Ring 'Em Up, Ship 'Em Out

By Bernard Baumohl

With the U.S. economy stagnant and domestic sales hurting, boosting new markets overseas became a simple matter of survival for many U.S. firms. So far, their efforts have paid off handsomely. Exports have zoomed to record levels this year, a trend that has helped narrow the chronic U.S. trade deficit and provide the domestic economy with just enough vitality to avert a recession. "Thank goodness for exports," says Allen Sinai, chief economist with the Boston Co. Economic Advisers. "Without them, the U.S. economy would be dead in the water."

Statistics released last week show the U.S. trade picture brightening considerably. The current-account deficit, the trade figure that is most closely watched because it measures transactions in services as well as goods, shrank 14% during the first three months of the year, to $22.9 billion, the smallest quarterly gap in six years. In a separate report, the merchandise trade deficit in April fell 17%, to $6.9 billion, its second best showing in six years. At this pace, the gap for the year as a whole could fall below $100 million for the first time since 1983.

The extraordinary rise in foreign demand for U.S. goods has come partly as a result of the fast-growing economies in the Far East and Europe. But the U.S. has received substantial help from a declining currency, which has made American goods less expensive overseas. Since 1985, the dollar has fallen 43% against major world currencies. American firms have also shown greater flexibility in negotiating trade deals. More U.S. companies are willing to barter or accept payment in local currency instead of dollars, notes consultant Matt Schaffer of Sand Point, Idaho, author of The Countertrade War.

The U.S. aerospace industry has been one of the top beneficiaries of the export boom. Last week Boeing announced a $4.8 billion deal to sell 23 new 747-400 jumbo jets to Korean Air Lines, which had earlier bought nine of the planes. All told, Boeing has 161 foreign orders for airliners, which range in price from $35 million to $130 million apiece. Even small U.S. firms have made impressive inroads abroad. Trilling Medical Technologies, a Carlstadt, N.J., firm of 50 employees that sells burn-protection products, has seen its international sales increase 400% during the past year, to $500,000.

Yet the impressive gains made by U.S. exporters have begun to inspire some resistance overseas. In South Korea, which is suffering from a flagging economy, the government has staged what amounts to an official boycott of many imports. Japan in recent years has substantially increased its imports of American goods, ranging from Timberland shoes to Harry Winston jewelry, but trade tension resurfaced last week. The Bush Administration voiced fears that Tokyo, after making promises this spring to help reduce the U.S. trade deficit with Japan, is dragging its feet again. Said Commerce Secretary Robert Mosbacher: "I hope they are just testing us to see if we have lost any of our resolve."

Now that more American products have gained foreign acceptance, U.S. business leaders have boosted their confidence as well as their competitive skills. "Over the past five years," says Jerry Jasinowski, president of the National Association of Manufacturers, "U.S. manufacturers have turned themselves inside out trying to improve the quality of their products, and they have succeeded in a great many cases."

With reporting by Gisela Bolte/Washington and Edwin M. Reingold/Los Angeles