Weak dollar, trade deals help bolster economy

This article appeared in the Patriot News, July 21, 2011.

Last year, I led a group of students to Geneva, Switzerland. The exchange rate then was about $1 per Swiss franc. I took another group this year, but the exchange rate now stood at about $1.20 per Swiss franc.

The 20 percent appreciation of the Swiss franc over the year meant that the study tour to Geneva had become much more expensive. The costs of lodging, meals, train fares to Zurich, tickets for the United Nations tour and the Red Cross Museum — all denominated in Swiss francs — had risen sharply in dollar terms.

While the currency movement made the finances of my study tour more challenging and probably will cause me to re-evaluate the fee next year, not all American enterprises are hurt by the dollar’s fall.

In fact, U.S. exporters cheer such declines because they result in a lower price for their goods in other countries, making their products more competitive against foreign rivals. This increases their sales in export markets and augments their profits from foreign operations. American multinationals like Coca-Cola, Caterpillar and Boeing stand to gain when the dollar declines.

Driven in part by a falling dollar, the manufacturing sector has staged a modest recovery, contributing to a rise in U.S. exports. In April, exports stood at $176 billion, up $28 billion, or 19 percent, from a year ago.

With domestic demand remaining anemic, foreign markets provide a beacon of hope for American businesses. Thus it should come as no surprise that the U.S. Chamber of Commerce, not a particularly stalwart supporter of President Barack Obama’s policies, has seen fit to throw its weight behind the president’s initiative to finalize trade agreements with South Korea, Colombia and Panama.

These agreements will result in lower import tariffs on American goods entering these countries, and lead to further expansion of the U.S. export sector.

But the legislation is held up in Congress, where normally trade-friendly Republicans are opposing a related measure to provide “trade adjustment assistance” for workers who lose their jobs as a result of increased imports into the U.S.

Such assistance programs pay for retraining workers and have long been a staple of trade agreements. They serve as a means for society to distribute the gains that arise from trade to those who lose from free-trade agreements, but this time they have become ensnared in the vitriolic debate over deficits in Washington.

While Washington dithers, other countries are not standing idly by. The European Union and Canada have their own trade agreements with South Korea and Colombia, permitting unfettered access to these countries for their firms. This leaves American firms at a competitive disadvantage, imperiling the creation of export-oriented jobs in the U.S.

Amid the gloom over international trade policy, a long-awaited decision over Mexican trucks on American roads provides a ray of light. Under the terms of NAFTA, Mexico’s trucking firms were to be granted free access to U.S. roads, but strong opposition from unions had effectively kept them out.

Till now.

Since the mid-’90s, Mexico has remonstrated with the U.S. for not adhering to the treaty, even at one point winning the right to impose retaliatory import tariffs on American goods. But Presidents Bill Clinton and George W. Bush used the specter of unsafe Mexican trucks careening down American highways to justify their unwillingness to meet their obligations under NAFTA.

But now, finally, Mexican trucks, subject to increased safety requirements even more stringent than those required of domestic trucking firms, will be able to transport goods freely across the border and within the U.S. As with any removal of trade barriers, this relatively minor measure will also benefit consumers in the form of lower prices.

In the current economic circumstances, no relief is too small.
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