The fading strength of U.S. exports

December 11, 2012

U.S. exports posted their biggest drop in nearly four years in October, pushing the U.S. trade deficit higher despite a decline in imports to their lowest level in 1-1/2 years.

The data reveal that U.S. exports of goods and services have now decelerated to a year-on-year growth rate of just 1 percent compared with 2.8 percent in the third quarter of 2012 and 11.5 percent last year at this time, writes Deutsche Bank Securities chief U.S. economist Joseph LaVorgna in a research note.

We are concerned by this export trend, not only in October, but over the past several months, because exports have contributed an outsized share to economic growth in the current cycle. If exports fade away as an economic driver in the near-to-medium term, other domestic engines will need to accelerate in order to pick up the economic slack and maintain growth near 2.0-2.5 percent. We think this is possible if fiscal cliff concerns are adequately addressed. The domestic offset will come from continued recovery in the housing sector, as well as pent-up demand from households and businesses.

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It is well known that most of the high wage nations have trade problems with present free trade rules. It is obvious any economic unit must sell (export) as much as it buys (import) or go into debt. WTO rules do not allow nations to tax excess imports. WTO does not allow nations to take actions to grow export industries they need (what ever they do on those lines ca be called export subsidies). We have kill such organizations and rules.

Common sense says each nation has to tax excess imports of things that cannot be smuggled easily, each nation has to do what can to assure enough export industries. Industries without significant payrolls of citizens do not account for much whatever they bring in goes out or goes into corruption.

Things to make export industries include having lower taxes for firms that increase exports paid by the rest of the economy. Having a good education system. Government owned technical research with the patent restricting use to local exporting firms.

Posted by Samrch | Report as abusive