US exports improve but more can be done — starting with China meeting

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U.S. international business has had a rough run over the last half decade. Especially in the last two years, a combination of tepid global economic proliferation, a slowdown in trade and increased protectionist actions by foreign governments have frustrated growth. Recently, however, there have been some encouraging signs. 

The global economy is on the rise and so is business confidence. The Organization for Economic Co-operation and Development (OECD) projects that global economic growth will pick up in both 2017 and 2018, although remain below the 4 percent averaged between 1987 and 2007.

{mosads}A most welcome piece of good news has been an increase in U.S. exports. Through May, U.S. exports of goods and services have grown by 6 percent in 2017 over last year. Exports of goods increased by almost 7 percent while services exports grew by over 3 percent. A boost in exports is a good indicator for American economic growth prospects.

 

Before we get irrationally exuberant about this, we should keep in mind that 2016 was a bad year, and total U.S. exports are essentially flat with the same period in 2015. Admittedly, exports are only one part of a complex picture for U.S. companies doing business overseas, as many companies serve their foreign markets from multiple global platforms.

While export growth is good news, there is a lot of room for improvement, especially in services. The Trump administration must help U.S. companies sell abroad by an increased emphasis on reducing foreign barriers to trade and opening foreign markets to U.S. businesses. Trade policy should focus on exports.

The top U.S. export markets provide good guideposts for trade policy focus. U.S. exports to Canada and Mexico are growing again by approximately 4 percent to each market after declines in 2016. The current North American Free Trade Agreement (NAFTA) “renegotiations” make good sense since these countries are crucial to U.S. businesses as both markets and integrated manufacturing bases. NAFTA is a 1993 agreement that needs to be updated.

The most promising and timely export data is coming from China, our third-largest export market and the second largest economy in the world. Exports to China through May have grown by 16.8 percent after a flat 2016. While the U.S. trade deficit with China is the largest with any country and continues to grow, U.S. exports to China are growing at twice the rate of imports from China. Prying open the Chinese market in closed sectors and improving the regulatory environment in China for U.S. businesses could help boost this rate of growth. 

On July 19, the first meeting of the U.S.–China Comprehensive Economic Dialogue will take place in Washington, co-chaired by Treasury Secretary Steve Mnuchin and Commerce Secretary Wilbur Ross on the U.S. side and by Premier Wang Yang on the Chinese side.

This marks the Trump administration’s continuation of the institutionalization of the U.S.–China bilateral economic relationship, although under a different name than the Obama administration’s Strategic and Economic Dialogue or the Bush administration’s Strategic Economic Dialogue. Every administration seems to need its own name, but the new mechanism seems to decouple the “strategic” elements from the economic at least at this level of negotiations.

Next week’s meetings are important. The United States will need all of the vaunted negotiating skills that Mnuchin and Ross can bring to the table. Trade negotiations with China are always tough, plodding procedures. The Chinese government remains obdurate in pursuing widespread protectionism, state-directed industry strategy and antagonism toward the United States. Although China traditionally offers some trade concessions, dramatic progress has usually been elusive.  

In May, China resumed imports of U.S. beef, promised to accelerate the license approval process for U.S. biotech products and signaled the opening of credit rating services and electronic payments processing to U.S. companies. Those were welcome moves, but they had been under negotiations for a long time.

Now is the time for China to demonstrate a true commitment to market reform and a mutually beneficial “win-win” relationship with the United States. A stable and prosperous world is in the interest of both countries, the two largest economies in the world. Tangible moves by China to improve its regulatory environment and provide fair and consistent treatment to U.S. companies in licensing and legal procedures would show that China practices what they preach about free trade and open markets.

Charles J. Skuba is professor of the practice in international business and marketing at Georgetown University’s McDonough School of Business. He previously served as an official in the International Trade Administration under President George W. Bush.


The views expressed by contributors are their own and not the views of The Hill. 

Tags Canada Economic policy of Donald Trump economy Economy of China Economy of North America International relations International trade International Trade Administration Mexico North American Free Trade Agreement U.S.–China Strategic and Economic Dialogue

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