This article by Mark Szakonyi originally published on JOC.com.
A weakening of the US dollar to other currencies is raising US exporter hopes for increased volumes in the low single-digits this year. That’s hardly spectacular growth, but it will be a welcoming change from the last five years in which exports had a compound annual loss rate of 0.15 percent.
Although just hoping for a weaker US dollar to boost exports isn’t enough. It’s going to take government support and new business practices, and even then, it’s going to be tough haul. The challenges are numerous, ranging from the frequent disconnect of where imports are heading and where exports originate, to trade barriers that have only become more frequent and erratic. It’s unlikely US exporters will get much of a boost from Uncle Sam in terms of better freight infrastructure that will reduce shippers’ transport cost and lessen disruption threats.
The federal government is maintaining existing funding levels, and many states have increased their own investment to shore up the gap created by need to not only maintain existing roads, highways, and waterways, but expand for freight growth. At its core, Congress balks at raising fuel taxes to pay for infrastructure projects and, along with the Trump administration, pins its hopes of more funding via corporate tax reform.
Aside from improving infrastructure, the United States needs to review and potentially negotiate trade agreements, as many of them are focused on manufactured goods rather than raw materials, agriculture goods, and heavy capital equipment, said Walter Kemmsies, an economist and managing director at Jones Lang LaSalle.
Restraint in unleashing new tariffs or anti-dumping duties on US imports will help the tenor of relations and lessen the chances of retaliation on US exports, said Paul Bingham, an economist and vice president at Economic Development Research.
There’s also room for more government support for US exporters that goes beyond the effort of the Commerce Department and the Small Business Administration in leading trade missions and providing foreign market analysis.
“US corporate tax policies that result in higher tax rates for overseas sales by US exporters compared with their competitor businesses based in other countries selling to those same customers, act as an obstacle to exports,” Bingham said. “That is one of the reasons for the trend in tax inversion takeovers of US firms by foreign companies.”
While US exporters await a long-discussed but politically difficult corporate tax reform legislation, the government and private sector need to address shortcomings in attracting and educating more skilled production workers, Bingham said. The need is even greater as automation in manufacturing requires workers more akin to an engineer than assembly line worker.
Bingham recommends exporters that are assembling or manufacturing to see whether free trade zones would reduce US duties owed and keep track of new developing markets for their wares.
The government can do little, however, to overcome the main challenge for many US exporters, particularly those of lower-value products and commodities: the high repositioning cost of containers from urban centers, where inbound containers flow, to rural areas where the exports await. Matchbacking can help ensure containers moving inbound are available for outbound loads, but more cost-control-focused carriers are reluctant to eat the cost of repositioning containers too far from importer flows.
“Two other strategies include ‘gray’ containers, meaning containers that are provided by third parties other than ocean carriers,” Kemmsies said. “The other possibility is to develop more easily stackable containers by making them collapsible. This would reduce the cost of repositioning empty containers to where they are needed.”
There’s also some evidence that grounded inland intermodal rail terminals also reduce repositioning costs. Although the cost for US-based railroads, which unlike the Canadian counterparts in the United States mainly operate wheeled facilities or hybrid facilities, would be massive. Railroads also don’t want to lose productivity by shifting to grounded operations because they take up more real estate and require two crane moves instead of the single move required at wheeled operations.
“Beyond matchbacking is the long-established but uncommon practice of triangular trade, where a third trade is added to equipment movements to further increase utilization and lower overall costs,” Bingham said. “Sometimes opportunities for that can be discovered within existing supply chain relationships, or opportunities can be uncovered with more detailed analysis of market flow data, finding commodities that are compatible yet perhaps in different industries to generate the efficiencies similar to those found with matchbacking.”