The 1,200 delegates at this year’s annual general meeting of the U.S. Export-Import Bank left Washington at the end of the conference realizing the United States is re-gaining its global manufacturing dominance.
Photo: All Canada Photos RM
However, they fear that will not happen if a key driver in the “American manufacturing renaissance” is derailed because a divided Congress can’t agree to extend funding for the government-supported Ex-Im Bank.
“We are looking at a manufacturing renaissance, but we can mess up,” said Hal Sirkin, a senior partner at the Boston Consulting Group. “What we are seeing is a pendulum swing – swinging back in the U.S.’s favor.”
The Export-Import Bank is one of about 60 similar government-supported export banks around the world, whose purpose is to assist domestic companies penetrate foreign markets. In the Ex-Im Bank’s case, it will essentially run out of money on May 31, when its temporary authorization for $100 billion expires. It is seeking, with President Barack Obama’s support, authorization for $140 billion over the next four years to help both veteran and rookie American exporters.
“We have $2.1 trillion in annual exports,” said U.S. Commerce Secretary John Bryson. “We can build here and sell it everywhere,” he said. “But we have to have the Ex-Im Bank.”
The United States saw its world manufacturing dominance eclipsed by the Chinese economic revolution and stunning growth in Asian manufacturing and exports. But the recent weakness of the U.S. dollar against foreign currencies, coupled with a powerful and vocal Chinese labor force demanding higher wages, has put the United States back in the manufacturing playbook.
Sirkin told the standing-room-only crowd at a downtown Washington hotel that the once wide-gap in production costs between China and the U.S. will soon narrow to about 10%, meaning transportation costs will now play the major role in delivering manufactured goods to end markets.
“We expect to see jobs move back to the U.S., simply because the pendulum has swung too far,” Sirkin said.
That view was echoed at the conference by Samuel Allen, CEO of Deere & Co., and chairman of the U.S. Council of Competiveness.
“These are very, very positive times,” he told the audience. John Deere, renowned for agricultural equipment such as tractors, had revenues of $32 billion last year, 50% of which were generated in the United States.
More importantly, he said, not only will the company double in size by 2018, but “50% of what we do outside the U.S. is made in the U.S.”
Deere has 67 manufacturing plants, including two in China, one in Brazil and one in India. “One of the most secure places to be is in the United States,” he said.
But vexing to manufacturers is the reluctance of the U.S. to reach out to new markets and support its exporters through organizations such as the Ex-Im Bank.
“We need every free trade agreement we can plug into,” said Allen.
The United States now has free trade agreements with Australia, Bahrain, Canada, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Peru and Singapore. President Obama signed free trade agreements with Colombia and Panama in 2011, but the agreements have not been implemented.
The United States is also in negotiations on a Asia-Pacific regional trade agreement, known as the Trans-Pacific Partnership (TPP), and is a member of the World Trade Organization.
The re-emergence of the United States in the global market has not been lost on HSBC. Steve Bottomley, senior executive vice-president, head of Commercial Banking, HSBC, North America, said the goal of the global bank in the U.S. is to connect U.S. companies and investors with emerging markets around the world, especially Asia, the Middle East and Latin America.
“We are building out our presence and capability [in commercial banking] across the U.S. and we are accelerating quite rapidly now,” Bottomley said.
Rahm Emanuel, Chicago’s 55th Mayor and former White House Chief of Staff to President Barack Obama, also weighed in at the conference, saying that Chicago’s manufacturing industry supports the new renaissance.
“I think it would be foolish to not re-authorize the Ex-Im Bank,” he said. “The financing is essential so we don’t fumble the ball on the 50th yardline.”
The bank’s chairman and president Fred Hochberg, a Bill Clinton appointee, was more blunt: “Some in Washington think government has no role to play in helping our companies compete abroad,” he said. “They think we should disarm in the middle of an economic arms race.”
Added former U.S. President Bill Clinton, the keynote speaker: “It’s time to get back into the future. If you don’t, you will be penalized.”