Exports demand continues to struggle. This has been a longer-term issue than the past few months. Real exports (2000$) fell from $1096.3 billion in 2000 to $1031.8 billion in 2003.
Treas. Sec. Snow blames weak growth in the other G7 nations:
NEW YORK (Reuters) – Treasury Secretary John Snow said Wednesday key trade partners will have to pick up their pace of growth to help correct the massive U.S. trade gap and he intends to carry that message to a meeting of the world’s richest countries next month…Asked about the record U.S. trade deficit in November and the prospects the deficit may widen this year, Snow said that the trade shortfall reflects growing U.S. disposable income, but that the United States cannot continue to be the prime mover of the global economy. “We are growing faster than our trading partners and we are creating more disposable income than they are,” he said. “We need Europe to be more of an engine of growth and we need Japan to be more of an engine of growth.” As Europe and Japan’s economies “grow faster, they will buy more from us,” Snow added.
Is weak economic growth in the G7 nations the cause of weak export demand? Robert Mundell might argued that under floating exchange rates, foreign demand shocks would impact exchange rates so as to insulate the current account and the domestic economy. But even if one wishes to forget Mundell’s writings (or note one certain Asian nations not in the G7 is pegging its exchange rate), let’s look at how much real GDP grew from 2000 to 2003 for the G7 nations starting with ours:
(All calculations based on International Financial Statistics).
Four of the six fellow G7 members had slow growth over the 2000 to 2003 period, but two had faster growth than we did. Not that I’m saying U.S. growth was all that fast, but doesn’t Sec. Snow say the U.S. economy has roared?