When the dollar is strong, it makes American goods expensive abroad, and can hurt domestic companies competing in international markets. The current low value of the dollar against international currencies makes American products more attractive.
With today’s relative dollar weakness, U.S. goods and services are more attractive to foreign buyers and the volume of exports should increase, resulting in greater revenue and earnings for Mississippi exporters, said Liz Cleveland, manager, international trade office, Mississippi Development Authority (MDA).
“With a weak dollar, Mississippi companies should act now to secure new export markets,” Cleveland advises. “MDA stands ready to help companies promote and sell their products overseas. For example, with our catalog show promotions, one international trade specialist can represent 30 firms in an overseas tour while splitting the cost between the 30 companies. With the high cost of international travel, this can be very compelling.”
Approximately 700 Mississippi firms have reported exporting manufactured goods to overseas markets. MDA estimates that there is potential for at least 500 more to participate in the international marketplace at some level. Cleveland encourages companies to contact the MDA International Trade Office at (601) 359-1120 to inquire about marketing programs that can be utilized to increase their marketing efforts.
The weak dollar isn’t all positive.
“The fluctuation of the value of the dollar against foreign currencies can be a double-edged sword for Mississippi businesses,” Cleveland said. “It helps exporters, but hurts importers. For Mississippi companies that depend on imported products or components, the weaker dollar increases costs. One way to offset these increased costs is for firms to begin or increase their exporting efforts.”
Boosting job growth, lowering trade deficit
The weak dollar does have its benefits in the short term as increased exports can boost job growth and lower the trade deficit.
“However, as the dollar continues to lose value, it becomes more costly to import goods, which means U.S. companies have to raise prices,” said Adam Murray, director of the Small Business Development Center International Trade Center at Hinds Community College in Raymond. “The combination of a weak dollar and increased costs usually leads to inflation.”
There is evidence the weak dollar is helping Mississippi exports. The Census Bureau reported that through the first three quarters of 2004, Mississippi exports were up 18.3%, an increase of $345 million, to $2.2 billion. Total U.S. exports were up 13.8%, or $73 billion.
Jay Moon, president of the Mississippi Manufacturers Association, said the lower dollar opening market opportunities to make U.S. products more competitive has definitely had a positive impact in the state.
“For a long time, there was a belief by the business community that we needed to let the dollar seek its own true level of value on international monetary markets,” Moon said. “The strong dollar was hurting us from an export standpoint. There is no question about it. The dollar’s drop in value has increased our ability to gain a foothold in export markets. Consequently, a lot of companies exporting large amounts of product into the U.S. are buying up dollars on the world market to prop up the dollar and prevent it from going lower because it affects their ability to sell into this market.”
Moon said some of the state’s largest manufacturer exporters have told him the drop in the dollar has made their products more competitive worldwide. This may be one factor in a turnaround in 2004 in the manufacturing job situation in Mississippi.
In 2002, Mississippi had 117 manufacturing plants close. In 2003, 102 plants closed. This year only 68 plants closed.
“That is obviously a significant step in the right direction,” Moon said. “We lost 11,063 jobs in 2002, 6,862 in 2003, and 4,495 jobs in 2004. But the good news is that 41 new manufacturing facilities came in during 2004 through October. That added 3,107 new jobs in manufacturing. Another interesting thing is that 60 existing manufacturers expanded, creating 2,279 new jobs.
“So if you take that collectively, we created 5,886 new jobs in manufacturing. That more than offsets the loss that we had this year. That is really good news. We have slowed down the rate of closures, and we actually see new businesses coming in and existing businesses expanding. Those are really good signs the economy is beginning to expand, and new opportunities are being created for existing business.”
While he is positive and optimistic, there are still issues of concern for manufacturers. Energy costs have gone up dramatically, and that can have a big impact on the bottom line.
Unfair foreign trading practices are also a concern, but Moon said positive efforts by President George Bush and Congress to deal with the issue are beginning to have a positive impact.
Overall, it appears that manufacturing employment in the state has stabilized.
“We have more than 180,000 employees directly employed in manufacturing right now,” Moon said. “We had dipped below that number. Now as the economy continues to improve, industries are beginning to hire more people.”
Ocean Springs-based freelance journalist Becky Gillette writers regularly for the Mississippi Business Journal. Contact her via e-mail at firstname.lastname@example.org.