Case 1: Why are US Exports so Competitive? When The rise of China as the leading exporter has been widely reported, one cannot ignore the incumbent leading importer and former leading exporter of the world - the United States. In 2015, the United States exported $1.51 trillion in goods. Of China's $2.28 trillion exports in goods, only about two-thirds of the value added was contributed by China (the rest were imported components assembled in China). The United States contributed approximately 90% of the value added of its exports. Do your math: The value added of US exports ($1.36 trillion) was very close to the value added of Chinese exports ($1.52 trillion). To make a long story short, first, US exports have to deliver value. Consider civilian aircraft. One crucial reason that the new Boeing 787 Dreamliner became the hottest-selling airliner prior to its launch is its ability to reduce fuel consumption by 15%-music to the ears of airline executives. Second, US exports also have to be rare and hard to imitate. There is no shortage of global rivals tearing apart US products and trying to reverse engineer them. European, Russian, and Chinese aerospace firms are doing this at this moment by trying to out-Boeing Boeing. While Airbus has been quite successful, neither Russian nor Chinese civilian aircraft makers have much presence in export markets. In service exports, the United States is even more competitive-it is the world champion. It is hard enough to design and manufacture world-class aircraft, but it is no less challenging to operate service, training, and maintenance networks for airlines that cannot afford any equipment breakdown for a long period-on a worldwide basis and for 20 to 30 years after the initial sale. While the products themselves have to be competitive, Uncle Sam also helps. At least ten federal agencies offer export assistance: Departments of Commerce, State, Treasury, Energy, and Agriculture as well as the Office of US Trade Representative (USTR), Export-Import Bank (Ex-Im Bank), US Agency for International Development (USAID), Overseas Private Investment Corporation (OPIC), and Small Business Administration (SBA). Since only approximately 1% of all US firms export and 58% of them export to just one country, clearly more assistance will be helpful to facilitate more firms to join the export game. Going beyond routine export assistance, new initiatives focus on negotiating free trade agreements (FTAS). As of this writing, the United States has 12 FTAs in force with 18 countries: Australia, Bahrain, Chile, DRCAFTA (Dominican Republic-Central America FTA, which covers Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua), Israel, Jordan, Morocco, NAFTA (which covers Canada and Mexico), Oman, Peru, Singapore, and South Korea. In addition, two FTAs with Panama and Colombia were negotiated, but they are still pending Congressional approval. FTAs typically reduce trade barriers to US exports and create a more stable and transparent trading environment. In this regard, the Trump administration's actions to withdraw from the Trans-Pacific Partnership (TPP), a massive FTA negotiated among 12 member countries over seven years, and to renegotiate NAFTA are likely to be counterproductive. In addition to formal institutions, informal norms and values also play a role behind US exports. While some gurus write about the decline of US influence, the informal norms of consuming and appreciating US products seem to proliferate overseas. Around the world, it is cool to consume made-in-USA products. In Paris metro (underground) stations, almost every other poster seems to be about a Hollywood blockbuster. In Accra, the middle class flock into Ghana's first KFC and lick their fingers greased by grown-in-USA chicken. In Beijing, the Chinese president takes off and lands in a "Chinese Air Force One," which is a Boeing 747. If you are studying this book outside the United States, then you are a US export customer too. Question 2 (10 marks) From an institution-based view, elaborate on the factors in both formal and informal institutions that helps US to be a top exporter. Use evidence from the above article to support your answers. For evidence not found above, you may provide specific examples based on known products/services or state your assumptions. State ONE(1) example each for formal and informal institutions respectively to support your answers.