May 14, 2007


Rising Exports Putting Dent in Trade Gap (JEREMY W. PETERS, 5/14/-07, NY Times)

Even as companies in the United States are gaining ground overseas, they are also sending more American-made products abroad. A weaker dollar is adding to their good fortunes, helping to make American goods and services more competitive in foreign markets.

As a result, it now looks as if the huge trade deficit, which swelled to a record $765.3 billion last year, could gradually decrease. The trade gap widened in March, mostly because of higher prices for imported oil, but the vast disparity between what Americans import and export is expected to narrow, which would allow trade to contribute to economic growth in the United States for the first time in more than a decade.

The shift to a more export-driven economy, if it continues, could add more jobs at home and help the United States bounce back from its slowest economic expansion in four years.

When the trade deficit shrinks, “home-grown demand is being fed by home-grown production instead of foreign production,” said Chris Varvares, the president of Macroeconomic Advisers, an economic research firm in St. Louis. “That requires more domestic employment, and that’s better for the domestic economy.”

Faster growth in Europe and Asia is helping to cushion the blow of a collapsing housing boom that has hampered domestic consumer spending, creating more demand from elsewhere for goods and services made in the United States.

Rather than hurting many American companies, a weak dollar is actually providing a strong lift. The exchange rate difference stokes profits from earnings generated abroad, countering the adverse effects on importers who must pay more and Americans traveling abroad with a less valuable currency in their wallets.

“The old notion that if the dollar’s bad, corporate profits have to go down is no longer correct,” said Howard Silverblatt, a senior analyst at Standard & Poor’s. “There’s a lot of growth going on in the rest of the world, and companies have to be there if they want to participate. There’s a lot to be sold.”

Posted by Orrin Judd at May 14, 2007 12:00 AM
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