The significance of trade remains to be a topic of debate since its advantages are not often quantifiable by the parties involved. Therefore, this article by ED Crooks is discussing why American Corporations are sometimes against exporting. According to some beliefs, the overvalued dollar was the key reason for companies to stop engaging in exportation (Crooks, 2011). But according to some suggestions, the primary reasons why most firms in the United States are not utilizing exporting opportunities has nothing to do with an overvalued U.S dollar. Therefore, other factors are obstructing the exportation of the manufactured goods and services in the United States.
It is true that the duty of the U.S dollar as the reserve currency of choice in the world tends to support its value. Thereby, hurting exporter in the United States. However, the National Association of Manufacturers, argues that the dollar is currently about 10% less its trade that is the weighted average in actual terms over the previous forty years. This suggests that the rate of exchange is now a non-pressing issue.
According to this article, Crook contributes the lack of exportation to the following reasons: the issue that affects the U.S manufacturers, and the industry executives are deeply rooted. Firstly, with the largest national market around the globe as their home base, the business of the Americans are not used to international selling (Crooks, 2011). Consequently, only 1% of the companies in the United States export, and this is fewer as compared to any other developed economy. Among these firms, about 58% of them strictly sell to one other nation.
Secondly, the United States have always been less active as compared to other countries particularly in signing trade agreements to aid international trade. For instance, there are over 260 trade agreements around the globe. According to the U.S Chamber of Commerce, there are about one hundred agreements under negotiations (Crooks, 2011). However, the United States has only signed seventeen trade agreements with a single current set of talks.
Thirdly, the problem of manufacturers in the U.S is about insufficient skilled and educated labor force (Crooks, 2011). For instance, in spite of high rate of unemployment, Boeing, and other firms have started to experience the shortage of skills. This has threatened to shrink the capacities of the U.S manufacturers. Fourthly, as the developing economies are acquiring modern facilities as well as skills, they are gradually becoming capable of replacing production in the United States and other industrialized nations (Crooks, 2011). When the manufacturers in the U.S look at the emerging economies, they will always make a decision that it would be better to construct plants close to the market. This will help in understanding the local needs, protection against currency volatility, and fulfil local regulations as well as improving relations with states that are always their largest clients.
Lastly, the main problem is that companies in the United States want to manufacture in the markets where they sell (Crooks, 2011). The U.S is the largest outward investor in the world. Therefore, the American corporations earn much more from the foreign activities as compared to the exports.
It implies that the economists and industrialists have strong views to provide on the above issues. Therefore, in my viewpoint, the industrialists are more affordable that the economists. This because no nation is economically mature, big and diverse as the Americans can succeed with only eight percent of the workforce in the manufacturing industry, which is what their number is currently. Therefore, it needs to range between 20% -25%. If not, the consumer credit driven bubbles may sustain the economy temporarily until they burst. Moreover, the former CEO of AT&T had an interesting point in this situation. He argues that how strong the U.S economy with weak numbers as low as 8%. Ultimately, the economic standing of the U.S will weaken at this rate. Therefore, I agree that the rate should be much greater than the 25% if possible.
References
Crooks, E. (2011). America: Riveting prospects. Ft.com. Retrieved 20 January 2017, from https://www.ft.com/content/ff270782-19cc-11e0-b921-00144feab49a