America’s Stealth Industrial Policy

by Jonathan Rothwell, Mark Muro | November 9, 2009

Port of SeattleEconomists continue to debate whether the U.S. can rebalance its trade deficit and lead itself into recovery through exports, with skeptics’ doubts prompted anew by the fact that U.S. consumer spending explained the bulk of last week’s announced 3.5 percent third-quarter GDP rise. Given that, it’s worth asking: Does the U.S. have a national export strategy?

Though it may come as a surprise, the answer is yes. It comes from the multi-agency Department of Commerce-led Trade Promotion Coordinating Committee (TPCC), which annually publishes a document entitled, “National Export Strategy.” And it is actually a rather good document, though you would be excused for having never heard of it. A scan of U.S. newspaper archives reveals very little coverage over the last decade. The Journal of Commerce is devoted to discussions of news relating to U.S. trade, but its most recent article on the TPCC was published in 2003, shortly after its reauthorization. And more broadly, there has been scant talk of a “national export strategy” since Bill Clinton, whose administration tried to strengthen export policies, referred to it in his 1994 State of the Union address.

The 2008 “National Export Strategy” is worth looking at, and highlights some of the many activities that the U.S. government engages in to promote and encourage exports. Along these lines, the U.S. government has an online clearing house of trade related resources called This website contains information on public-private partnerships that help companies find solutions to financial problems, regulatory questions, marketing, transportation hurdles. The site also has links to relevant government agencies that help exporters. The most directly significant agency is probably the Export-Import Bank of the United States, which, in 2008 provided $14.4 billion in loans, guarantees, and export-credit insurance to exporters.

Now if you think this sounds surprisingly like, horror of horrors, “industrial policy,” then you’d be right. But of course, this is the U.S. version, so the efforts are rather half-hearted compared to what other countries are doing. Here is how the report attempts to defend the differences between U.S. industrial policy and that of such competitors as Japan and especially Korea:

The governments of our trading partners approach the issue from different perspectives. Some subsidize financing and market entry programs for new exporters. Others have created umbrella agencies that combine industry, finance, trade policy, and trade promotion under one roof. None of these approaches is suited to the U.S. style of governance, which looks to maximize and complement the role of public and private partners. It is important to know, however, what we are up against in the competitive global marketplace.

The problem is that the U.S. government, with its peculiarly selective embrace of laissez-faire, has long viewed explicit public export promotion as if it was a performance-enhancing drug: unfair to the competition and dangerous to global economic health. Yet, less ideologically fastidious countries simply don’t agree that there are negative side effects to export strategies--or at least they don’t worry about them. Even the 2003 Journal of Commerce article seemed to recognize the problem of unilateral disarmament and at once saluted the government’s effort to enhance U.S. exports through public policy changes while implicitly criticizing the U.S.’s relatively weak approach:

Still, no matter how hard Ex-Im Bank and other TPCC agencies strive to bolster their products and services, U.S. export promotion will likely continue to pale compared to the programs of major competitor nations.

In short, America’s “National Export Strategy” is a curious document, a well-intentioned strategy for a nation without real commitment. The irony, moreover, is that no one seems to disagree that U.S. exports could be substantially increased through more robust promotion policies. As the report details, some possible strategies range from increasing the number of free trade agreements to allowing more companies to benefit from Ex-Im Bank financing. To that list, we would add that the implementation of a well-designed, bottom-up federal industry cluster initiative, as discussed in a previous post, could boost exports by coordinating and diffusing knowledge about foreign markets and U.S. assistance programs to relevant exporting industries. With an initiative like that in place, along with a few more similar efforts, we might at last gain a credible campaign to boost our position in the world. In the meantime, at least we can say that we have a national strategy, notwithstanding its short-comings relative to the efforts of other nations.

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