America’s next export product: services I had a very interesting conversation last week with one of our esteemed City Council members and the topic turned to exports and how the City of Savannah should encourage and accommodate local businesses to trade with and export to China. Intrigued by the idea and the topic, my first question was of course: What product exactly do you have in mind? The answer was: pecans. We should export pecans. I kept my comment simple but you’ll get the drift of where I was and am going with this story. If I give the Chinese a pecan, they’ll ask for the pecan tree and they will plant them, reap the fruits, prune them and then export them to Savannahians to make pie. The morale of my sarcastic answer is this. The US once was the world’s powerhouse in manufacturing and therefore a leading exporter. Since the late 70s that is no longer the case as by then our demand for consumption had vastly outgrown our limited production capacity. Throw price competition into an expanding global economy and one can see where the American economic model lost its luster, hence the fact that we are barely scraping by economically with an over-leveraged consumer-driven economic engine. What is even more worrisome is the fact that some politicians continue to think that exporting manufactured goods to emerging or growing economies will put the US back into play and can make us regain our economic status. Globalization has gone so far down the road and integration is not stoppable anymore that grasping back to an antiquated “industrial revolution” model is the equivalent of economic suicide in slow motion. The alternative approach would be to reevaluate our assets that are either readily available or can be groomed and nurtured and are or will be in demand in the next 5 to 10 years. The most valuable asset in the US is service in its broadest definition and context. With service I mean the intellectual property that pertains to any manufacturing of goods and the maintenance and innovation thereof. The export of services is currently minimal compared to bulk or containerized goods and is heavily curtailed by legislation in the name of national security but the future may look bright. Economists estimate that if the US would relax its intellectual export restrictions that the service sector would surpass the manufacturing export by 2020 and account for a large portion of GDP. Going back to the pecans and pecan trees for China. We can export the growing, pruning and fruit yielding services to China and other manufacturing-focused economies while reaping the benefits of GDP growth and a more balanced trade balance sheet. That requires a new focus and direction but it also requires the understanding that production, consumption and servicing thereof will always be a seesaw motion over long periods of time. The economies that easily adapt to this perpetual economic motion in a fully integrated global economic model will never be excluded but will always be an integral part of the forces that be.
Posted on: Tue, 06 Aug 2013 17:30:35 +0000
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