Unleashing Exports Tied Up in Red Tape


President Obama's vow to double U.S. exports turns in part on an effort to rework trade restrictions

Eric Hirschhorn keeps two axle pivots on his desk at the Commerce Dept. He uses them in a test he gives visitors: Which is a military part, for which overseas sale can lead to a prison term? Which is for fire engines and can be sold worldwide? "The differences are almost imperceptible to the naked eye," says Hirschhorn, Under Secretary of Commerce.

President Barack Obama's vow to double U.S. exports turns in part on an effort by Commerce Secretary Gary Locke and Defense Secretary Robert Gates to end such uncertainty by reworking export restrictions. The changes could boost U.S. exports by $57 billion a year, according to a study by the Milken Institute, an economic research group in Santa Monica, Calif.

In the first half of this year, officials such as Hirschhorn will determine which products can be cleared for export. Three-quarters of the items on the first list reviewed—there are 20 more to go—were found not to pose a national security risk.

The initiative has drawn praise from companies most affected by the curbs, among them Boeing (BA), United Parcel Service (UPS), and Lockheed Martin (LMT). "Change is long overdue but has never been more needed than now," Thomas H. Casey, a spokesman for Lockheed, said in an e-mail.

Under the current system, exporters must seek government approval before exporting items that could have military uses. Exporters complain of overlapping lists maintained by the Commerce and State Depts. The State Dept.'s munitions list captures everyday items such as hoses, wires, or brake pads that may have been designed for a military system and are now widely available in civilian use, says Remy Nathan, vice-president of the Aerospace Industries Assn. in Arlington, Va.

Beyond export controls, business lobbyists are working to get Congress to clear the stalled free-trade agreement with South Korea after Obama negotiated changes that won over dissatisfied U.S. automakers. House Republicans also want to push for approval of deals with Colombia and Panama that have been opposed by labor unions and some Democrats. Says Doug Goudie, director of international trade at the National Association of Manufacturers in Washington: "2011 is the year we absolutely need to deliver results on trade."

The analyst's take: President Obama argues that his goal of doubling U.S. exports, to $3.14 trillion, by 2015 will create jobs and accelerate economic recovery. Bloomberg Government, using Milken Institute estimates, concludes that gains from export-control reform would provide 4 percent of the boost needed to reach that goal.

Learn more about Bloomberg Government

Drajem is a reporter for Bloomberg News.

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