The Obama Administration has now articulated the President's vision to expand exports significantly over the next five (5) years. To do so, Mr. Obama has established an Export Promotion Cabinet. He has also brought together corporate leaders through the President's Export Council. There is more money for the Ex-Im Bank. There are also more trade missions plus a promise of one-stop places for advice and counseling about how tos of starting to or expanding export activities. All of this is worthwhile, but will these actions really cause U.S. exports to increase dramatically?
Michael Elliott wrote an on-line column for Fortune 500 - money.cnn.com/2010/04/23/news/economy/trade_exports_imports.fortune/index.htm in which he made the point - the focus should be trade, not just exports. He has a valid point. Imports are what make our lives better. It exposes us to goods and wares we might not otherwise encounter. True, it is important that the government takes steps to assist industry to recover from the recession. At the same time, it is fair to ask - are the steps proposed enough?
Perhaps, but maybe not! U.S. politicians need to be willing to recognize that if we want good neighbors, we need to be good neighbors. It does us little good to negotiate free trade agreements with Panama, Colombia and South Korea, if they are not timely ratified and implemented. It also causes tremendous disruption to industry to have such complex trade agreements. Understandably those complexities come from domestic industries in the negotiating countries wanting to protect their interests. This causes one to ask - why not revert to the model of the original U.S.-Canada Free Trade Agreement? It had a certain number of rules of origin, but then it had a catch-all way to qualify - 50% value added. For those of us who recall those days, we know that approach became disfavored simply because of a dispute between Canada and the U.S. over audit results for a car company. Canada said the 50% was met and the U.S. vigorously disagreed.
The one thing free trade agreements should be good at doing is opening up markets. Why not focus there, allow the minimum number of individual rules of origin, and focus instead on refining the definition of value added? As things stand now, many companies choose not to take advantage of the reduced duties offered by free trade agreements, simply because the hidden costs of compliance are just too darn much! Mr. President, if you want to expand exports, first spend some of your political capital getting the existing free trade agreements with South Korea, Colombia and Panama ratified. Second, make sure the future U.S. negotiating position makes it transparent and cost effective for companies to comply with the resulting rules of origin. Do those two things and you will have greatly helped industry and the image of the U.S. internationally.