U.S. Exports Must Grow, Says Economist

Economic growth in the U.S. will be built upon a more balanced trade flow, but developing nations in Asia and Latin America will have to import more goods and commodities to make this happen, according to one economist.

“The U.S. consumer pulled the world economy for years,” said Walter Kemmsies, chief economist at Moffatt & Nichol engineers. “Now it’s the rest of the world’s turn. The U.S. has to export more,” he told the annual conference of the Agriculture Transportation Coalition in San Francisco.

Demographics dictate that U.S. exports should grow. The economies of Asia and Latin America are growing faster than the United States. Those nations have a younger population than the developed nations of the West, and younger families consume more goods than aging populations.

U.S. exports are contributing to the U.S. emergence from its worst recession since the 1930s. Containerized exports from West Coast ports increased 15 percent through April, while imports increased 12 percent, according to the Pacific Maritime Association.

However, U.S. exporters face significant challenges, especially in selling to China. The Chinese yuan is undervalued in relation to the dollar by 20 to 40 percent. “China is clearly manipulating its currency. That is disruptive,” Kemmsies said.

Although the young, growing middle class of China will consume more manufactured goods, U.S. products are too costly for many Chinese. “You can’t manufacture at $45 an hour and sell to workers who earn 45 cents an hour,” he said. Even recent labor unrest in China that has led in some cases to a 30 percent increase in wages won’t be enough to threaten China’s export machine, Kemmsies said.

U.S. exports to developing nations will be based upon commodities, minerals and food, as well as advanced products where the U.S. has an edge such as biotechnology. Food exports will be big. China faces problems feeding its population as it is becoming a desert, Kemmsies said. “We will grow the food and sell it to them,” he said.

The containerization of grains and other food products will enhance the ability of U.S. farmers to move their products by rail to the coasts and by vessel to developing nations. “Developing nations will take our exports in containers,” he said.

On the other hand, outsourcing of labor-intensive production to developing nations will continue, and this will drive growing imports into the U.S.