Obama Looks to Jump-Start Export Push

Wall Street Journal – by William Mauldin

The Obama administration will fall well short of its goal of doubling exports in five years. But it is hoping to secure a longer-run victory on the trade front with sweeping new agreements in the next two years.

A weak global economy deserves some of the blame for the failure to double exports in the five years through 2014, a target first outlined in President Barack Obama’s 2010 State of the Union address. Concerns about global growth also could determine whether the U.S. and its trading partners step up to strike deals, or step back in the face of domestic political concerns and worries about jobs in sensitive industries.  

Mr. Obama met with heads of the Group of 20 leading economies over the weekend in Australia to discuss ways to juice growth, which has again disappointed in Europe and Japan. For the U.S., one goal of increasing exports is to lift the lackluster manufacturing sector and relieve the pressure on consumers to deliver economic growth.

The U.S. and European Union announced trade negotiations early last year as a way to kick-start sluggish growth without changing tax or spending policies. Japan sees a separate Asian-Pacific trade deal as part of its efforts to bring efficiency and growth to stagnant sectors of its economy.

At home, the Obama administration is dangling the prospect of export gains—and associated manufacturing jobs—to attract support for the Trans-Pacific Partnership talksthat include Japan and other Pacific Rim countries, as well as for the EU deal. Trade deals are widely seen as one economic area where the president and congressional Republicans, which swept to gains in this month’s midterm elections, are in general agreement.

“To ensure that TPP is a success, we also have to make sure that all of our people back home understand the benefits for them—that it means more trade, more good jobs, and higher incomes for people throughout the region,” Mr. Obama said last week in China.

With weak demand sapping trade with some top U.S. trading partners, American exports of all products remain far short of doubling over a five-year period. They totaled $1.2 trillion in the first nine months of the year, up 59% over the same period in 2009, according to the Commerce Department. At that rate, exports would double only by mid-2017, under Mr. Obama’s successor. (Figures for all of 2014 will be available in early February.)

“If the pieces fall into place, it will take a while, but I do think the combined impact of new trade agreements with Asia and Europe will lead to very positive results for the United States over the next few years, although obviously not by 2015,” said Miriam Sapiro, former deputy U.S. trade representative in the Obama administration who is now at the Brookings Institution, a think tank.

A handful of areas have far exceeded expectations. In a trend few officials could have foreseen, exports of petroleum, coal and related items tripled over that time, as shale-extraction techniques spurred U.S. energy output. They totaled $124 billion in the first nine months of the year.

The surge in fossil-fuel exports, especially refined oil products, comes as U.S. policy has limited shipments of crude and other energy exports. “Ironically, it’s the one major area that the administration hasn’t encouraged and in fact has discouraged,” said John Felmy, chief economist at the America Petroleum Institute, a trade group.

Diesel and fuel oil, in particular, are seeing growing demand in Latin America and other places. Colombia, an oil exporter in its own right, bought 3.4 million barrels of American diesel and fuel oil in August, or four times as much as five years earlier, according to the U.S. Energy Information Administration.

Even tightly controlled crude exports are growing: The U.S. sent 11.7 million barrels of crude to oil-rich Canada in August, or more than 10 times as much as five years earlier.

Meanwhile, one economic impediment to trade this year has been the strength of the dollar, which makes U.S. goods less competitive abroad. Some manufacturers, including the auto industry, want language in the trade deals to prevent countries from keeping their currencies artificially low to goose exports.

“We need the administration to step up onto the plate on currency,” said Matt Blunt, a former Missouri Republican governor who leads the American Automotive Policy Council, which represents the big Detroit auto makers. Mr. Blunt predicts U.S. automobile and part exports will double in the five-year period. Commerce Department data show car shipments on pace to double this year from 2009, the year of General Motors Co.’s bankruptcy amid the financial crisis.

The trade deals haven’t delved into currency concerns. Instead, they are focusing on breaking down barriers through lengthy negotiations sector by sector.

Last Monday, Mr. Obama met other leaders at an economic summit in Beijing in an effort to clear logjams in the Trans-Pacific trade deal. The U.S. has been working for about a year to overcome an impasse with Japan, the biggest economy in the bloc, over barriers to American agricultural products and related issues.

After missing earlier targets for wrapping up the TPP talks, the administration hasn’t set a new goal. Experts say a deal could be struck as early as the first half of next year. With the European negotiations, the U.S. is seeking a “fresh start” after the terms of key officials in Brussels expired last month.

China isn’t a part of the TPP talks. But during Mr. Obama’s Asian-Pacific trip, the administration announced a breakthrough with China in a multinational deal to cut tariffs on high-tech goods through the World Trade Organization.

U.S. officials, led by U.S. Trade Representative Michael Froman, also achieved an understanding with India over its giant food-stockpiling program, an issue that months ago derailed a deal to smooth global customs and border movement through the WTO.

In order to finalize the agreements and unlock any gains from new agreements with foreign countries, the Obama administration will need approval from Congress, likely with the help of special legislation that eases passage of trade deals through Capitol Hill.

The Republican midterm gains will likely help passage of the so-called fast-track measure because the GOP overwhelmingly supports business-backed trade initiatives. Getting enough Democrats to sign on is expected to be a challenge, despite the administration’s efforts over the past five years to make trade a leading plank of its economic agenda.

Write to William Mauldin at william.mauldin@wsj.com

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