By Michael R Czinkota and Charles J Skuba

Commentary Mar. 05, 2009 - 05:42AM JST ( 4 )

New U.S. Commerce Secretary nominee Gary Locke has some depressing global economic data to confront as he anticipates assuming the job of America’s chief export officer.  There is little good news anywhere in the world on the trade front and 2009 does not hold much promise for export growth.  However, reinforcing U.S. President Barack Obama’s confidence in American business “as the engine of growth,” trade data show that Governor Locke may have good reason to encourage U.S. businesses to invest in future success overseas.

As has been typical for the past three decades, global activities reflect, in an outsized way, the shifts in domestic economies. When domestic consumption is up, trade is up even more. Nowadays, when domestic activities are down, trade is down as well, only much more so. With predictions of further economic decline in 2009 and contracting global demand, further international slides can be expected. Indeed, the release of annual trade data by the Commerce Department in February showed that U.S. exports declined 6% in December following a depressing November. Yet, a closer look at the trade data does offer some encouraging longer term implications for U.S. exporters.

First, the decline in the U.S. trade deficit, which hit a six-year low in December, was good news. The trade data reveal underlying strength in exports. Barring a steep rise in the price of oil imports, the decline in the trade deficit, which still stands at a daunting $678 billion for the year 2008, promises to continue. Imports are down more sharply than exports, despite their larger base. Economic theory, recent trends, and experience from previous cycles promise a continuation of that import decline.

American goods and services producers have continued to build demand among overseas customers. 2008 was a record year for U.S. exports which passed $1.8 trillion. Exports grew at a rate of 12% over 2007 and now comprise 13.1% of U.S. GDP. This marks a continuing trend since U.S. annual export growth has been in double digits from 2004 through 2008 and has outpaced import growth since 2006. Through mid-summer, this export growth had been sizzling along at a rate of nearly 19% before slowing as the global economy began to contract and Boeing workers went on strike.

In seven of the top 10 export markets for the United States in 2008, American exports growth exceeded that of imports by nearly twice or more. U.S. exports to Mexico and China, our second and third largest export markets, grew at 11.4% and 9.5%, while imports only grew at 2.5% and 5.1% respectively. Exports to Canada, the largest market, grew at 5%, while imports grew slightly more at 5.8%, reflecting the interconnectedness of the two economies.

U.S. service providers have also demonstrated a strong growth pattern. In 2008, U.S. service exports grew faster than imports, interrupted only by the one-time payment, made in August, for the broadcast rights for the 2008 Summer Olympics. Overall, the U.S. services surplus increased $24.9 billion to an annual record of $144.1 billion.

We believe that American manufacturers and service firms are well positioned globally because they are increasingly delivering what the world prefers and wants. U.S. worker productivity in manufacturing continues to increase at a rate faster than most of the major competitor nations. The reasons for eventual success are rooted in marketing factors. Decades of dedication to innovation, quality, customer-centrism, marketing research, and branding, is providing American companies with an advantage.  As the 2008 Business Week annual ranking of the 100 Best Global Brands shows, even if difficult times, 52 of the leading brands were American.

Of course, when demand is down among the world’s global trading partners, little or no trade growth is likely to occur until a recovery begins. However, it makes sense to prepare for when global buyers regain confidence. Many countries have export promotion capabilities and the expertise needed to help more of their firms market overseas.  Our research shows that it typically takes new exporters about two years to get their international legs before they begin to realize good sales results.

Our university currently sees a great increase in the applications for our MBA programs – since many students want to stock up on knowledge and capabilities during bad times in order to be ready for the good ones. Companies can do the same. Now is the time to use slack resources to explore new market opportunities, new cultures, new customers. Then, when economic conditions get better, companies can pounce on the markets they have researched and prepared for. 

Export promotion is a vital economic stimulus. Let’s not lose time in supporting the international preparation of firms.

Michael Czinkota researches international marketing issues at Georgetown University and the University of Birmingham in the UK. He served in trade policy positions in the Bush and Reagan administrations. He can be reached at czinkotm@georgetown.edu.

Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W Bush administration in trade policy positions in the U.S. Department of Commerce.  He can be reached at cjs29@georgetown.edu.