A Boom in Exports Helps U.S. Firms Stave Off Recession
The nation’s economy has been kept out of a full-fledged recession, so far, largely because of an unlikely helpmate--the burgeoning U.S. export boom.
Despite all the grumbling over American trade difficulties, a report released Thursday by the National Assn. of Manufacturers shows that U.S. firms are making substantial sales abroad and they are counting on export markets to keep their businesses alive and healthy.
Partly because of the low dollar, which makes U.S. goods more competitive abroad, and improvements in the quality of U.S. goods, American exports have nearly doubled over the last five years. And with the domestic economy weakening almost daily, businesses are turning more and more to overseas markets.
The report by the manufacturers’ group shows that in the first half of 1990, export growth accounted for nearly 90% of all economic expansions in the United States. The trade organization predicts that U.S. exports will nearly double over the next three years, possibly leading the way into the next economy recovery.
“If it hadn’t been for U.S. export growth in the first six months of the year, or even the last year, the American economy would have been in a recession,” said association President Jerry Jasinowski. “The best opportunities for American companies and the American economy are going to be outside U.S. borders between now and 1995.”
A companion survey of 120 exporting companies also shows broad confidence that exports to Europe, Japan and East Asia will continue to expand.
The boom in U.S. sales abroad also helps account for another phenomenon--the fact that the economic slowdown in the United States varies so widely from region to region.
Rust Belt economies such as Ohio and Illinois, hit hard when the dollar was high, are back in operation and holding their own, while others, such as New England, are in a serious slump.
Indeed, the regions that suffered most in the 1981-82 recession, when manufacturers were forced to adjust to fierce global competition, are now outperforming the Northeast, where banking, real estate and financial services are contracting.
“If you go to Ohio, it’s a different world,” Jasinowski said. “The economy has been transformed. It is no longer anything like what it was five years ago. It has become an export-oriented economy . . . and that’s why they’ve suffered less in this slowdown.”
Other places participating in the export boom are Illinois, Pennsylvania, Texas, Washington and parts of California and Connecticut, according to economists for the manufacturers’ association.
Jerry Jordan, an economist with First Interstate Bancorp in Los Angeles, cautioned that the ascendance of exports is more a matter of weakness everywhere else than great strength in the manufacturing sector.
Nevertheless, Jordan agreed that the news, thus far, seems good from the old Rust Belt.
“The Great Lakes states--the upper Midwest--are doing quite well, so far,” Jordan said. “But it’s not just exports. It’s also goods that compete domestically with imports--that are doing well.”
But Jordan noted that growth in those categories does not signal that all is rosy in the nation’s factories. “Don’t forget that 580,000 jobs have been lost in manufacturing over the past 18 months,” he said.
Altogether, merchandise exports account for slightly less than 10% of the gross national product.
The categories of U.S. exports that have expanded the most include high-technology and chemicals, up 70% in foreign sales from 1985 to 1989; aircraft, up 67%; and scientific instruments, up 75%.
But even the more competitive industries are lagging in exports to Japan.
The manufacturers group’s figures also disregard the fact that imports continue to outstrip exports. As a result, “net exports” actually will reduce overall economic growth in 1990, continuing the pattern evident in every year of the post-1982 expansion.
But at a time of extreme weakness in other sectors, the anticipated increase in exports underscores their increasing importance to the economy’s health.
And more U.S. goods are selling in foreign markets than before; the manufacturers group’s statistics suggest that high-technology, “value-added” products are moving best.
The European Common Market now absorbs 24% of all U.S. exports and buys 27% of all chemical products sold abroad, 40% of optical equipment, 36% of scientific instruments, 39% of aircraft and parts and 44% of computers and office machines. In all, exports to the Common Market have about doubled since 1985, to $86.6 billion last year.
Those same industries are lagging in exports to Japan, however, even though U.S. exports to that nation also have doubled, to $44.6 billion, in five years.
“Japan tends to take much lower shares of the most competitive U.S. machinery products and relatively higher shares of commodities, basic manufactured and consumer goods for which the United States has large and seemingly permanent trade deficits,” the manufacturers group’s report said.
Primarily for this reason, the accompanying survey of 120 export manufacturing firms said that the largest remaining impediment to expanded export growth in the next few years is persistent foreign import barriers.
Company managers responding to the survey cited four other key problems: increasingly global markets, the skill and flexibility of foreign competitors in servicing customers, their own lack of knowledge and experience in operating overseas and the ever-improving quality of many foreign products.
EXPANDING EXPORTS
U.S. exports have been expanding, particularly in relationship to growth in the gross national product:
GNP Export Year growth growth Ratio (billions of 1982 dollars) 1986 $99 $14 14% 1987 $127 $41 32% 1988 $170 $58 34% 1989 $119 $43 36% 1990* $35 $31 89%
* First six months, annualized
Source: Commerce Department Bureau of Economic Analysts
