NEI) and the portion of our GDP attributable to exports remains the same now (11%) as it has for two decades. Does anyone honestly expect small business to meet that challenge in the next two years, or will we resort to purely Washington, DC, methods and keep moving the goal posts until we achieve the results we want?
    2. The majority of SMEs in the U.S. are service providers, not manufacturers.
    3. Doing business in the U.S. is predictable, particularly when it comes to getting paid. Thus, there is no desire to export;
    4. The two biggest challenges that US SMEs face when exporting is financing and getting paid; the next biggest challenge is reliable information;
    5. SMEs are not hard-wired to export. My experience tells me that many SMEs that export do so at the motivation/interest of the owner. The demands on their time are great which results in their attention to exporting being inconsistent at best;
    6. American companies do a lousy job of understanding foreign cultures and business etiquette;
    7. While the Commercial Service (CS) is full of dedicated civil servants and professionals, its budget is a speck in the federal government’s universe. Moreover, the CS has never made a compelling argument to OMB that they are a productive agency. Thus, their budget remains static under the best circumstances. We are not operating under those circumstances now;
    8. The strength of the CS is its overseas operations. Unfortunately, the CS doesn’t have strong Congressional support, nor is it well known to most Congressional representatives. For example, there are over 300 Commercial Specialist vacancies in overseas posts and there is talk in Congress that those positions can be eliminated without adding to the unemployment numbers because they are foreign nationals. One consequence of this mess: service delivery in some countries is 3-6 months. Trade missions, especially those led by the secretary or another political appointee suck the resources out of the post, further delaying delivery;
    9. The weakness of the CS is its management structure. The leadership consists of political appointees that come and go every couple of years; most of them haven’t real world experience in running a government organization or international trade. The net result is that the organization lurches from one political appointee’s priorities to the next. Moreover, the CS civil servants are bureaucrats and are not trained to be managers or leaders. The culture of pleasing one’s boss in order to get promoted often leads the most creative and dedicated trade specialists to leave the Service because there is no room to grow, and
    10. While the DECs perform a vital function, they are volunteers who have companies to run or jobs to fulfill themselves. To suggest that the DECs will have a significant impact on doubling U.S. exports is simply not realistic and no amount of cheerleading from Washington, DC, can change that.

    There is no short term solution to increasing U.S. exports.

    The long term solution is two-fold: 1) education (how many business schools focus on international trade) and 2) significant budget increases. The first is obtainable; the second is not in today’s political climate.

    Lastly, I don’t think anyone believes that the US economy will fail, or that it will not continue to lead the global economy, but we must be realistic. The world has changed greatly over the past two decades and the US must adapt accordingly. Relying on US SMEs to make the US competitive is simply not realistic.

    Posted by Duaine Priestley | September 11, 2011, 3:34 pm
  6. Duane,

    First, thank you for your service as a Director of the U.S. Commercial Service in Houston. I’ve met many of your colleagues around the world, and as an organization, I believe that the USCS helps U.S. business more than any other government agency.

    You have a health sense of skepticism on the two key points: (1) Can the U.S. double exports in 5 years? (2) Will the U.S. double exports in 5 years?

    I admit that Point 2 is debatable… Time will tell if it will happen. However, I disagree with you on Point 1. Doubling exports is absolutely possible. Let’s look at the 1970s, another decade with political and economic strife. U.S. exports grew from $57 billion in 1970 to $133 billion in 1975 to $271 billion in 1980.

    Allow me to address each of your 10 reasons above:

    1. I might be splitting hairs here, but bear with me… The main article did not specifically refer to the National Export Initiative (NEI), though I think it is fair say I alluded to it, and I plan to do a future article dedicated to NEI. Yes, the planning of NEI goes back three years, but NEI was officially launched last year with the March 11, 2010 Executive Order. We’ve seen an increase of over 16% in U.S. exports from 2010 to 2011 YTD. IF we can maintain that growth rate, we will double exports by 2015.

    2. Yes, most SME exporters are service exporters… EXACTLY why we should focus on SMEs. Our best opportunity for trade growth is the export of services. Just look at the data on the U.S. Balance of Trade from 2000 to 2010. Based on the numbers, should we put more effort into driving services exports or manufacturing exports?
    • 2000 – Goods export DEFICIT of $452 billion / Services export SURPLUS of $74 billion
    • 2010 – Goods export DEFICIT of $646 billion / Services export SURPLUS of $146 billion
    • In my opinion we should stop focusing on big manufacturers, whose stock performance drives them to send U.S. jobs overseas. If we put our resources toward the support of SME exports (services and manufacturing), we will do a better job of driving U.S. exports and U.S. jobs.

    3. Yes, there is a comfort level in selling only to the U.S. market… but it’s getting tougher for small businesses in the U.S., and SMEs are open to trying new strategies. If you look at the new generation of American small business owners, they grew up in a globalized economy, and with advances in technology, doing business abroad is getting easier. Smart business owners will seize the opportunity and find creative ways to uncover new markets internationally.

    4. Again, technology is making it easier to bridge the challenges of international payments and information collection. As for financing, it’s a challenge all over the world. In fact I think it’s easier in the U.S. than most countries.

    5. Fair statement that small businesses might not be wired for exporting.. Hopefully, with outreach and education, we can help make exporting easier for SME owners.

    6. I agree with you that Americans have a long way to go on cultural awareness… Hopefully this will change over time.

    7. I agree… but I would say that the USCS accomplishes a lot on a shoestring budget.

    8. I agree… Congress needs to get an education on the benefits of USCS. Exports = jobs = happy constituents = reelection

    9. I agree… USCS has room to improve. After all, it’s part of the federal bureaucracy. That said, it’s still a good tool for small businesses drive exports, despite its blemishes. I also believe that the USCS is better than most of its foreign counterpart trade agencies.

    10. Yes, District Export Council volunteer members are busy executives and busy business owners. I’ve served on 3 DECs in California, Ohio and Arizona. I think it’s fair to say that the regional DECs vary in quality and all could merit improvement. A little extra effort goes a long way. If DEC members are too busy or not willing to participate, then they need to move over and make room for fresh blood and fresh ideas. With the right people, the right grassroots communication, better brand awareness and the right programs, the regional DECs can make an impact. If not, we DEC members need to figure out HOW to make an impact or stop wasting our time.

    You are correct that we need a long-term solution for exports, but my belief is that we need to push harder in the short term to make this happen… Every step forward counts.

    Will the U.S. economy fail if we don’t improve exports? Maybe not, but we’d better do something to outrun the Chinese steamroller.

    Thanks for a good dialog, Duane. I hope you will chime in on my future blog posts with your perspectives.

    Posted by rayhays | September 12, 2011, 11:05 am

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