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Export Boom Helps Farms, but Not American Factories

 

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. 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.”

Commodity sales have been helped greatly this year by rising prices, particularly for grains, and also by the decline in the value of the dollar, which reduces the cost of American exports in other currencies. Both trends, however, have recently reversed, suggesting that the rise in commodity sales will not be sustained, and that exports might shrink, weakening the economy another notch.

“What amazes me,” said Robert L. Thompson, an agriculture specialist at the University of Illinois, “is that we have been able to greatly increase corn exports while also using it for ethanol. Only by increasing the acreage devoted to corn have we been able to do this, and by squeezing down the use of corn for domestic livestock feed.”

An analysis of trade data by the federal Bureau of Economic Analysis illustrates just how lopsided the gains have been between manufactured goods and 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. (The figures strip out such items as arms sales and exports to American territories, like Puerto Rico and the Virgin Islands.)

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. Indeed, not since the bureau began compiling detailed trade data in 1977 have commodities outpaced manufactured exports for two consecutive quarters.

Weakening demand abroad accounts for some of the decline. But the manufacturers themselves acknowledge that they gradually undercut their ability to export as they moved more and more production to factories overseas. 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. DESA LLC, for example, known for its heating devices, recently moved some production back to Bowling Green, Ky., from China.

The contrast with commodities, which cannot be shifted overseas, is striking. John Hardin Jr. and his son, David, focus their attention on growing as much grain as they can on 2,500 acres near Indianapolis, counting on exports to absorb their harvest. Meanwhile, Sarah Bovim, a Whirlpool Corporation executive, points to expanding global operations at her company, where production abroad has eclipsed its exports.

“We are looking to expand in emerging markets,” Ms. Bovim said, “which means we are looking to set up shop there.”

The Hardins have every acre of their mostly rented land planted with corn, soybeans and wheat — devoting more acreage to corn in anticipation of huge demand. The nation’s corn exports, measured in tons, have risen nearly 20 percent this year, outstripping the gains of nearly every other commodity. And farmers are on schedule to harvest the second-largest corn crop in the nation’s history, the Agriculture Department reported this week.

“We were in a situation where there wasn’t enough corn in the world to go around,” John Hardin said, noting that damaged harvests in other countries had pushed up the price. The weak dollar also made American corn more attractive.

 

UNIT V.

What Determines a Car Shipping Rate?

 

 

Overseas shipping rates make up a large part of a traveller's budget and shipping quotes are based on a variety of aspects. Find out how to minimise shipping costs.

Travelling the world by private vehicle implies moving to other continents and thus overseas car shipments. Before starting out on an around-the-world journey it is good to have some insight into shipping costs – they may play an important role in the final decision as to the traveller's itinerary.


Date: 2016-01-14; view: 522


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