China's cooling economy puts Obama export goal at risk
HONG KONG -- The slowing economies of China and other emerging nations are stunting foreign demand for U.S. goods, jeopardizing one of the Obama administration's most ambitious economic initiatives.
In his 2010 State of the Union address, President Obama set a goal to double U.S. exports in five years — from $1.58 trillion in 2009 to $3.15 trillion by the end of 2014. With the world coming out of recession then, exports rebounded strongly at first — soaring 16.7% in 2010 and nearly 15% last year to $2.1 trillion, putting the U.S. ahead of schedule in meeting its goal.
A growing number of economists and trade experts say that performance is unlikely to be matched this year — or next — with much of Europe in a mild recession and two of the world's largest emerging economies, China and India, decelerating from a torrid pace of double-digit annual expansion.
The doubling of U.S. exports was "an aspiration when it was disclosed, and now it seems an increasingly difficult objective to meet," says Eswar Prasad, Cornell University senior professor of trade policy.
Exports are a key driver of the American economy, accounting for more than half its expansion last year. For every $1 billion of U.S. goods or services sold overseas, about 7,000 American jobs are created, estimates Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
Driving exports is "just one component of growing an even healthier economy," says Francisco Sanchez, U.S. undersecretary of Commerce for international trade. With 95% of the world's consumers outside the U.S., "it would be a wasted opportunity not to promote our goods and services" overseas.
Yet U.S. export growth could slow to 5% this year, and then climb to 7.5% or 8% for the next two years, predicts Gregory Daco, principal U.S. economist for IHS Global Insight. To meet its goal, the U.S. needs about twice that growth rate — an average annual rise of 14.4% in exports — for each of the next three years.
U.S. exports to China, the largest export market outside of North America, have already decelerated from as high as 30% year-over-year growth rates in early 2011 to the single digits at the end of the year. They grew at a slower pace last year than U.S. exports to the rest of the globe as the world's second-largest economy grappled with high inflation and the threat of a housing bubble. U.S. exports of agricultural products, computer electronics and primary metals also fell sharply to China last year, after adjusting for price increases, according to an analysis by Brookings Institution, a Washington, D.C., think tank.
As China's growing demand for goods from elsewhere in the world slips as well, that could weigh on other countries' economies, and in turn, their desire for U.S. goods. China's voracious appetite for commodities such as iron and soy has fueled economic growth in countries including Australia, Chile and Brazil.
A Chinese slowdown would "ripple through trade chains and put a squeeze on U.S. exporters, whether they ship directly to China or to other destinations," says Frederic Neumann, co-head of Asian economics for HSBC in Hong Kong.
