Earlier this year President Barack Obama announced the National Export Initiative his Administration’s ambitious plan to double U.S. exports in five years. It’s a bold target: The last time U.S. exports doubled in five years was 1981-1986 when Ronald Reagan was President—and Japan not China was the economy Americans feared most.
Obama’s effort includes expanding export credits from 4 billion to 6 billion encouraging midsized companies to look overseas and assailing import barriers and unfair subsidies in other countries. To boost exports from 2009’s 1 trillion level Obama is increasing the budget of the Commerce Dept.’s International Trade Administration ITA by 20 percent to 534 million and will hire an additional 300 ITA staffers next year to serve as international trade specialists at home and abroad.
Where are U.S. companies to find a further trillion dollars of annual export revenue? Most of the world is trying to increase exports too. We can’t all export our way out of the current funk. And some of the European Union’s mature markets don’t offer prospects for much incremental growth at this time.
There is still room for U.S. exports to grow though. My colleagues and I analyzed the numbers and think that almost half the targeted increase in U.S. outbound trade can come from just five countries whose domestic markets are growing fast or whose proximity familiarity and free trade commitment will enable new companies to gain market share. Those countries are China India Brazil Canada and Mexico. U.S. exports to them totaled 445 billion last year and we expect the number to more than double to 925 billion by 2014.
world’s fourth-wealthiest economy
Let’s face it: Actual exporting has to be accomplished by corporations not by the government. Hands-on experience in recent years has led me to conclude that U.S. corporate executives generally lag in paying attention to potential exports to India.
Having crossed the trillion-dollar mark in 2007 the Indian economy is the world’s fourth-wealthiest—based on purchasing power parity—after the U.S. Japan and China. Its growth rate has never dipped below 5.8 percent in recent years even during the worst of the global economic crisis.
India’s own statistics which don’t fully account for its vast undocumented economy show a growth rate of over 8 percent this year. Many believe that the country will keep growing at close to 10 percent in the next decade barring unforeseen disasters. Growth in India is driven by domestic factors and is not hostage to exports. The Indian government has helped by lowering duty barriers and overhauling direct and indirect tax codes moreover the government recognizes the need for foreign technology products and services to keep up the growth rate.
U.S. executives scanning the globe for low-hanging fruit should note India’s remarkable untapped potential. When the Washington-based Pew Research Center conducted its most recent Global Attitudes Survey it asked: Do you have a favorable or unfavorable view of the U.S.? Some 76 percent of Indian citizens responded affirmatively. By contrast only 47 percent of Chinese and 44 percent of Russians thought positively of the U.S. A year earlier the market research firm Ipsos reported similar results.
how to convert good will to revenue?
Americans are better-liked in India than almost anywhere else in the world. Particularly when compared with attitudes in China and Russia U.S. brands celebrities and culture are well appreciated in India. Unlike China India does not limit American movies and media and India does not censor or limit foreign Web companies such as Google GOOG.
Yet in my experience there is a gap in the minds of U.S. executives when it comes to converting this surplus of good will into revenue. Let’s look at some examples of how India’s market is quickly changing.
India has the world’s largest military that is dependant on foreign imports. The country is ready to spend upwards of 50 billion to upgrade its aging land sea and air defenses which are largely Soviet in origin. U.S. export controls and corporate inertia have permitted much early business to be won by companies from Israel France and other countries. Four years ago a disheartened U.S. defense industry executive returning from India told me he believed India was an acronym for I’ll never do it again
Today India has become the first international customer for the P-8i Poseidon surveillance aircraft a deal that will produce 2.1 billion in revenue for Boeing BA. Meanwhile Lockheed Martin LMT is readying the first Hercules C130J transport aircraft for delivery to India in a billion-dollar deal for six of these giant planes—an order that could soon double in size.
many U.S. companies shun India
Now let’s examine consumer products. In the cities of India U.S. fast food restaurants abound from McDonalds MCD and KFC YUM to Subway and Dominos DPZ. You can even find Ruby Tuesday RT and TGI Friday in some cities. On the streets Indian teenagers are wearing genuine Levi Strauss LEVI jeans and Reebok sneakers. Levi’s has a brand just for India called Spykar sold in Levi’s stores in major cities. Procter & Gamble PG Chief Executive Officer Bob McDonald visited India for the first time in 2008 when he was chief operating officer and made an immediate commitment to ramp up P&G’s presence there.
Yet dozens of prominent U.S. consumer product companies have not entered the Indian market. If the National Export Initiative galvanizes some on the sidelines to research and study Indian opportunity more carefully American exports to the rising Indian middle class will skyrocket.
Today the U.S. is the world’s breadbasket. In India you will find Washington State apples as well as California almonds and pistachios. India’s growing population shrinking supply of arable land and rising economy create a potentially lucrative market for U.S. food ingredients seeds technology food processing machinery and more.
Historically U.S. companies have shied away from infrastructure projects in India. Indeed leading foreign participants in the massive public-private partnerships that have modernized airports at Delhi Mumbai Bangalore and Hyderabad include overseas companies from Malaysia South Africa and the European Union—not the U.S. Many of the coal-fired power plants coming up are using Chinese equipment. India now hopes for a trillion-dollar upgrade of roads bridges power plants harbors and more. U.S. companies have an unprecedented opportunity to participate in this expansion. India’s finance minister commerce minister foreign minister and others traveled to the U.S. last spring to highlight such opportunities.
The nuclear door is open
Consider the possibilities in nuclear power. India’s 19 plants together produce just 4500 megawatts of electricity. To boost that capacity to 30000 megawatts and modernize its existing facilities India has the funds and desire to buy American in the wake of the historic 123 Civilian Nuclear Agreement signed in 2008 by President George W. Bush and Prime Minister Manmohan Singh. Despite the freeze in new plant construction since the Three Mile Island accident in the late 1970s the U.S. still produces more energy from nuclear sources than any other country. A wealth of technology products and services expertise alone could mean tens of billions of dollars worth of opportunity and hundreds of thousands of jobs for Americans. That requires battling rival suppliers from Russia France and Canada and overcoming challenges from Korea Britain Kazakhstan and Japan—all with companies eager for a piece of India’s bounty.
Similar opportunities abound in professional services entertainment infrastructure improvement training services and almost every sector where the U.S. is active.
As the President and his team plan Obama’s first-ever trip to New Delhi scheduled for November much of the attention is going to be on political and cultural issues. Economic cooperation should really be the centerpiece of his visit—Jimmy Carter was the last President to travel to India within two years of taking office. There is an historic opportunity for corporate and government leaders in both countries to align themselves more closely on business matters.
