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U.S. manufacturing exports continue to boom with the weak dollar, but now's the time to consolidate gains and sharpen strategies.
David Lamb can hardly believe his good fortune. Three years ago, his business, Legacy Automation, a Washington state company that manufactures paper and pulp processing machinery, was being decimated in export markets and having trouble competing with European and Asian companies in the U.S. "I wasn't sure we would be able to export much at all anymore," Lamb says.
But as the value of the U.S. dollar has fallen against other major world currencies, including the euro, Lamb's firm has revived. European manufacturers' "competitiveness [in the U.S.] has diminished-that has helped us," Lamb says. "Our [European] competition had stolen a march on us in global markets... [but] with our markets in the U.S. under less pressure from European competitors, we can defend our home turf." Today, Legacy Automation's sales are rising, and it is boosting its exports to Europe and other foreign markets.
Lamb is not alone. Since 2001, the dollar has declined by more than 30 percent against other leading currencies such as the euro, the new common European currency. As Lamb has seen, this fall has helped many U.S. world traders. It has made American exports comparatively cheaper in Europe, and sales made in Europe or Japan have become more valuable when converted back into dollars. Meanwhile, the plummeting dollar, which makes the euro more expensive, jacks up the cost of many European products sold to U.S. markets, pumping up revenues for many American exporters, since they are able to undercut European competitors. "The dollar's decline has helped a lot among small and medium-sized enterprises," says James Morrison, President of the Small Business Exporters Association, a leading trade group.
In fact, Morrison says, for most medium-sized exporters, the value of the dollar is now among the biggest factors in their businesses' success or failure. Still, not all world traders are sanguine about the greenback's fall. Savvy exporters and importers realize that they need to prepare for both the positive and the negative effects of the currency's fluctuation.
Why the dollar fell
The dollar has fallen for several reasons. The Bush administration has essentially abandoned the Clinton-era policy of maintaining a strong dollar....