WASHINGTON — Suddenly, outsourcing is on the way out and insourcing on the way in as the U.S. trudges unevenly toward President Obama’s goal of doubling American exports around the world by the start of 2015.
So far, export levels are about halfway to his mark.
Obama set the five-year target in his January 2010 State of the Union address and recently has hastened his drumbeat, telling his export advisory council last month the nation was “well on our way” to his goal. “The question now becomes: How do we sustain this momentum?”
While economists and industry leaders generally expect the ambitious target to be missed, impressive gains already booked in American manufacturing and exporting suggest such a miss may not be by that much.
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Why the optimism toward a manufacturing comeback? Here are five reasons:
• Cheap U.S. natural gas and other increased energy production are helping to power U.S. factories more efficiently, with gas especially providing inexpensive raw materials for U.S. manufacturers of plastics, tires, pharmaceuticals and other petrochemical products.
• Higher wages in China and other export markets are making outsourcing less profitable to U.S. firms.
• Congressional approval in 2011 of trade agreements with South Korea, Colombia and Panama and other agreements being negotiated now with Asia and Europe opens more foreign markets to U.S. products.
• High U.S. unemployment is relieving pressure on factory owners to increase wages, helping to make U.S. labor costs more globally competitive.
• Major technology advances have steadily boosted factory efficiency and worker productivity.
Yet while many industries are doing more with fewer workers, more than half a million new manufacturing jobs have been added in just the past few years.
Obama’s starting point was 2009 exports of $1.57 trillion. Since then, they’ve climbed to a record $2.19 trillion in 2012 — about 48 percent toward his goal of some $3.14 trillion a year by the start of 2015.
But 2012 exports, while a record, grew just 5.5 percent from those in 2011, down from a 15.9 percent surge from 2010 to 2011. The rate would have to pick up sharply again this year and next to meet Obama’s target.
“Some of the headwinds we faced last year have started to improve,” said Chad Moutay, chief economist for the National Association of Manufacturers. “And I think energy is a game-changer. We definitely have increased the competitiveness of U.S. manufacturing.”
U.S. manufacturers posted a fourth consecutive month of expansion in March. While the rate was a bit below February’s gain, the overall trend is still up.
The U.S. now makes about 18 percent of the world’s goods, down from nearly 40 percent right after World War II. Clearly, many manufacturing jobs will never come back.
“The U.S. had manufacturing trade surpluses until around 1980 (but) has run big deficits since then,” said Martin Baily, a Brookings Institution senior fellow and co-author of a new Brookings study of U.S. manufacturing.
Manufacturing “still remains a very important sector and one that I think we need to foster and that needs to flourish,” Baily said. “So we need to expand manufacturing in order to reduce that trade deficit. We can’t just do it on services alone.”