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Ed Gerwin

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Harleys to Hanoi: How Foreign Consumers Can Rev Up U.S. Growth

Posted: 09/22/10 10:56 AM ET

Every year, 70 million new consumers join the world's middle class. By 2030, the international middle class could surge by an additional 2 billion people. These global consumers will help drive worldwide prosperity. If we are smart and strategic, they will also play a key role in driving American economic growth.

For many years, American consumers played an outsized role in powering economies both here and abroad. But after losing $13 trillion in the Great Recession, Americans are saving more and spending less. While this frugality may be good for households, it is bad for U.S. business, and leaves a $400 billion hole in the American economy.

Foreign consumers are an obvious choice to take up this economic slack. U.S. business leaders and policymakers are rightly focused on generating new demand and increasing output by significantly increasing exports of America's innovative products and services. But we will not succeed in revving up the country's export engine unless we urgently address the many obstacles to our export trade.

The journey from U.S. loading docks to foreign stores and showrooms is often treacherous for American exports. There are countless examples of unfair foreign restrictions that block exports of iconic American products and services:

• Sky high duties and taxes can triple the cost of a Harley-Davidson motorcycle in some countries. A $17,000 Harley "Fat Boy" can cost as much as $50,000 in Indonesia.

• French regulations require John Deere and other American riding mowers to wear "skirts" over their transmissions--a requirement with no safety basis.

• Campbell's Soup loses some $200 million a year in exports to India and Korea because of high duties and taxes on soup and vegetable juice.

• FedEx deliveries are hit with 60% fees in Brazil, while other countries shut out American express delivery companies with unfair preferences for domestic firms and post offices.

These and many other export barriers rob large and small U.S. companies of billions in exports, stunt U.S. growth and prevent the creation of good jobs. Addressing these pernicious trade barriers must be the centerpiece of our government's efforts to grow U.S. exports.

Key business and political leaders met in Washington last week for the first formal meeting of the President's Export Council. In their advice to the Administration on expanding U.S. exports, the Council members should urge that the United States pursue an aggressive four step plan to combat foreign trade barriers:

1) Reenergize export promotion and enforcement programs that have been uncoordinated and underfunded in recent years. U.S. export officials do tremendous work in opening up foreign markets for our exporters. We need more of them and they need better direction.

2) Bring a strategic focus to export enforcement. There are countless obstacles to U.S. exports. We must determine which foreign barriers have the most destructive impact on U.S. growth and new jobs and then pursue these barriers with a vengeance.

3) Make new trade deals a cornerstone of our plans to knock down foreign export obstacles. Many barriers to U.S. exports are unfair, but are not illegal. In these cases, only new trade agreements can assure that American companies and workers obtain the fair and reciprocal treatment they deserve in foreign markets. We can break down numerous foreign trade barriers by finishing the work on pending trade agreements and by actively pursuing new trade deals with major countries and in key sectors, including clean energy and health care.

4) Get in the game. China, the European Union, Japan and our other competitors are actively seeking many new trade deals to knock down barriers to their exports. In Asia alone, the number of new trade agreements rocketed from 3 to 54 between 2000 and 2009, and 78 new trade deals are under negotiation or proposed. As barriers to our competitors' exports fall away, existing obstacles to U.S. exports will loom even larger. America must also use new trade deals and tough trade enforcement to win fairness for our exporters. If we take a "time out" from trade, we will fall further behind.

The United States virtually invented the modern middle class, and middle class prosperity powered much of the nation's impressive growth in the 1950s and 1960s. Today, our exporters must reach out to the global middle class, and our government must assure that foreign trade barriers don't stand in the way.

Ed Gerwin is the Senior Fellow for Trade and Global Economic Policy at Third Way, a Washington, D.C.-based think tank, and Anne Kim is the Domestic Policy Program Director at Third Way.

 

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