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Declining value of the US dollar as calculated by the US Federal Reserve Bank in their Index of Major Currencies, 5-Feb-08, 15-year trend
I recently asked a panel of experts in the food and beverage industries to rank a set of five topics by level of importance in their 2008 strategic plans. Among 6 respondents these were their rankings in order of importance:
1. Supply chain developmentResults indicate continuing emphasis on the competitive necessity of reducing input costs by buying abroad (items 1 and 3), but also strong emphasis on innovation.
2. Product innovation
4. International trade channel development
5. Safety and compliance
This analyst sees opportunity in international trade channel development (4) for U.S.-based multi-nationals in light of weakness in the U.S. dollar and the trade imbalances that are sustaining that weakness. U.S. businesses have gained price competitiveness, as the value of the US dollar has fallen more than 10% in the past year against major currencies and 33% since 9/11/01 (see chart above).
U.S. sales channels overseas have not developed nearly as fully as have our supply channels, despite the fact that U.S. made products are generally valued for their quality and safety. In part this results from draconian government policies in China, now our largest trading partner, which prevent Chinese consumers from fully participating in the value they create. This imbalance has become so extreme and prolonged that some analysts are predicting that it will cause substantial unrest within the next couple of years.
Nonetheless, in China, India, Brazil and other rapidly developing countries the fast-growing middle classes represent important potential markets for U.S. goods. Manufacturers are advised to invest in opening trade channels to these consumers and take advantage of excess ocean container capacity flowing into these markets.
See "Midwest Manufacturers Fight to Stay Competitive in Global Marketplace", On Line NewsHour, 29-Nov-07
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Wednesday, February 6, 2008
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Posted by James P. Farrell at 5:00 PM