International trade significantly contributes to American economic growth and well being. For example, in 2008 exports and imports generated nearly 30 percent of U.S. economic growth, up from 20 percent in 1990. Alone, exports contributed nearly 13 percent, measured by gross domestic product (GDP).

Although these figures dropped in 2009 due to the Great Recession and a decrease in world trade, the importance of global business has not diminished. In fact, according to a newly released Department of Commerce report, Exports Support American Jobs, exports supported over 10.3 million American jobs in 2008 and more than one in four manufacturing jobs.

But that’s not all. Compared to nonexporting firms, exporting firms, on average, employ almost twice as many workers, produce twice as much output, pay workers more, provide health insurance and pensions, and have higher productivity levels, says Howard Rosen of the Peterson Institute for International Economics, a Washington, D.C. think tank.

Boosting exports has an additional benefit: it’s the only was to reduce the growing American debt burden without incurring enormous sacrifices on behalf of our workers and families, Rosen claims.

The Bad News

Despite these advantages, it’s surprising how many companies do not engage internationally. For example, Rosen says only four percent of U.S. companies export, and more than half only trade with one country.

On the other hand, our competitors rely on exports to a much greater degree. As noted above, U.S. exports produced roughly 13 percent of American GDP in 2008. However, exports of goods and services represent 40 percent of European and Chinese GDP, 36 percent of Canadian GDP, 22 percent of Indian GDP, and 16 percent of Japanese GDP, Rosen says.

What’s worse, “The United States actually exports only half as much of its manufacturing production as the average for other major manufacturing nations,” said Frank Vargo, Vice President of International Economic Affairs at the National Association of Manufacturers in Washington, D.C.

Doubling Exports in Five Years

With the understanding that exports are vital, in January, President Obama announced the National Export Initiative and the ambitious goal of doubling exports in five years. Although foreign sales increased toward the end of 2009, total exports of goods and services last year fell to $1.55 trillion, down from $1.83 trillion in 2008. However, prior to the recession, U.S. exports doubled—but this occurred over the lengthy period of 2000 to 2008.

Stated by Vargo, “Achieving a goal of doubling America’s exports in five years is going to require much more than export promotion. The goal is equivalent to a 15 percent increase in exports every year for the next five years—one that can only be reached by major policy changes.” Vargo recommends the following steps:

  1. Send Congress the pending bilateral trade agreements with Colombia, Korea and Panama, which would boost U.S. GDP by $25 billion, according to the U.S. Trade Representative.
  2. Complete negotiations for a Trans-Pacific trade agreement and other new agreements as well as the Doha Round.
  3. Modernize the obsolete export controls system.

Vargo further said “U.S. export competitiveness also depends on a dollar that is fairly-valued.” Additionally, he noted, the United States has the second highest corporate tax rate among major industrial countries. “Reducing the U.S. corporate income tax to match the average of other industrial countries could boost GDP by $375.5 billion in the next decade, enabling U.S. companies to be more competitive in global export markets while creating 350,000 manufacturing jobs.”

Where To Look for Growth

Bank of America anticipates U.S. economic growth to reach 3.3 percent this year and 3.4 percent in 2011. However, other countries are anticipated to grow considerably faster. For example, of the emerging markets, which are anticipated to grow by 6.8 percent this year (2.6 percent for developed markets), China’s GDP is projected to reach 10.1 percent, followed by Singapore at 8.8 percent; India, 8.3 percent; Russia, 7 percent; Korea, 6.2 percent; Brazil, 5.7 percent; Indonesia, Taiwan, Hong Kong and Nigeria 5.5 percent; Malaysia, 5.2 percent; and Egypt, 5 percent.

According to a Goldman Sachs report, this year the BRICS—Brazil, India, Russia and China—will contribute almost half of global consumption growth. And a Credit Suisse report projects that Chinese consumer demand will rise from 9 percent of global demand today to 21 percent of global demand by 2020. Meanwhile, the U.S. share is forecast to contract from 27 percent today to 21 percent over the same period.

Higher GDP growth and stronger demand abroad present opportunities that may not be available here. As a result, American companies are wise to consider expanding abroad and pursuing foreign market share.

Consider Various Factors

Although GDP growth is a good statistic to consider when deciding which markets to pursue, other factors play an important role. For example, review the value of your product each candidate country has purchased. In addition, consider total demand (domestic production plus world imports) for the previous three years. This will determine each country’s market size, its rate of growth, U.S. marketshare, and whether it’s increasing or decreasing.

This article appeared in Impact Analysis, May-June 2010.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author of several books, and a nationally syndicated columnist on global business, emerging risks and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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