U.S. Exports Gain An Edge
For watchers of the U.S. economy, one of the biggest surprises of 1995 was the sharp turnaround in the trade deficit. Early in the year, the omens were anything but positive. Japan, America's second-largest customer, was mired in recession. Mexico, its third-largest, was in economic collapse. Yet U.S. merchandise exports rose by close to 15% during the year, and the deficit, aided by a drop in imports, has been shrinking steadily since July.
The big question is whether exports can continue to provide enough fuel to shore up a sluggish U.S. domestic economy in the months ahead. One economist who thinks the answer is yes is Joseph P. Quinlan of Dean Witter Reynolds Inc., who points out that U.S. exports are extraordinarily diversified in terms of both products and markets.
Unlike other countries, the U.S. is a major exporter not only of capital goods and industrial materials but also of agricultural products. Indeed, all three categories posted double-digit increases last year, with agricultural products up some 22%, to a record $50 billion-plus.
Meanwhile, the U.S. has been successful in diversifying into emerging markets in Asia, Latin America, and elsewhere. In 1990, such markets accounted for 35% of U.S. merchandise exports, compared with 42% going to Europe and Japan. But, by last year, the emerging-market share was up to 42%, vs. 34% for Europe and Japan.
Just as important is the rise in U.S. competitiveness stemming from years of productivity investments and restructuring. Indeed, double-digit increases in U.S. exports to sluggish European and Japanese economies last year underscore the enhanced competitiveness of U.S. products. All of this suggests that U.S. exports are well positioned to sustain the expansion this year. Despite the stronger dollar and weak European economies, says Quinlan, "even modest growth in the world economy should bolster our trade performance."