Ed Crooks, the author of the article “America: Riveting prospects”, feels that American countries have some issues when it comes to exporting their products to foreign markets. In his article, Crooks gives main reasons for the difficulties faced by the local companies in exporting. According to him, the five main reasons are: dependence of American companies on the local market, lack of trade agreements to get rid of trade tariffs, lack of sufficiently trained labour force, rise of production in growing economies, and the preference of American companies to produce in their foreign markets instead of exporting (Crooks, 2011). Each of the above reasons is discussed in the following part of this essay.
American companies face problems in exporting because they largely target the local market (Crooks, 2011). They are not used to exporting their products to foreign markets, with only one percent of them doing so. Of the one percent exporters, only 42% of them sell in more than one foreign market; the rest specialise in only a single abroad market. The local companies are not fit and prepared to compete in the foreign markets, which increases their challenges to exporting. Some do not have the capacity to produce for both their local market and foreign markets.
The second reason that Crooks gives for the difficulties faced by American companies in exporting is failure of the government to sign international trade agreements with foreign nations to facilitate trade (Crooks, 2011). The country has only signed 17 international trade agreements, and is currently pursuing only one more agreement, the US-South Korea trade agreement. With lack of trade agreements, exporters face a hard time dealing with trade tariffs, which greatly affects their ability to export products. For example, the US-Korea Agreement would eliminate or reduce tariffs on US exports over 95% of consumer and industrial goods in five years, and would increase American exports by $10 billion (The Whitehouse, 2015, p. 1). Currently, the country lies eighth in the world in the list of the countries mostly affected by trade tariffs.
The labour force in the country is not sufficiently skilled and educated to maintain the required production capacity to support exportation o products (Crooks, 2011). Production lines in the country are faced with the threat of closure because of lack of a sufficient labour force to run them. Insufficient skills and education denies the country of the possibility of new opportunities and innovation, and therefore the possibility to develop new products to compete at the international level. In recent times, the country has produced less and less science and engineering graduates, who are the main providers of the labour force needed to keep the mainly manufacturing-dependent export market alive. For example, only 17% of the students who graduated from American universities in 2002 took a course in engineering or physical sciences (U.S. Department of Commerce, 2004, p. 49).
In recent times, emerging economies have acquired modern production facilities and skills. They are able to produce their own goods and services, as well as others for export. As such, their dependence on imports has decreased. This is a threat to US exporters, as well as to exporters from other developing countries (Crooks, 2011). For example, China has risen to be a major exporting power, especially in manufactured goods. It ranks fourth among the largest exporters, especially of manufactured goods, which has greatly reduced the market for the American products (U.S. Department of Commerce, 2004).
The last reason that Crooks gives for the challenges facing American exporters is that American companies prefer to maintain foreign operations in their foreign markets instead of manufacturing at home and exporting (Crooks, 2011). Such companies build production facilities in their foreign markets to improve on their logistics, hedge against currency volatility, to understand the specific needs of the foreign markets better, and to improve on their relationships with the governments of such foreign markets, who are some of their largest customers. The maintenance of foreign operations reduces the need and export. It reduces the cost of operations in a number of ways. For example, it eliminates freight charges involved when exporting goods, while at times, it may reduce production costs as both raw materials and labour may be cheap and readily available in the foreign markets.
The view of the economists is more agreeable than the view of the industrialist. Economists are against the special treatment and accord given to manufacturers. According to them, the special treatment leads to policies that can potentially damage the economy, such as wasteful subsidies and protectionism. The jobs lost if manufacturing companies are not protected can be compensated for by other sectors. Protecting industries using taxpayer money could have the potential of raising the cost of basic commodities such as food, while it may also encourage inefficiency within the industries.
- Crooks, E. (2011). America: Riveting prospects. The Financial Times. Retrieved from http://www.ft.com/
- The Whitehouse,. (2015). The U.S-South Korea Free Trade Agreement: More American Jobs, Faster Economic Recovery Through Exports. Washington DC. Retrieved from http://www.whitehouse.gov
- U.S. Department of Commerce,. (2004). Manufacturing in America a Comprehensive Strategy to Address the Challenges to U.S. Manufacturers. Washington, D.C. Retrieved from http://www.nist.gov