Export Grants

The Obama administration is going to make sure that the Export-Import Bank (Eximbank) has the funds it needs to double exports over the next five years which is one of the cornerstones to help bring more jobs to the country. US Treasury Secretary Timothy Geithner announced on friday that:

We’re going to work hard to do what the president said, to make sure you have enough firepower to do sensible things to support American exporters. We think it’s good policy, but we need to do it carefully, make sure you’re putting it in areas where you’re going to get very good returns.

At the annimal Eximbank conference Geithner spoke alongside Eximbank President Fred Hochberg. If everything goes according to plan US Exports should rise to more then $3 trillion dollars over the next five years. Part of the plan inclides a new program to inject $2 billion dollars in loans for small and medium-sized exporters on top of the already authorized $21 billion in loan guarantees and export credit insurance. More money was pumped into these programs during the height of the global financial crisis when normal methods of loans for businesses dried up.

During the fiscal year 2010 so far, the amount given out has more then tripled the amount between October and December 2009. Geithner believes that exports are a measure of the American economy.

We do believe that exports are America’s future, and how American exporters are doing, how American businesses are doing around the world is a good measure of how America is doing.

The current democratic administration has proposed doubling of the exports from the United states in five years with the stated goal of creating over two million jobs and boosting the sagging economy. Former Treasury employees have lauded these moves however realistically speaking it will be near impossible considering the partisan bickering currently holding up congress. Even if congress was willing to push through major legislation to ramp up job creation the short five year time frame would be near impossible.

Exports have double inside of two or three year period in the past, but only a handful of times since the end of World War II so this is not a very frequent phenomena. When it did happen it was during times of rapid inflation such as after the oil crisis of the 1970s. If inflation is taken into account such a huge jump has never occurred in this nations history, and at the moment interest rates are so low that inflation has been stagnant since the beginning of the recession so there will not be any help to the natural increase in the value of goods.

Many of the proposals that the Obama administration has put into place also seem better on paper then they will pan out in reality. Taxing multinational corporations that send jobs overseas will only lead to a vast exodus of jobs from our country as these companies which are often the major driver for economic growth will take their jobs elsewhere. This has been a common talking point among politicians but the reality is much more complicated. Other ideas have already fallen flat. The “Buy American” policy has already drawn anger from many countries from around the world due to its protectionist import connotations, which also flies in the face of the free trade goals that every country “seems” to support.

Currently health care is still front and center for the president, but hopefully once this has been either moved through congress or given up on we are not likley to see any debate on what we can do to improve our numbers. During the last few years the trade deficit with our trading partners has narrowed, but we are yet to close or surpass them. After all, a doubling of our exports will not help out the economy much if our imports have tripled during the same period of time.

In December 2009, the U.S. trade deficit jumped to $40.2 billion dollars an increase of over 10 percent. This figure represented a far higher number then the $36 billion that was expected by many economists. Despite this increase the overall trade deficit or $370 billion, which is a sharp drop from the 2008 number which was close over half a trillion dollars.

During the same December period exports were actually up over 3%, however imports continued to grow at a faster 4% rate.

On January 27th, Barack Obama gave his State of the Union address to the United States Congress. He looked back on what has been achieved (or not) over the last year and laid out his strategy for 2010 which included more of a focus on the economy, rather then his health reform plans which had been the cornerstone of his administration in 2009.

One of his plans to get the unemployment rate under control is to double the exports of the country over the next five years. A number which would create up to two million more jobs.

Because the more products we make and sell to other countries, the more jobs we support right here in America. So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support 2 million jobs in America. To help meet this goal, we’re launching a national export initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security.

Finding markets for this increase will be a challenge, but through expanded free trade agreements with major economies in Asia and South America he is betting that they are out there. Some economists do not believe this can be achieved so easily as during the time of recession, many countries are taking steps to impose barriers to imports so as to boost their own economy. The Democratic party in the United States is also backed in large part by labor unions which are often opposed to free trade agreements. When other countries are able to trade on an equal footing with the United States, they are often able to take advantage of cheaper labor costs to gain a competitive advantage.

Here is the rest of Obama’s speech dealing with exports to grow the economy.

We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules. And that’s why we’ll continue to shape a Doha trade agreement that opens global markets, and why we will strengthen our trade relations in Asia and with key partners like South Korea and Panama and Colombia.