5:06pm

Sat April 21, 2012
Economy

The Export Boom: Who's Buying American?

Originally published on Sat April 21, 2012 9:09 pm

In his State of the Union address two years ago, President Obama argued there were a few things the U.S. needed to do in order to recover from the economic recession. One of them was to export more of our goods around the world.

"The more products we make and sell to other countries, the more jobs we support right here in America," Obama said.

That night, the president unveiled a new goal: to double U.S. exports over the next five years. It would be an increase that the president said would "support two million jobs in America."

Most economists dismissed the pledge at the time as somewhat quixotic, but two years later, the U.S. is on pace to meet that goal. American exports are up 34 percent since the president gave that speech, and the number continues to rise.

Competitive In A Global Market

Marlin Steel, a metal working business in Baltimore, employs about 30 people and makes parts that ship all across the world.

"We export to 36 countries," owner Drew Greenblatt tells weekends on All Things Considered host Guy Raz. "We're working around the clock, and we're growing."

Greenblatt says his business has almost doubled. They made $5 million in revenue last year, and a lot of that business was in exports, he says. This year, they're hoping for $8 million.

"Exports are critical to our future, critical to our hiring and our investment, and our optimism in the future," Greenblatt says.

It's not just advanced manufacturing exports on the rise, but pork, cattle and all kinds of agricultural exports are up as well. Even American craft beer has found an export market.

Flying Dog CEO Jim Caruso says that increasingly, people all over the world are trying the beer from the Maryland-based brewery.

"We ship to Amsterdam; from there it goes to 19 countries," Caruso says. "The top countries for us are England, Sweden, Italy and the Netherlands." Even in those top beer-producing countries, a competitive American product is finding a market.

Services Are Exports, Too

Another place exports are coming from is New York City — in particular, the 30th floor of a Manhattan skyscraper on 5th Avenue and 52nd Street.

That's where the consulting firm Kurt Solomon employs about 75 to 100 people. The firm doesn't actually produce a product for export; it provides management advice and strategy — and their overseas clientele is growing.

"In the past five years, we've seen significant increases," Managing Director Madison Riley says. The company is very active in China, Singapore and Japan, but also does business in Canada, Mexico, the U.K., Germany and France.

Of course, when you think exports, you probably don't think of consulting. As doing business globally becomes easier, the future of U.S. exports is just as invested in services as in the things Americans make, says the nation's top trade official, Ron Kirk.

"Four out of every five Americans is now employed in the service sector," Kirk tells Raz. "Services are a critical component of our exports, and make up about a quarter of our exported goods."

These services can include everything from legal consulting, finance, architectural, information technology and even engineering. Compared to hard goods and agriculture, it's harder to track service exports, so Kirk says the numbers might even be higher than what's reported.

And There Are Other Factors

So why, across the entire economy, has there been an increase of more than 30 percent for exports in everything from management consulting to craft beer?

Part of the increase, at least for the manufacturing side, is due to better technology, says Tyler Cowen, an economist at George Mason University who has written about the American export boom.

"A lot of it is being driven by smart machines," he tells Raz, "The U.S. has high wage rates, which is a disadvantage, but if machines are doing a lot of the work, that doesn't matter."

China factors a lot in America's export economy, too. "As China continues to grow, America will become a bigger winner," Cowen wrote in a recent article in The American Interest.

Wages in China have been going up as the country becomes more productive, Cowen says. More production may be good, but it's diminishing the cheap labor advantage China has held for some time.

"Those days are somewhat in the past," Cowen says," so the United States and Mexico will become, in relative terms, more competitive. This will mean that we export more."

Will Jobs Grow, Too?

Now remember, the president's secondary goal with the increase in exports was to also add two million jobs. Cowen says growth there has been a bit more sluggish.

"Companies have become more productive by shedding workers and lowering costs," he says. "So I don't, at the moment, view exporting as a way of creating a very large number of jobs, but it will create a lot of output and profits."

So not every business or worker is necessarily benefiting from the export boom in the U.S., and Cowen says that could ultimately lead to a polarization of economic outcomes.

"If you're an owner of capital, a business ... or someone with technical skills that works with smart machines, I'm extremely optimistic," he says. "[But] if you're someone that is not that skilled and faced with dysfunctional education and healthcare systems, then I'd say I'm fairly pessimistic."

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

GUY RAZ, HOST:

It's WEEKENDS on ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.

(SOUNDBITE OF APPLAUSE)

RAZ: In his State of the Union address two years ago, President Obama argued there were a few things the U.S. needed to do to begin recovering from the economic recession. Here was one of them:

PRESIDENT BARACK OBAMA: We need to export more of our goods.

(SOUNDBITE OF APPLAUSE)

OBAMA: Because the more products we make and sell to other countries, the more jobs we support right here in America.

(SOUNDBITE OF APPLAUSE)

OBAMA: So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America.

(SOUNDBITE OF APPLAUSE)

RAZ: Now, most economists at the time dismissed that pledge as somewhat quixotic. But two years on, the U.S. is actually on pace to meet that goal. American exports are up 34 percent since the president gave that speech, and that number is still climbing. Our cover story today: the American export boomlet, what we're selling and where it's going.

And one of those export hubs happens to be New York City where we sent producer Jeff Jones to visit a Manhattan skyscraper at the intersection of 5th Avenue and 52nd Street to check out an office.

JEFF JONES, BYLINE: So how many people work here?

MADISON RILEY: This office has probably, I'd say, 7,500 people.

RAZ: And there, he met Madison Riley, a managing director at the company, which is called Kurt Salmon.

RILEY: Some of our colleagues right here.

RAZ: And what sort of export is this company producing? Well, actually, they're not producing anything.

RILEY: I don't think that we think of ourselves necessarily as exports, although we certainly are.

RAZ: Kurt Salmon is a consulting firm. They provide services, business advice strategy. And increasingly, they do it for clients outside the U.S.

RILEY: You know, in the past five years, we've seen significant increases. We're very active in China obviously, in Singapore, in Japan. We are active Canada. We're active in Mexico. We're active in the U.K., Germany and France.

RAZ: Services, things like consulting, design or architecture, IT, they now account for about a quarter of all U.S. exports. But it turns out traditional exports, things we're making right here in the U.S...

(SOUNDBITE OF MACHINERY)

RAZ: Well, that side of the American export market is also doing pretty well.

DREW GREENBLATT: That's a punch. That part that you heard it making just now is something that we're exporting to China.

RAZ: That's Drew Greenblatt. He's the owner of Marlin Steel. It's a metal working business in Baltimore that makes things like wire baskets.

GREENBLATT: Right now, we're standing on the factory floor. We have 30 employees here. And we're making parts that are going to ship all across the world. We export to 36 countries. We're working around the clock, and we're growing.

RAZ: Later off the floor, I asked Drew Greenblatt exactly how much his business has grown. And the answer is it's almost doubled.

GREENBLATT: We did just shy of five million last year, and we're hoping to do eight million this year. We're very bullish on the future.

RAZ: Wow, five million last year, eight million this year. That means that business has really picked up. Is some of that coming from exports?

GREENBLATT: A lot of it's coming from exports. Exports is critical to our hiring and our investment and our optimism in the future.

RAZ: And it's not just advanced manufacturing. Pork, cattle and all kinds of agricultural exports are up as well. Even craft beer.

JIM CARUSO: This is the fermentation cellar. These are cylinder, conical tanks.

RAZ: Jim Caruso is showing out the equipment at his Maryland brewery. He is the CEO of Flying Dog Ale. Maybe you've tried their beer before. Well, increasingly, he told us, people all over the world are doing the same.

CARUSO: Well, we ship to Amsterdam; from there, it goes to 19 countries. But the top countries for us are England, Sweden, Italy and the Netherlands.

RAZ: Wow, you're getting the Low Countries - they're drinking your beer in the Low Countries. That's a big deal. I mean, these are some of the best beer-making countries in the world - England, Netherlands. Why do you think there has been an uptick over the last year or so in exports of your beer?

CARUSO: Well, I think a couple of different reasons. A lot of wine drinking over the last generation, and a lot of the people who have very sophisticated wine palates are now transferring that knowledge and that sensory experience to beer. There's microbreweries popping up across...

RAZ: OK. That's a pretty specific answer. How about this, though? Why across the entire economy - why the upswing of more than 30 percent for exports in everything from management consulting to craft beer? I put that question to Tyler Cowen, an economist at George Mason University, who's written about the American export boom.

TYLER COWEN: Well, some of it is we were starting from an artificially low base due to the financial crisis. So some of the numbers are a bit misleading. But the general trend really is there. A lot of it is being driven by smart machines. So the U.S. has high wage rates, which is a disadvantage, but if machines are doing a lot of the work, that doesn't matter.

RAZ: Here's something that you wrote, which I thought was really interesting, counterintuitive that as China's economy continues to grow, America will become a bigger winner. Explain that.

COWEN: Well, Chinese wages have been going up because they've become more productive, and that's good for China. It's good for Chinese workers. But the big advantage that China has incredibly cheap labor, those days are somewhat in the past. So the United States and Mexico will become, in relative terms, more competitive. This will mean that we export more.

RAZ: Export to who?

COWEN: Literally to everyone. If you look around the world, over the last 10, 15 years, with a few exceptions such as North Korea and parts of Africa, most economies have been growing quite robustly in the developing world. So those economies used to invest in construction, so they would buy timber, they would buy copper, they would buy building materials. But the wealthier they get, the more they will want to buy business services and aircraft and entertainment and pharmaceuticals, exactly the kind of things we're best at making.

RAZ: The president, when he pledged to double exports in five years, he also set a goal of creating two million jobs, new jobs, with that increase in exports. A, has that started to happen? And, B, can that happen?

COWEN: Job growth has been a lot more sluggish than virtually all of us had predicted. Fossil fuels and natural gas will give us quite a bit of job growth, but a lot of our exports will not. Think of it in terms of technical skills. If you're great at working with computers so that they augment your productivity, you'll be a pretty big winner.

But if you're competing against computers, you're likely not to do so well. Companies have become more productive by shedding workers and lowering costs. So I don't, at the moment, view exporting as a way of creating a very large number of jobs, but it will create a lot of output and profits.

RAZ: Can the president take credit for the export boomlet, if you will, over the last few years?

COWEN: Presidents have much less control over the economy than we like to think, both on the upside and the downside. So it's mostly driven by longer-term structural factors. And in terms of credit or blame, I tend to minimize the role of any president.

RAZ: So right now, when you look at this export situation and this boomlet and our overall economy, you are pretty optimistic.

COWEN: Well, I think we need to disaggregate the good news and the bad news. If you're an owner of capital, if you're a business, if you're someone with technical skills, if you're someone who works with smart machines, I'm extremely optimistic. If you're someone who is not that skilled and you're faced with dysfunctional education and health care systems, then I would say I'm fairly pessimistic.

The end result, I think, will be a kind of polarization of economic outcomes in the United States, depending essentially on education - how good are your skills, how good is your self-discipline, how high is your conscientiousness.

RAZ: Do you think we're already starting to see that trend now?

COWEN: I think we've been seeing it for over a decade. If you think of computers as getting really powerful in the early '90s, we start seeing this to a very small degree already in the '90s, and it's picking up pace today.

RAZ: Economist Tyler Cowen from George Mason University. He's written about the American export boom in the latest issue of The American Interest.

Now, another part of the export picture has to do with the increasing ease of doing business globally, and not just for businesses selling products but for businesses like Kurt Salmon, the management consulting firm we heard from earlier. Now, if you're thinking that selling and consulting from Manhattan isn't the same thing as shipping a car overseas from Detroit, well, the nation's top trade official Ron Kirk would invite you to think again.

RON KIRK: Four out of every five Americans now is employed in the service sector.

RAZ: The future of U.S. exports, he says, is not just in things Americans make; it's in the ideas and services they provide.

KIRK: Services are a critical component of our export and make up about a quarter of our exported goods, and that can include anything from architectural and engineering services. For example, Brazil is going to be privileged over the next 48 months to host both the World Cup and the Olympics. They've got to build everything from roads and bridges and streets and subways to a number of stadiums.

In many cases, American architects and engineers will be involved in the design of those, but we may also be involved in the financing and insurance of those. The other significant part of that, as opposed to manufactured goods in which we still tend to buy more and consume more than we make, we have a balance of about $180 billion in our services trade. So it's an important element of our export policy.

RAZ: So when we're talking about services, it's things like legal services, consulting, IT, it seems straightforward when it comes to products, right? So John Deere tractors, let's say they send half a million overseas, we can measure that. How do you measure services in comparison to goods? How are you able to say, you know, five consultants going overseas to help a company increases our exports this much?

KIRK: Well, that's a very good question, and I'll be honest, it's one we're struggling with. And it is much easier for hard goods and agriculture. But we also know that the numbers that we report for that very reason tend to be underreported. And when they dig into it and talk to the industries, we find that those numbers tend to be greatly inflated.

RAZ: And up until 2003, the United States was the largest exporter in the world, surpassed by Germany that year and then a few years later by China. How important is it for the United States, in your view, to become the top exporter again? Is that a priority?

KIRK: It is both a priority and an opportunity. And I say that, well, we are in a period of time now where 95 percent of the world's consumers live somewhere other than the United States. And as the rest of the world has looked at our economy, our model, they're finally beginning to develop a middle class.

And as these hundreds of millions of new consumers now come of age, we have the opportunity for us both to rebalance our trade and to have an economic model that's going to be more sustainable and create jobs that Americans are looking for.

RAZ: That's U.S. Trade representative Ron Kirk. He told us if you're a business owner interested in learning more about how to export your products, check out ustr.gov.

(SOUNDBITE OF MUSIC)

RAZ: And you're listening to ALL THINGS CONSIDERED from NPR News. Transcript provided by NPR, Copyright National Public Radio.