Ask Consumers if They Like a Weak Dollar
According to a Washington Post story today, “the weak dollar is one problem the United States loves to have.” The story reports how the fall of the dollar against the euro and other currencies in the past year has boosted U.S. exports and discouraged imports, cutting the trade deficit and allegedly boosting the U.S. economy. A weaker dollar has spurred complaints in Europe and elsewhere, but here at home the Post story leaves the impression the approval is practically unanimous.
Nowhere in the 1,058-word story is the impact on consumers ever mentioned. But it is American consumers who pay the biggest price when the dollars we earn buy less on global markets. We are paying more for oil, which not coincidentally has zoomed toward $80 as the dollar flounders. A weaker dollar means higher prices than we would pay otherwise for a range of goods, from imported shoes and clothing to food, that loom large in the budgets of American families struggling to make ends meet in this difficult economy.
Ignoring consumer interests is widespread in reporting about trade. It reflects the strong bias of elected officials to see trade issues strictly through the lens of producers and never consumers. After all, it is producers who form trade groups and hire lobbyists to promote their exports or protect themselves from imports. Nobody in Washington represents the diffused, disorganized but much more numerous 100 million American households.
The dollar’s value should be set by markets, and I have no reason to believe the dollar is over- or undervalued. But pardon me if I dissent from the consensus that a falling dollar is unambiguously good news.
Filed under: International Economics and Development; Trade and Immigration
Good News! Recession Cuts Trade Deficit in Half!
The latest U.S. trade numbers were released this morning, and the news reports so far have predictably focused on the fact that the U.S. trade deficit in March expanded modestly compared to February.
The real story behind the numbers, however, is that U.S. imports and exports continue to decline. Compared to the month before, U.S. exports of goods fell another $3.0 billion, while imports fell by $1.6 billion.
If we go back a full year, the drop in trade is staggering. Between March of 2008 and March of 2009, U.S. exports of goods and services fell by 17 percent, and imports fell an even steeper 27 percent. As a result, the goods and services deficit is less than half of what it was a year ago.
Critics of trade such as CNN’s Lou Dobbs are always harping that if we could only reduce our dependence on imports, and along with it the trade deficit, Americans would enjoy higher wages and more plentiful jobs.
Well, we’ve managed in the past year to reduce imports by more than a quarter and cut the trade deficit by more than half. Are we feeling any better?
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