Milton Ezrati of Lord AbbettThis country's balance of international trade just keeps on improving. Long in deep deficit, which is frequently considered a sign of fundamental economic problems, the United States' tendency to import more than it exports persists. But the trade deficit has nonetheless narrowed considerably of late. Part of the improvement reflects the currency, for the dollar, though up recently against the euro, has fallen long term against almost all other currencies, relieving American producers of a long-standing pricing disadvantage. Part of the improvement, and the factor that has dominated most recently, stems from the new fracking technology for natural gas and oil extraction and its impact on petroleum imports. This favorable influence promises to become still more dominant in coming years.

Overall, the global economic slowdown and the disappointing pace of expansion in this country have slowed the growth of both exports and imports. Until recently, both seemed to boom with the economic recovery, anemic as it otherwise was. Between mid-2010 and mid-2011, the country sucked in almost 13% more imports of both goods and services, while the rest of the world bought about 14% more from the United States. But in the 12 months from mid-2011 through June, the most recent month for which complete data are available, exports have expanded barely over 7%, while imports have grown just 2.2%. The imbalance of imports over exports has shrunk from a monthly deficit of $50.3 billion in June of 2011 to $42.9 billion this June, an improvement of almost 15%.

Though the dollar has gained in value against the euro recently, the more relevant influence on trade has been its longer-term decline against the euro and most other major currencies. Even with its recent losses, the euro's overall gain against the dollar over the last 10 years verges on 30%. Japan's yen has risen almost 40% and China's yuan almost 25%. By making the dollar cheaper globally, these currency moves have made American products much more affordable to foreign buyers. By making other currencies more expensive, these same currency moves have made foreign products dearer to those with dollar incomes, that is, Americans. The net impact has brought more foreign buying to American-based producers and persuaded more Americans to buy at home. To be sure, the euro's 5.7% decline since last spring has undone some of this effect, but even now, according to the International Monetary Fund, the euro is not especially cheap, at least relative to European production costs, while Japan's yen, still near all-time highs, remains remarkably pricy.

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