Skip to main content

Trade Deficit Shows Need to Improve Exports



The Commerce Department stated on Tuesday that the trade gap increased in September 7.6% to $43.03. It is much larger than the estimated $38.1 billion. It is believed that an improving GDP will lend to improvements in exports but this not what happened. The results may be long-term or short-term but do reflect a need for the U.S. to adjust its policies to return to a higher exportation status unseen since a generation ago. Exportation is a solid reflector on internal capacities of a nation to meet market demands.

Much of the recent decline is associated with global economic factors much outside the control of the U.S. The biggest losses were a 6.5% decline in exports to the European Union, 3.2% to China, and 14.7% to Japan. The losses seem to reflect lower economic activity in all three regions of the globe and may simply be a factor of total consumption.  That doesn’t mean the country can’t improve its export capabilities.

Outside of a slower global economy are two major points that should be considered. 

Dollar Value: The dollar has an impact on the total cost of American made products to foreign buyers. When the dollar is cheaper American products become cheaper as well. Research supports the idea that the deflation of the dollar improves exports (Bahmani-Oskooee & Ardalani, 2006). The opposite is also true; a rise in value of the dollar makes imports cheaper and lends to increased trade deficits. 

Regional Export Specialization:  One of the reasons why I am an advocate of regional hubs is that specialization raises exportation but is not so much as to thwart adjustments into complementary products and services when the market shifts. According to Naude, Bosker, & Matthee (2010) and their analysis of exportation found that specializations increased local economic development.  

The dollar amount is difficult to adjust unless you artificially deflate its value while a global slowdown isn’t something in our control. However, ensuring that a greater allocation of international business is in the hands of American companies and worker pockets is important. This requires a level of hub based development focus to create efficiencies that lower the overall cost of production that make companies more competitive. 

When regional hubs are attracting investments, improving their infrastructure, developing the right skills in the local labor market, and generating market breakthroughs they naturally lower the cost of production and improve market relevance. The dollar may be worth more but the cost of production is lower to thwart its damaging effect. A higher dollar can be used to purchase raw materials and turn them into higher profit exports. 


Bahmani-Oskooee, M. & Ardalani, Z. (2006). Exchange rate sensitivity of U.S. trade flows: evidence from industry data. Southern Economic Journal, 72 (3).

Naude, W. Bosker, M. & Matthee, M. (2010). Export specialization and local economic growth. World Economy, 33 (4).

Comments

Popular posts from this blog

The Meaning of A Boundless Moment by Robert Frost

A Boundless Moment by Robert Frost He halted in the wind, and — what was that Far in the maples, pale, but not a ghost? He stood there bringing March against his thought, And yet too ready to believe the most. "Oh, that's the Paradise-in-bloom," I said; And truly it was fair enough for flowers had we but in us to assume in march Such white luxuriance of May for ours. We stood a moment so in a strange world, Myself as one his own pretense deceives; And then I said the truth (and we moved on). A young beech clinging to its last year's leaves. The poem is one of seasons changing and the cycle of life. Each May the bloom comes out and brings life to the death of winter. The poem is about a single moment when the characters see that life has changed. The layers of meaning can be deep but on the surface it appears Robert Frost is discussing nature and its cyclical momentum.   Everything in nature moves through patterns. The poem indicates that

Art Review: The Kiss by Gustav Klimt

The Kiss is Gustav Klimt’s most famous and well known painting. Produced in 1908 in Vienna, Austria and incorporated oil and gold life on the canvas ( 1 ). This was unique for his time and represents both tile works with Asiatic influence. The painting and the romance it brings forward is still wonderment to onlookers. The picture depicts a passionate relationship between a man and woman in a sort of perfect place.  The couple is embracing, bodies entwined, wearing robes of wealth and decadence. It provides linear constructs of the Art Nouveau style and the movement of arts with crafts ( 2 ). The male is square and masculine while the woman painted is in curves to represent femininity. The couple is a pair with the woman and man equal in stature. They are in a field of flowers and appear to rise above it.  To many this painting represents the concept that love has no bounds. Social position or worldly wealth cannot hide what goes on under the fancy clothes and standard m

The Nine Parries of Saber Fencing

The Parry is important for defending against attacks and offers an opportunity to counter attack. Without learning parries it will be difficult to effectively compete in fencing. Your body will be generally open to seasoned fencers. Practicing defending against attacks using multiple parries is important for creating the highest levels of competitive skill. The most common parries used are Parry of Four, Parry of Six, Parry of Seven, and Parry of Eight ( 1 ). They are designed to protect your right side, left side, lower stomach, middle of your stomach. They are parries designed to cover the core areas of your body and help you defend against the majority of fencing attacks.   Prime: Stops a cut to the chest. Seconde: Stops a low cut to the flank Tierce: Stops high cut to the flank Quarte: Stops high cut to the chest. Quinte: Stops cut to head. Sixte : Stops cut to head. Septime: Stops cut to back. Octave: Stops cut to flank. Neuvieme: Protects Back Mic