US and China Gain Ground In the Race to Win Exports
Japan is seen as less of a threat, as the world shops elsewhere
When Toshiba introduced its first-ever desktop computer in the United States last week, it was one more sign that Japanese companies are looking to invade America's high-flying computer market. What did the domestic computer industry do? It yawned.
In the past 17 months, the yen has weakened by one-third against the dollar, giving Japanese automakers an added edge. The US auto trade deficit widened in July because Japanese imports of cars and car parts jumped while American exports to Japan fell, according to the latest US trade figures, released this week. But Detroit and trade experts do not seem overly concerned about another invasion.
Japan Inc. just isn't the attention-getter it used to be. A decade ago, American industry and government officials quaked at the prospect of Japanese competitors rolling over US companies. Today, the Land of the Rising Sun is overshadowed by two stronger trends: the emergence of China as a major exporter, and the re-emergence of US companies as strong exporters in their own right.
So when the US Commerce Department this week released figures showing the largest trade deficit in at least 4-1/2 years and, arguably, in nine years (when trade figures were counted differently), a range of economists saw it as a hiccup in the surge of American goods going abroad.
"Better times are ahead for US exports," says Paul Kasriel, chief economist for Northern Trust Company in Chicago. "The deficit with Japan is likely to be shrinking over the next several years."
"There's a fundamental improvement in US competitiveness around the world," adds H. Erich Heinemann, an economist affiliated with Brimberg & Company, a New York investment house. The US share of exports to economically developed nations stands at a 30-year high, he says.
In basic industries such as automobiles, steel, and textiles, manufacturers gasping for life a decade ago have made a dramatic resurgence, not only at home but abroad as well. American steel exports rocketed ahead to $7 billion in 1995, nearly double the 1994 total, seven times the amount exported a decade earlier, and the highest figure in 55 years.
American auto companies, for their part, have largely stopped the Japanese juggernaut from making further import gains. Even with the latest export figures, which showed a downturn in US car and car-part exports to Japan, the trend this year is up.
"Clearly, the industry here is much more cognizant of what globalization is," says David Cole, director of the Office for the Study of Automotive Transportation in Ann Arbor, Mich. In the long run, car exports may not surge because companies plan to build them where they sell them, he says. But US car companies will be big players in that move.
In both steel and auto, it's not entirely clear how much real improvement US companies have made because their rise in exports has been greatly enhanced by a decade long fall in the value of the dollar against the Japanese yen and the German mark. The fall in the dollar's value makes US goods cheaper internationally and, thus, easier to export.
In textiles, however, it's clear that the industry's retooling has been the major factor in its rebound from a decade ago. That's because it has made the biggest gains in countries such as Mexico and Canada, where the value of the dollar has gone up against local currencies, not down.
"People think we've been an inward-looking, protectionist industry worried about imports," says Carlos Moore, executive vice president of the American Textile Manufacturers Institute in Washington. In fact, US textile makers have nearly tripled their exports in the past decade.
They have invested heavily in new plant and equipment. The $2.5 billion US textile companies spent on modernization is likely to go up this year, Mr. Moore says. And, by carefully strengthening its ties with Canada and Mexico under the North American Free Trade Agreement, the industry has managed to take business away from Asian garment makers (which rarely use US textiles) and give it to low-wage garment makers in Mexico, the Caribbean, and Central America (which almost always use US textiles).
The results are significant. A decade ago, more than 60 percent of all garments imported into the US came from the Far East. Today, it's down to around 40 percent, Moore says, with Mexico, the Caribbean, and Central America taking up almost all that slack.
The fall in Chinese exports of textiles to the US is a rare setback for that looming export powerhouse. In June, China for the first time topped Japan as the nation with which the US had the largest trade deficit. Japan retook the lead in July, according to the trade figures released this week. But in the long run, economists say, it is China - not Japan - that will run up US trade deficits.
"Realistically, you're looking at a real juggernaut," says Mr. Cole. According to some estimates, he says, China will grow to exceed the US economy by 40 percent in the next quarter-century.