Can the US grow through exports?

[EasternBelle]

Can the US economy grow itself out of the current malaise through its exports?

A recent special report published by the Economist claims that the American economy will be able to re balance itself and economic growth will come out of its formidable ability to export in high end areas of manufacturing (such as medical devices), pharmaceuticals, specialized engineering services, architecture and film.

The Economist states that the US will be able to increase exports to developing countries that already account for 50% of US exports. In addition blockbuster movies such as Avatar could become drivers of growth in exports of personal and cultural services (15.6b$ as of 2007, WTO) .

The iTulip emphasis has been on looking into the domestic economy (based on the fact that the consumer makes made up 73% of US GDP and will not be able to support growth due to the debt deflation process and stagnating or falling real wages), and subsequently recent iTulip analyses have focused on domestic economic markers, such as car sales, housing start, median duration of unemployment and rail traffic among others.

The Economist report argues that the falling dollar together with the gap in economic growth rates between the US and its potential trading partners in the developing countries will allow the US to grow its exports to such an extend that will support employment and growth at home.

In addition Obama is now announced the National Export initiative to double exports in five years time. This is no small change as based on 2010 numbers 185000 $ of exports support one job (Bloomberg, 15.04.2010). Based on the 1.69 trillion of exports in 2008 this would translate into 9.1M jobs supported by exports. Doubling exports therefore could possibly create the number of jobs lost during the Great Recession.

I am intrigued by this numbers and claims and did some digging on the WTO site. Their 2008 world trade report shows some interesting trends, I'd like to put forward.

It appears that in all manufacturing and most other areas the US has been losing market share since 2000. Following is a table compiled from some tables from the WTO report that lists US exports in a given category by value and market share.

PRODUCT	Value 2008 in B$	Share in world exp 2000	Share in world exp 2008
Automotive products	111.5	15.3	13.9
Food	112.6	12.6	10.1
Agricultural products	140	12.9	10.4
Pharmaceuticals	38.3	12.1	9
Iron&Steel	20.1	4.4	3.4
Office and Telecom Equipement	137.4	15.8	8.8
Other commercial services+(2007 data), see below	295.6	19.6	15.3

It appears that the US has been losing market share in virtually every category that I reviewed. Although the exports as such have grown the US is still losing market share. It is interesting to note that this loss of market share came about at a time where the slow loss in value of the dollar has already been in place together with the gap in growth rate differential between the US and major developing economies.

Other commercial services (data according to WTO is difficult to obtain from all countries) include exports in construction, insurance, finance computer and information technology, other business services, (legal, accounting, advertising, market research, R&D, architecture and engineering, management consulting) totals 86.9b$,as well as personal and cultural services. The bulk of the money comes as expected from financial and insurance services exports (68b$), while the exports coming from engineering, architecture and film/TV together accounted for 20.9b$.

While I don't see how the Economist's view that salvation can come from exports in medical devices (could not find statistics here), pharmaceutical, software, creative services (film/TV and architecture) and engineering it is interesting to note that the US showed great growth rates there in 2007 at least ranging in the 20% to 25%. It also seems to the thrust of the administration as the US commerce department has said that the goal of doubling exports in five years is attainable.

There are certainly many question marks regarding such a thesis (one of them being that if everyone one wants to export, somebody has to sustain a negative trade balance) and it does not seem obvious that Germany, Japan or China want to do that.

Having said that it has worked for Germany and Japan to keep exports as their engine of growth, while real living standards at home have stagnated or declined. Can the US emulate this if it wants to? Could the US and China play ping pong together? While China spends its Treasury Bond Chest on buying assets with depreciating dollars in Africa and Latin America in exchange for long term raw material supplies, the US exports itself out of its current predicament. Together they squeeze the EU that does not want to inflate either assets nor government balance sheets like there is now tomorrow.

I guess what I am saying is that while I have the highest respect for the iTulip analyses there has been a big bias towards domestic US growth and analyses. So looking into exports might widen the picture and indeed bring some new insights into the scenarios.

Eastern Belle

[DRumsfeld2000]

Re: Can the US grow through exports?

Just consider the fact that not only the USA but China, Canada, Japan, Brazil, UK, Euro Zone etc etc have all stated that exports are the way to get out of this financial crises. Is there that amount of worldwide pent up demand? I think not....

[ThePythonicCow]

Re: Can the US grow through exports?

EasternBelle -- I don't know if this is noticeable in your browser, but in my browser, your post is almost unreadable, apparently because many of the formatting marks, such as paragraph markers that are converted to double tongue-sticking-out faces (:p>:p>). I'm guessing you prepared this post in a word processor and then cut+paste it. I'm not familiar with the word processor you were using (likely a Microsoft product); perhaps others know an easier way to do this.

Here's your post reformatted (the cruft removed), so that I and perhaps others can read it.

=============

Can the US economy grow itself out of the current malaise through its exports?

A recent special report published by the Economist claims that the American economy will be able to rebalance itself and economic growth will come out of its formidable ability to export in high end areas of manucturing (such as medical devices), pharmaceuticals, specialized engineering services, architecture and film.

The Econmists states that the US will be able to increase exports to developing countries that already account for 50% of US exports. In addition blockbuster movies such as Avatar could become drivers of growth in exports of personal and cultural services (15.6b$ as of 2007, WTO) .

The iTulip emphasis has been on looking into the domestic economy (based on the fact that the consumer makes made up 73% of US GDP and will not be able to support growth due to the debt deflation process and stagnating or falling real wages), and subsequently recent iTulip analyses have focused on domestic economic markers, such as car sales, housing start, median duration of unemployement and rail traffic among others.

The Economist report argues that the falling dollar together with the gap in economic growth rates between the US and its potential trading partners in the developing countries will allow the US to grow its exports to such an extend that will support employment and growth at home.

In addition Obama is now announced the National Export initiative to double exports in five years time. This is no small change as based on 2010 numbers 185000 $ of exports support one job(Bloomberg, 15.04.2010). Based on the 1.69 trillion of exports in 2008 this would translate into 9.1M jobs supported by exports. Doubling exports therefore could possibly create the number of jobs lost during the Great Recession.

I am intrigued by this numbers and claims and did some digging on the WTO site. Their 2008 world trade report shows some interesting trends, I'd like to put forward.

It appears that in all manufacturing and most other areas the US has been losing market share since 2000. Following is a table compiled from some tables from the WTO report that lists US exports in a given category by value and market share.

PRODUCT	Value 2008 in B$	Share in world exp 2000	Share in world exp 2008
Automotive products	111.5	15.3	13.9
Food	112.6	12.6	10.1
Agricultural products	140	12.9	10.4
Pharmaceuticals	38.3	12.1	9
Iron&Steel	20.1	4.4	3.4
Office and Telecom Equipement	137.4	15.8	8.8
Other commercial services+(2007 data), see below	295.6	19.6	15.3

It appears that the US has been losing market share in virtually every category that I reviewed. Although the exports as such have grown the US is still losing market share. It is interesting to note that this loss of market share came about at a time where the slow loss in value of the dollar has already been in place together with the gap in growth rate differential between the US and major developing economies.

Other commercial services (data according to WTO is difficult to obtain from all countries) include exports in construction, insurance, finance computer and information technology, other business services, (legal, accounting, advertising, market research, R&D, architecture and engineering, management consulting) totals 86.9b$,as well as personal and cultural services. The bulk of the money comes as expected from financial and insurance services exports (68b$), while the exports coming from engineering, architecture and film/TV together accounted for 20.9b$.

While I don't see how the Economist's view that salvation can come from exports in medical devices (could not find statistics here), pharmaceutical, software, creative services (film/TV and architecture) and engineering it is interesting to note that the US showed great growth rates there in 2007 at least ranging in the 20% to 25%. It also seems to the thrust of the administration as the US commerce department has said that the goal of doubling exports in five years is attainable.

There are certainly many questionmarks regarding such a thesis (one of them being that if everyone one wants to export, somebody has to sustain a negative trade balance) and it does not seem obvious that Germany, Japan or China want to do that.

Having said that it has worked for Germany and Japan to keep exports as their engine of growth, while real living standards at home have stagnated or declined. Can the US emulate this if it wants to? Could the US and China play ping pong together? While China spends its Treasury Bond Chest on buying assets with depreciating dollars in Africa and Latin America in exchange for long term raw material supplies, the US exports itself out of its current predicament. Together they squeeze the EU that does not want to inflate either assets nor government balance sheets like there is now tomorrow.

I guess what I am saying is that while I have the highest respect for the iTulip analyses there has been a big bias towards domestic US growth and analyses. So looking into exports might widen the picture and indeed bring some new insights into the scenarios.

Eastern Belle

[sunskyfan]

Re: Can the US grow through exports?

We are THE agricultural power of the world if we pull our head out of our ass. A banker on Wall Street or a politician in Washington doesn't get this.

[ThePythonicCow]

Re: Can the US grow through exports?

I guess what I am saying is that while I have the highest respect for the iTulip analyses there has been a big bias towards domestic US growth and analyses. So looking into exports might widen the picture and indeed bring some new insights into the scenarios.

If so many major countries are seeking to become net exporters in order to work their way back to economic health, then who is doing the importing?

(Perhaps this is why NASA is so keen to travel to Mars ?)

Looking at this another way, the global monetary system of the last several decades has been based on the U.S. Dollar as the world's reserve currency. This has (oversimplifying a bit) devolved into the following:

• The oil and commodity exporting nations export oil and import dollars, military protection and luxury items.
• The low labor cost mercantile focused nations export the goods and services produced by their labor, and they import dollars and spend some of those dollars for oil and commodities.
• The U.S. (private, local and federal) borrows money, "polices" the world and buys stuff.
• Other nations sell what they can, borrow what they must, and buy what food, oil and stuff they need.
• The multi-national banks lend to one and all. If it moves, extend credit on its movement. If it sits, mortgage its future rental or residential value. If it is overly indebted, monetize its potential default.

This has created a single "globalized" system. Everything depends on everything and if any part fails, it all fails. Everyone has been optimizing short term profit at the expense of increased long term systemic risk.

This (quite literally) can not stand. Therefore it shall fall.

The reason small villages with a long history survive so well is that each family maintains some robust autonomy. We need more such robust autonomy at the global level. But first we're going to have to push aside some very wealthy and powerful entities who have been feasting to unhealthy excess on the imbalances of the current system.

[thriftyandboringinohio]

Re: Can the US grow through exports?

EasternBelle -- I don't know if this is noticeable in your browser, but in my browser, your post is almost unreadable, apparently because many of the formatting marks, such as paragraph markers that are converted to double tongue-sticking-out faces (:p>:p>). I'm guessing you prepared this post in a word processor and then cut+paste it. I'm not familiar with the word processor you were using (likely a Microsoft product); perhaps others know an easier way to do this.

MS Word always does that on my posts. I write in that word processor to get grammer and spell checking. When finished, I paste the whole thing into Notepad. Copy from Notepad into browser at iTulip, all the junk falls away when you move it through Notepad.
Only takes about 10 seconds extra, works every time.

[thriftyandboringinohio]

Re: Can the US grow through exports?

If so many major countries are seeking to become net exporters in order to work their way back to economic health, then who is doing the importing?

(Perhaps this is why NASA is so keen to travel to Mars ?)

Looking at this another way, the global monetary system of the last several decades has been based on the U.S. Dollar as the world's reserve currency. This has (oversimplifying a bit) devolved into the following:

• The oil and commodity exporting nations export oil and import dollars, military protection and luxury items.
• The low labor cost mercantile focused nations export the goods and services produced by their labor, and they import dollars and spend some of those dollars for oil and commodities.
• The U.S. (private, local and federal) borrows money, "policies" the world and buys stuff.
• Other nations sell what they can, borrow what they must, and buy what food, oil and stuff they need.
• The multi-national banks lend to one and all. If it moves, extend credit on its movement. If it sits, mortgage its future rental or residential value. If it is overly indebted, monetize its potential default.

This has created a single "globalized" system. Everything depends on everything and if any part fails, it all fails. Everyone has been optimizing short term profit at the expense of increased long term systemic risk.

This (quite literally) can not stand. Therefore it shall fall.

The way small villages with a long history survive so well is that each family maintains some robust autonomy. We need more such robust autonomy at the global level. But first we're going to have to push aside some very wealthy and powerful entities who have been feasting in unhealthy excess on the imbalances of the current system.

Very good summary of a very bad situation.
I still believe that the US can take a larger share of manufacturing, even if the game is zero-sum (and I don't think it is).

[ThePythonicCow]

Re: Can the US grow through exports?

all the junk falls away when you move it through Notepad

Good hint. Thanks.

[Raz]

Re: Can the US grow through exports?

Does anyone here remember back in the 1980s when Mr. "T" hosted Saturday Night Live?

One skit was a commercial for Mr. T's Bloody Mary Mix.
The sales pitch was: "Buy it - or I'll kill you!"



Maybe that will be the "export model" for the *New* America.:eek:

[c1ue]

Re: Can the US grow through exports?

Germany has been able to build an export powerhouse because it combines productivity, technology, and cost of living to net a higher export competitiveness than anyone in Europe.

While the Germany/China export battle is still ongoing - the US will never even begin to compete until its cost of living issues are resolved.

And that won't happen without FIRE being taken down.

As EJ and iTulip have stated many times, as have others like Dr. Michael Hudson, fundamental changes in focus must be implemented before real 'change' will occur.

Throwing some money at the National Export Initiative or whatever the latest happy sounding crap is, is merely thinly disguised pork barrel legislation. A perusal of the industries and companies poised to benefit from these types of programs will quickly reveal this.

And god forbid NEI becomes an industry equivalent of NEA (either one).

[GRG55]

Re: Can the US grow through exports?

Does anyone here remember back in the 1980s when Mr. "T" hosted Saturday Night Live?

One skit was a commercial for Mr. T's Bloody Mary Mix.
The sales pitch was: "Buy it - or I'll kill you!"



Maybe that will be the "export model" for the *New* America.:eek:

Na. It's all much more civilised now.

Buy it - or We will bring democracy to your country too!

[and while you are at it, better revalue your currency upward a wee bit...all the better so you can buy more :cool:]

[touchring]

Re: Can the US grow through exports?

And that won't happen without FIRE being taken down.

in my opinion, this is impossible, unless WWIII, and the americans have to start making stuff because they can't import.

[EasternBelle]

Re: Can the US grow through exports?

Thank you for the republishing and the hints on how to avoid the messy posting!

While I do think that the thrust at exporting seems far fetched there are some aspects that might warrant attention.

Germany's exports might be vulnerable from a exchange rate perspective if the US still has the capability to actually produce the goods. EJ has often argued that US manufacturing capability and knowledge has vanished together with the closure of factories. Is the loss of market share in world exports due to this? If so, is it realistic at all to think that the US can grow through exports. Will China and the US "team" together against the EU in the sense that China does the lower value stuff, the US the higher value stuff with a lower valued dollar and the EU with its deflationary policy biases gets stuck in the middle?

Eastern Belle

[touchring]

Re: Can the US grow through exports?

Will China and the US "team" together against the EU in the sense that China does the lower value stuff, the US the higher value stuff with a lower valued dollar and the EU with its deflationary policy biases gets stuck in the middle?

Eastern Belle

I think Germany complements with China very well, if you consider.

1. German luxury products are highly sought after by the Chinese rich - BMW, Mercedes, stuff that the Chinese can never duplicate at least in 50 years - neither by price nor by brand image - in any case, it is the premium pricing of the Merc that makes it so attractive to the Chinese buyer.

2. Some German products are known to be durable. There are many industrial products that are difficult to install and replace, or replacement involves ripping out a building or downtime that will incur losses many times the cost of the product itself.

http://autonews.gasgoo.com/auto-news...na-up-112.html

Generally speaking, the Chinese mentality is they prefer to buy tangible stuff, something that can be worn or used to show off to their peers. That is also the reason why the Chinese are so crazy over real estate as the real estate is something that is tangible and can't disappear. On the other hand, stuff like music and software, these are to be downloaded free over the Internet, as exemplified by Baidu's music search engine.

Shanghai, April 14 (Gasgoo.com) Mercedes-Benz, the luxury car division of Daimler AG, recently said that its first-quarter sales in the Chinese mainland surged 112% from a year earlier to 23,610 cars, and China is now Mercedes-Benz's fastest-growing market globally, media reported.
In March, sales of the Mercedes-Benz, Smart, AMG and Mayback brands in mainland China rose 62% year on year to 8,280 cars, the company said on its website on Friday. In China's mainland and Hong Kong, March sales grew 57% to 8,500 units, bringing Q1 sales up 105% to 24,100 units.

http://www.chinaknowledge.com/Newswi...ewsID=%2032761

BMW's China sales jump 100% in Q1

Apr. 9, 2010 (China Knowledge) - BMW AG, the world's largest premium car maker, said yesterday that its first-quarter sales in mainland China, Hong Kong and Taiwan more than doubled to 34,179 units, Dow Jones Newswires reported. In the first quarter, sales of BMW- and Mini-brand cars reached 11,902 units and 1,853 units, respectively, the company said. BMW sold 12,662 vehicles in March, the luxu

[c1ue]

Re: Can the US grow through exports?

in my opinion, this is impossible, unless WWIII, and the americans have to start making stuff because they can't import.

Except you first then have to explain how the US is going to be able to continue importing $300B+/year when debt on its interest payments keeps increasing - even as national wealth keeps decreasing.

Net foreign purchases of US Treasuries is already at a standstill.

Germany's exports might be vulnerable from a exchange rate perspective if the US still has the capability to actually produce the goods. EJ has often argued that US manufacturing capability and knowledge has vanished together with the closure of factories. Is the loss of market share in world exports due to this? If so, is it realistic at all to think that the US can grow through exports. Will China and the US "team" together against the EU in the sense that China does the lower value stuff, the US the higher value stuff with a lower valued dollar and the EU with its deflationary policy biases gets stuck in the middle?

Given the euro performance of the past 5 years or so, there is no evidence whatsoever that exchange rates themselves affect exports.

The euro started at parity with the dollar, fell to 0.84, but by 2006 was over 1.30. It is now 1.35 after peaking at 1.60.

I don't recall EJ's view on US manufacturing/factory closure, but I personally have noted many times that China's 'miracle' wasn't a case of industrialization in the normal "build it" sense; it was industrialization in the sense of entire factories being pulled out of the US and Europe and dropped into China.

Thus unless said factories are re-uprooted and brought back to the US, manufacturing in the US must spend that much more money to literally rebuild factories - a huge barrier. Machine tools are actually one of Germany's and other parts of Europe's bigger exports - and import of machine tools runs into the spending issue noted above.

And as for the US exporting to Europe: so long as the effects of FIRE drag upon US competitiveness - not just in wages via housing costs and taxes, but also lack of a comparable health care system, it seems highly unlikely that the US can pull this off.

Throw in the EU's various barriers to competitiveness such as its agricultural subsidies, and the likelihood shrinks even more.