Today’s release fills out the trade picture for 2010, and what a year it was from the foreign trade perspective: economic growth around the world was mixed (as the IMF recently put it, "Global Recovery Advances but Remains Uneven”), several commodity prices shot up, and some foreign exchange rates swung around (hello euro).
The foreign trade release contains copious amounts of data, and today I will just focus on exports. In the name of symmetry and even-handedness, next month I’ll discuss imports and the role petroleum plays in our trade deficit (spoiler alert: yes, it plays a very large role, and I would be surprised if most people realized the extent to which it affects their wallet).
So what about exports? [1] The bottom line is that exports rebounded strongly in 2010, increasing 16.6 percent from their low 2009 levels (recall that exports plummeted 14.6 percent from 2008 to 2009, a period when global trade experienced a sharp contraction). Export growth was uneven during 2010 (not necessarily surprising), and exports accelerated in Q4, ending the year on a good note. Now, the National Export Initiative (NEI) calls for a doubling of exports by the end of 2014, which translates to an average annual growth rate of, drum roll please… 14.9 percent. Therefore, 2010 was an excellent start toward meeting that goal.
The most crucial aspect of growing exports is their relationship to jobs: The more we export, the more we produce. The more we produce, the more people get hired. Following methodology we previously published ("Exports Support American Jobs"), we estimated that the increase in exports from 2009 to 2010 helped support hundreds of thousands of additional jobs. Pretty good, eh?
Another reason we care about exports is because of the quality of jobs associated with those exports. As you’ve probably heard, exporting is associated with relatively high wages, hence the phrase “good jobs”. This statement is based on a number of studies that find remarkably consistent wage results, regardless of whether those studies use data at the establishment, individual or industry level. [2]
The last point I’ll make is on where our exports grew the fastest, and what that says about their future growth. One of the most important factors that researchers have found in export growth is foreign GDP growth – when countries expand, their appetite for U.S. goods and services tends to increase. The graph below shows GDP growth for our top 30 export markets and the growth in exports from 2009 to 2010 (click here for a higher resolution PDF version of the chart).
Beautiful isn’t it? As you can see, there’s a strong positive relationship. The size of the dots is proportional to the value of exports (Canada and Mexico are our largest export markets, for instance). Note that Asian countries in this graph (the gold dots) tend to have higher GDP and export growth than their counterparts in the more industrialized parts of the world (European countries are in blue).
Looking ahead, the IMF expects world GDP growth to decelerate ("Global Recovery Advances but Remains Uneven"), but it expects developing countries to continue to grow at a good clip, meaning that U.S. companies need access to these fast growing markets to support export growth. Therefore, it is important to focus trade efforts here, as we've seen through the U.S.-Korea trade agreement and Commerce Secretary Locke’s trade mission to India. How else can we help American businesses in the export/global market? By making them more competitive, and we can do that by making investments in educating today’s and tomorrow’s workers (especially in STEM fields) and R&D. More about competitiveness in a future post.
[1] All of the export statistics cited here are in nominal terms.
[2] For explicit references, please feel free to contact my office via email: ESAblog@doc.gov. This finding appears in other countries as well.
~Mark Doms, Chief Economist, U.S. Department of Commerce
February 11, 2011
