The United States: Low Cost Country Exporter of Choice?

I know a lot of you have been reading on this blog and others about how the cheap dollar could potentially drive up export demand for US products. Well, the proof is finally here. According to a recent Industry Week article, the weak dollar is helping to directly fend off slacking domestic demand for products. According to a study from the Manufacturers Alliance/MAPI quoted in the above-linked article, "The exports orders index, which measures how fourth quarter 2007 exports are expected to compare with those of fourth quarter 2006, reached an all-time high of 80%, surpassing the previous high of 79% in June 2007 and above the 75% recorded in September 2007. The rise in export orders suggests that slower growth in domestic markets is being partly offset by continued growth abroad. Most of the survey respondent companies are global manufacturers and are therefore likely to better withstand a slowdown in U.S. economic growth."

Long-term, I'd argue this type of activity is not sustainable. The US is simply not capable of the low-skilled industrial manufacturing production that many developing nations with lower cost labor structures are (and as I've wrote about before, labor-cost or currency-based arbitrage sourcing opportunities are always short-lived). But if US manufacturers can use this temporary stroke of good luck to raise their investments in R&D and productivity, then perhaps, we'll continue to carve out an ever larger skilled-labor manufacturing niche which will be sustainable over the long haul.

- Jason Busch

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