NYT: Export Boom Helps Farms, but not American Factories

Ah, the weak dollar has led to the great American manufacturing export economy - well not so much

• Exports are the bright spot this year in an otherwise bleak economy. But the world is not suddenly snapping up made-in-America goods like aircraft, machinery and staplers. The great attraction is decidedly low-luster commodities like corn, wheat, ore and scrap metal. (let's cheer that US Multinationals have not found a way to outsource these products - at least we have something left that others in the world want to buy)
• This helps explain why manufacturing jobs are continuing to disappear by the tens of thousands and factories are closing even during a miniboom in exports. While the surge in commodities is a welcome relief, it is an unreliable prop for an industrial power.
• “The historical data tell us clearly: don’t get too used to commodity export booms; as any third world country will tell you, they tend to go away pretty quickly,” said L. Josh Bivens, a trade expert at the labor-oriented Economic Policy Institute. His point was that while Boeing’s aircraft or Caterpillar’s tractors are distinctive and sought after, corn grown in Iowa is virtually interchangeable with corn grown in Argentina or any other bread-basket country. “Over a long period,” Mr. Bivens said, “commodities contribute right around zero to export growth.” (easy now, let us have some bright spots in the morbid economy)
• An analysis of trade data by the federal Bureau of Economic Analysis illustrates just how lopsided the gains have been between manufactured goods and unprocessed commodities. All exports of goods and services in the first half of the year rose at a $52 billion annual rate, adjusted for inflation, up 7.1 percent. Commodities accounted for 41 percent of the increase and manufactured products contributed just 12 percent, the bureau reported.
• Such unevenness, favoring commodities, is unusual, given that manufactured products, even by this definition, account for 40 percent of the nation’s exports, while commodities make up only 26 percent and services 30 percent.
• But the manufacturers themselves acknowledge that they gradually undercut their ability to export as they moved more and more production to factories overseas. (oh really... imagine that) Bringing that production back to this country, so that it could be exported, would dismantle global networks constructed relentlessly over the last 25 years.
• “We have achieved a worldwide manufacturing base, and we are not going to shut down our factories overseas,” said Franklin J. Vargo, vice president for international economics at the National Association of Manufacturers. “But on the margin, we will shift a little bit of manufacturing back to the United States.” That has happened recently, in response mainly to soaring transportation costs and the weaker dollar.
• Many American manufacturers argue that as factories spread across the globe, exporting is no longer an effective means of competing against sophisticated and ever more numerous local manufacturers. In addition, as American companies set up operations in, say, China, they insist that their suppliers locate nearby, for quick and efficient delivery — and that draws more manufacturers overseas.
• Currency fluctuations rarely alter these long-term commitments, and profits stay abroad. “Most of the money we make overseas, we keep there,” Mr. Pistell said, “and then plow it back into growing the business overseas.”

Conclusion: We continue to move to a flatter world - as consumption flattens in the US but grows overseas more production will follow (i.e. jobs). We are told the weak dollar is a great boom for the U.S. manufacturing base. The numbers tell a starkly different story, as we've pulverized the manufacturing base so there are not many even left to take advantage of this shift. But it is good for U.S. commodities - the multinationals have yet to figure out how to move coal mines or Iowa farmland to distant countries to take advantage of cheap labor. So we at least have that going for us as we continue to move to the 95.2% service economy.