Congress is on the verge of considering an important economic dilemma: How can it expand American exports at a time of economic slowdown among many of its best customers?
During the past two decades, the US share of world exports has fallen from 20 percent to 14 percent. The percentage of construction awards abroad snapped up by American companies -- ranging from heavy-duty construction firms to engineering and architectural concerns -- has plummeted from first place worldwide to around seventh.
To a considerable extent, such trends are the normal result of the growing economic capacities of other nations.
There is some suspicion, however, that US tax policies may have hastened these developments. For instance, a new study by Chase Econometrics Associates Inc. finds a definite causal linkage between the presence of US companies abroad -- including engineering- construction firms, and subsequent US exports. And the study maintains that US tax changes have made it more difficult for American engineering-construction firms to compete abroad.
Congress is focusing on three areas involving overseas trade:
1. Lawmakers this month began consideration of the National Export Policy Act of 1980. It would encourage groups of small and medium-size companies to form overseas trading operations to engage in world trade. Such companies are common in Europe and Japan.
The bipartisan legislation, introduced by Sens. Adlai E. Stevenson III (D) of Illinois and William V. Roth Jr. (R) of Delaware, already has at least 26 supporters in the Senate. It is given a good chance for enactment (at least on a partial basis) this year or early in 1981.
2. On June 26 the Senate Finance Committee will examine a number of bills that would sharply expand tax exclusions for earned income of American citizens working abroad.
3. The Carter administration is proposing a significant liberalization of Export-Import Bank financing. The administration, in effect, would take the Exim Bank financing out of the annual budgeting process by having the Treasury underwrite loans directly -- with Exim making the loan guarantee. The administration plan -- called the Federal Financing Bank Plan -- is not expected to clear the Senate, however.
The Exim Bank, which finances sales of American products abroad, is down to $ 77 million in lending authority, and could be out of money by early July. For that reason, a supplemental budget authorization of from $1 billion to $1.5 billion is expected to clear Congress during the next few weeks.
The rising congressional interest in boosting exports is believed linked to the danger of mounting worldwide recession. Some economists reckon that the United States may be coming out of recession later this year or next year just as much of the rest of the industrialized world is slipping into recession. That could lead to less demand abroad for American exports -- and abort or slow the US recovery. This happened in some degree in the Great Depression in the early 1930s, when most nations put up trade barriers.
Moreover, traditionally aggressive American exporters -- such as the consumer electronics industry -- have been taking a drubbing in the world market for a good number of years at the hands of competitors.
Every $1 billion in exports is believed to lead to at least 50,000 jobs for American workers.
At present, exports make up about 8.3 percent of the US gross national product. That percentage has been growing steadily. But it compares with an average of about 17.6 percent in most industrial nations.
The Chase Econometrics study concludes that the United States will lose $6 billion in tax revenues this year on lost export sales as a result of current tax policies which require Americans working abroad to pay taxes on earned income.
The Chase study was prepared for the US & Overseas Tax Fairness Committee Inc., a lobbying arm of the National Constructors Association. The NCA represents contractor companies with overseas business. It has been in the forefront of groups seeking to exclude taxes on income earned abroad.
The Chase study estimates there will be a loss of at least 5 percent in exports this year because of present tax laws.
According to Robert M. Gants, who is an official of both the NCA and the US & Overseas Tax Fairness Committee, the US is the only major exporting nation that taxes income earned by its citizens working abroad.
Tax code revisions enacted in the last several years boost sharply the tax burden on American citizens employed in foreign nations. Mr. Gants maintains that these changes make it "too costly" for US engineering and construction firms to compete abroad.
Since these revisions, the US share of the Middle East market for engineering-construction firms has dropped from 10 percent to less than 1.5 percent, Mr. Gants says.
Worldwide, West Germany, France, and Japan lead the competition for new engineering-construction contracts.
Despite increasing congressional attention to the tax issue, no major changes are expected this year, because of congressional support for a balanced budget. The outlook for 1981, however, is considered somewhat better.