The Key to Recovering America's Export Edge: Patience

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Writing in the Wall Street Journal, Ed Gerwin, Senior Fellow for Trade and Global Economic Policy at Third Way, has five recommendations for making the United States just like exporting powerhouse Germany.

I'm hesitant to draw too many comparisons between the two countries. German consumers are as thrifty as Americans are ravenous. That means that German producers have to look overseas for big markets whereas American producers live in the world's biggest market, which makes exporting less natural or appealing for firms making new products and services. Over time, America will have to make more and consume less, but that's a long-term trend that won't materialize over-night with the "right" policy.

Still, this is the right kind of thinking:

Double Down on Strengths -- As a manufacturing powerhouse, Germany makes the capital equipment that emerging markets want to buy. Germany pays special attention to a particular source of its export prowess -- Germany's extensive network of nimble, family-owned firms that produce niche products (like car sunroofs) that often dominate global markets.

Although Germany exports more goods, America remains the world's largest manufacturer. Large manufacturers account for the bulk of U.S. exports, while also providing strong export platforms for thousands of smaller firms. But America has unparalleled strength in services. We are the world's leading services exporter, and our financial, entertainment, logistics and other services exporters generate a $130 billion services trade surplus. Our world-class firms can go toe-to-toe with anyone, but need to be supported by smart tax, innovation and regulatory policies, intellectual property protection and aggressive efforts to knock down barriers to their exports.

America is rich. High wages make our products expensive, which pushes down exports. High spending attracts lots of foreign goods, which pushes up imports. Low exports + high imports = trade deficit. It's easy, but not inevitable, to be trapped in that equation. If we can't make products that are cheap, we have to make products that are unique, or of a uniquely high quality. That might mean high-quality services or uber-specific pieces of equipment. But whatever the solution, it will likely require a slow-motion shifting of exchange rates and national priorities rather than a single law or tax policy.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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