Sheriff Doubling As Salesman

Obama’s New Export Promotion Policy
Obama’s 2010 state of union address has set the tone for America’s new found thrust on exports. By setting a goal of doubling exports in next five years as a major job boosting strategy, US signals to play hard at global trade forums. Exports will be expected largely to carry the burden of recovery. Some trade friction looks inevitable with unfinished and contentious Doha round still on table. It is estimated that US economy will add 2 million jobs by doubling its exports in next five years. Though historical trends militate against such ambitious rise, yet a weak dollar and faster growing rest of the world could see significant export growth in coming years. The president also announced a National Export Initiative, first ever of its kind, targeting US small businesses and farmers to be major engines of it’s export strategy. By promising to aggressively pursue market access , US has given enough hint of its likely stance at stalled Doha round. However what is most important of all is the President also promised to review US stringent export control rules in a way that they remain consistent with the objectives of national security. Reforming US export controls may not result in revival of national Export control Act but the promise carries potential of far reaching changes in the way US views it's companies declining competitiveness in global market. A long pending demand of America’s high-technology industries, who mostly constitute small and medium enterprises, easing export control regulation will see export growth while at the same time may unleash trade war in strategic commerce arena.
On March 11th, administration rolled out a slew of initiatives. The most significant being replacement of current system of export controls by one time notification. The review time taken in scrutinizing an application drops to 30 minutes from two and half months for 85 percent of the 3300 affected products. End-use and end-user requirements on exported goods have been further simplified. The Exim bank authorized financing limits have been raised with special focus on small and medium enterprises. Some symbolic steps such as naming an ‘Export Promotion Cabinet’ with representation from Commerce, Treasury, State, Agriculture as well as from other concerned government bodies and revival of long defunct President’s Advisory Council chaired by chief of Boeing and Xerox reinforce a sense of urgency on export front.
Though SMEs and farmers may need promotional stimulus to export but big firms would need market access more than any home grown help. The disappointing trajectory of Doha round has set widespread disenchantment with Geneva based WTO and set member countries getting busy striking regional trade deals. Free trade deals with Panama and Korea may be low hanging fruits. In any case concluding them would be easier than dealing with Brazil and India under Doha gridlock.
However , the real prospects of quick export surge lie in influencing China against holding on to fixed yuan. The growing and also shrill criticism of China’s fixed exchange rate policy has the potential to trigger a trade war leaving everyone worse off. But a bleeding US job market may find an easy scapegoat in lowly pegged yuan that keeps Chinese exports cheap and discourages investment in American manufacturing.
This New Export Initiative, however as pointed by leading strategic journal ‘Stratfor’ could have unintended and unprecedented consequences. First, America has not been historically a market capturing empire unlike those in the pre-World war II era. To build a stable global security architecture after 1945, US allowed allies to penetrate its markets without demanding access to theirs. This only in return to grant US the control on security matters. These arrangements proved successful beyond imagination as Japan, Germany reconstructed their war ruined economies giving them powerful incentives to be part of US alliance structure. The replication of that model proved equally good in Western Europe, Taiwan, Korea and also to some degree in Indonesia. This arrangement seems to be facing a subtle challenge now.
Doubling exports in five years would mean finding additional 1.5 trillion US dollars market. That’s unlikely to happen without trade frictions even in a vastly expanded global market. It is bound to have widespread disruptive effects. Few then are likely to trust the idea of free and fair trade when the global policeman also starts doubling as an active salesman.