NAFTA: Key to NEI Success?

The following is a guest post by Caroline from the Global Trade Content Blog.

U.S. Commerce Secretary Gary Locke, hosted a meeting for North America’s Industry Ministers.  Tony Clement, Canada’s Minister of Industry, and Bruno Ferrari, Mexico’s Secretary of Economy, were in attendance.  They discussed the importance of trilateral cooperation on issues such as the National Export Initiative.  The leaders agreed to identify ways to encourage small and medium-sized firms to export their goods and services.  Secretary Locked added:

Canada, the United States, and Mexico have a sophisticated and robust trade relationship because of NAFTA… Because our businesses already cooperate in the production of goods and delivery of services, we must work together to develop strategies that will benefit these businesses and the workers of this region.

According to American Shipper, trilateral trade among the NAFTA partners totaled more than $735 billion in 2009.  (An increase of 148% since the year before NAFTA’s implementation.)

An Update on NEI and the Control Angle from BIS

Was recently at BIS Update and wanted to share what is new on the National Export Initiative.

What NEI Is

On March 11 of this year, President Barak Obama signed the National Export Initiative Act (NEI) (http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative) as an Executive Order, thus following up on his January State of the Union promise to double U.S. Exports within five years and create new NEI-related jobs. The Act Designated a top-level Export Promotion Cabinet—composed of Secretaries of the Cabinet and all relevant Department Directors—to develop and coordinate NEI’s implementation.

  • A month later Defense Secretary Robert Gates outlined the Obama administration’s proposed reforms of the U.S. export control system, which included:
  • The creation of a single export control list by consolidating the U.S. munitions and commerce control lists to provide a single, frequently- updated listing of unrestricted trading partners
  • The establishment of a single export licensing agency with jurisdiction over both defense articles and dual-use items and technologies to streamline the review process and enhance consistency in licensing approvals
  • The creation of a single enforcement coordination agency to strengthen global enforcement, and enhance cooperation and coordination with the intelligence community
  • Develop a single, unified IT infrastructure that would receive, process and help screen new license applications and end-users to reduce the redundancies, incompatibilities, and costs
  • Encourage and assist small business exports.

Among other priorities included were federal export assistance, trade missions, increasing export credit, enforcement of intellectual property rights, increased coordination between government agencies and collaboration with the private sector and export promotion of services.

And… it seems like there is actually a plan behind this to make it work…

UPS–On February 19, the Commerce Department announced a partnership with UPS to increase trade by identifying small-and medium-sized companies that currently export to a single market. UPS will then analyze company data to recommend new markets based on industry, geography, currency, and market access opportunities. From there, the U.S. companies will be directly connected with trade specialists from the Commercial Service (part of Commerce’s International Trade Administration), to design targeted strategies to identify new market opportunities and increase customers in existing markets.

Since the president announced the NEI, the Department of Commerce’s Advocacy Center has assisted American companies competing for export opportunities, supporting $11.4 billion in exports and an estimated 70,000 jobs. The department’s commercial service officers stationed around the world have helped more than 2,000 companies generate $3.8 billion worth of exports. To date, the Commerce Department has coordinated 18 trade missions with over 160 companies to 24 countries.

The USPS–In July, the U.S. Postal Service’s Global Business team announced the launch of a New Market Exporter Initiative with the Department of Commerce’s International Trade Administration and U.S. Commercial Service to help USPS small to medium-size business customers expand their reach to international markets by offering logistics expertise and other support resources.

Doubling Exports Needs Redoubling of Effort

Remember the Obama Administration plan to double exports as a way to rebuild the US economy? Well it looks like the one part vision and a pinch of desire to change is not enough.  The New York Times has analyzed the progress so far, with mixed results, and highlights the many barriers to achieving the goals of the National Export Initiative (NEI).

The challenges include:

  • Manufacturing Leadership. We are becoming more and more of a service economy.  As the country is fighting to exit the recession, companies are uncertain of their ability to access capital and invest in the US in this time of increasing regulation and taxes.  Simply put,  manufacturing capacity and jobs are being exported (but unfortunately don’t count towards the doubling objective).  So if you aren’t producing more how do you export more?
  • The Rising Strength of the Dollar. The Euro bottomed with the banking crisis and has caused the dollar to appreciate.  While China has talked about slowly appreciating the renminbi, it is still promoting a steady flow of exports to world markets, and increasing competition for US Exports.
  • The Political Sensitivity of Trade Agreements.  As the election year approaches, I can’t see Congress getting too aggressive on trade agreements.  Clearly from a State-level there are winners and losers when trade agreements like NAFTA are implemented.  Who is going to fire up the old job debate now when the economy is stuck in neutral and slowly rolling backwards?

Exports in the first four months of 2010 have increased by 17 % versus the same period in 2009. However today we learned that the real trade deficit increased in June from $46bn to $54bn.

Clearly we aren’t playing on a level field and struggle with trade barriers erected by countries around the world.   For example, a wine industry expert says, “The single most restrictive barrier to wine exports remains the high import tariffs of most of the major markets buying U.S. wine today.”

Read more about the barriers to increasing exports at the New York Times: Hurdles Deter Obama’s Pledge to Double Exports.

Thanks to Lauren for the inspiration for this post.