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Hurdles Deter Obama's Pledge to Double Exports

When President Obama announced at his State of the Union address in January a goal of doubling American exports over five years, business owners applauded, envisioning a flood of goods moving into new markets in the Asian and Latin American countries that are leading the global recovery.

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AP

The chief executives of Boeing and Xerox agreed to lead an advisory council to support the effort, called the National Export Initiative.

But now, as officials complete a plan of action due in September, the hurdles before Mr. Obama’s ambitious goal are getting clear.

Opening access to foreign markets, especially the fast-growing developing countries in Asia and South America, remains a politically touchy matter that will require the cooperation of Congress.

A free-trade agreement with South Korea that was negotiated under President George W. Bush and that has been endorsed by Mr. Obama still awaits Congressional ratification, as do agreements with Colombia and Panama, and important issues remain unresolved in each.

Even more critical, by some measures, is the rising strength of the dollar, which increases the cost of American goods and makes them less competitive. The dollar has risen in value relative to the euro and the pound and remains overvalued, in the view of many economists, against China’s renminbi.

“When the dollar does get excessively valued relative to other currencies, exports don’t grow, period,” said Franklin J. Vargo, a former Commerce Department official who is the vice president for international economic affairs of the National Association of Manufacturers.

And in hundreds of pages of comments filed last week with the Commerce Department, industries as varied as winemaking and long-haul trucking identified dozens of smaller hurdles — including regulatory barriers and a shortage of customs officers — that they claim hinder trade. The comments, invited by the department, offer a glimpse into why the country’s large trade deficit persists even as consumers reduce spending.

On July 7, Mr. Obama said the country was “on track” to meeting his goal; exports in the first four months of 2010 grew almost 17 percent over the same period last year. But while exports are growing, imports are growing even faster: in May, the trade deficit in goods and services was $42.3 billion, up from $24.9 billion a year earlier.

In a detailed critique of United States trade policy, the National Association of Manufacturers, which supports Mr. Obama’s goal, called for negotiating new free-trade agreements, ending outdated export controls, promoting American goods and services abroad, expanding export financing and reducing nontariff barriers to trade, among other things.

But those issues are overshadowed by currency concerns, according to Mr. Vargo. “You can’t devalue your way into export increases, but you have to be very careful that the dollar doesn’t get overvalued,” he said.

Of particular concern is the value of the renminbi, which China has for years held down as a way to support its export-reliant economy.

Despite pressure from an increasingly restive Congress, the Obama administration, like the Bush administration before it, has declined to declare China a currency manipulator, a step that could lead to retaliatory measures. In June, China agreed to allow the gradual appreciation of the renminbi, but so far it has risen only about 1 percent against the dollar.

Lael Brainard, the Treasury under secretary for international affairs, noted that the Chinese currency appreciated by about 20 percent from 2005 to 2008, though at an uneven pace. “We do believe that the renminbi remains undervalued,” she said last week in an event at the Peterson Institute for International Economics.

Treasury officials have preferred persuasion over retaliation, hoping to convince China that a higher-valued renminbi is in its own interests as it seeks to increase domestic demand.

Meanwhile, world trade talks continue to be bogged down as American negotiators try to deal with emerging economies.

“We have asked some of our key trading partners to come back to the negotiating table and provide some market access, to make sure it is one the Congress can get excited about,” Ms. Brainard said last week of the long-stalled Doha round, while acknowledging that the administration was “not quite there yet.”

Along with currency and market access, an array of less obvious themes emerged from the submissions to the Commerce Department, including infrastructure shortcomings and what some industries saw as heavy-handed regulation. The comments illustrate the breadth of issues that might need to be addressed to achieve the administration’s goal.

Long-haul truckers are up in arms over a decision by United States Customs and Border Protection to require importers to estimate the quantity and value of the chemical residue that clings to the sides and bottoms of reusable tank trailers coming back into the country after being unloaded in Canada or Mexico.

Since 1994, trucking companies had been able to classify these containers as empty. The new rule could mean costly delays and a loss of tank-washing business (which counts as a service export) to Canadian companies, the American Trucking Association said.

The Port of Vancouver, Wash., which handles Subaru imports and shipments of wheat, copper concentrate, steel scrap and malted barley, urged American investment in freight-rail projects. “A one-day improvement in transit time in the U.S. could result in $28.9 billion a year in increased international trade,” port officials wrote.

Complaints related to travel were common. Spending by foreign tourists in the United States is counted as exports, and slowness in processing visas for foreigners was of particular concern to the travel industry.

The State Department has only four consulates in Brazil and five each in China and India, the Airports Council International-North America said, and in Beijing in July, the wait time for a required visa interview was 100 days. It also complained about a shortage of customs officers to clear passengers and cargo at airports.

Levi Strauss, the apparel manufacturer, urged officials to make it easier for exporters to find accurate data on tariff rates. And James B. Clawson, a representative of the California wine industry, wrote, “The single most restrictive barrier to wine exports remains the high import tariffs of most of the major markets buying U.S. wine today.”

At the Commerce Department, which is coordinating the report on the export initiative, officials said they were undaunted by the feedback.

“We weren’t looking for pats on the back,” said Travis Sullivan, director of policy and strategic planning for the department.

He added, “You can look at them as critiques; we take them as opportunities for progress.”