(Business Intelligence Brief) The statement from President Barack Obama regarding the need to increase U.S. exporting had a hint of desperation from the moment it was made. Nobody doubts that the United States needs to improve, and there was generic support for the concept from Congress and the general public. But when it comes to specifics, there have been struggles.
Obama's initial call was to increase exports by 5% in the next few years, but there was nothing to support that goal in subsequent speeches. Congressional actions actually made things worse. Most Americans oppose free trade and have become convinced that the solution to the U.S. economic crisis will be isolating the economy behind massive walls of protectionism. It's perceived that the only nations benefitting from trade include those like China, ones holding advantages such a low wage structure, flimsy laws on safety and the environment as well as a government willing to manipulate currencies, erect trade barriers and otherwise stack the deck in favor of the local company.
Those who assume this position have not looked very closely at a nation that is far more like the United States than any of these high growth nations. The Germany have become the export masters of Europe while maintaining maintained its place in the world despite the various disadvantages the United States claims: high wages, a generous system of benefits, high taxes and strict environmental and safety laws. In most respects, the Germans have even more inhibitions when it comes to competing on the global stage.
Analysis: The German economy and the U.S. economy have become more similar amid the global recession. The biggest change has been in the behavior of the consumer. U.S. companies really never had the same need to seek out foreign business as the domestic consumer was eager to purchase what was on offer. Prior to the recession, the US consumer accounted for 70% of the action in the economy but that number is now slipping and may be down to 65% or 60% by the end of the decade. In Germany, the domestic consumer only accounts for about 57% of consumption and is notoriously cautious when it comes to buying. This has forced German companies to seek markets elsewhere and they have expanded into developed and developing nations alike. The German economy is only about one-quarter the size of the US economy, but it exports more in the way of manufactured goods and in more categories. The demand for high value German machine tools and technology is well known, but the Germans export consumer goods as well. It is not generally appreciated in the US that Germany produces inexpensive goods that sell well in markets like China, India, Brazil and elsewhere.
If the US is going to reach the lofty goals set by the White House, it could do worse than copying what the Germans have done. The analysts are somewhat divided as to what makes the Germans effective at exports, but there are some patterns that win plaudits from most observers:
- Strong support from the top...Chancellor Angela Merkel leads as many as two dozen trade missions annually.
- Commitment to trade promotion within the bureaucracy...The US Department of Commerce does a yeoman's job but their budgets are paltry compared to what is spent in Germany, Japan or most other nations.
- Backing up its strongest export sectors...The Germans work diligently to support the pillars of its export economy with policies that focus on opening up the world market to the niche manufacturing companies that often dominate their unique sectors.
- Positive attitude toward trade...The Germans unite behind the notion of export and import while some polls show that 70% of Americans believe trade has been bad for the domestic economy.
Chris Kuehl, of Armada Corporate Intelligence, is NACM's economic advisor