Record-setting export levels have been the monthly norm for the past two years due in large part to a weaker dollar. Heavily discounted goods are helping U.S. manufacturers get past high tariff barriers, consumer resistance, and local competition to build volume in foreign sales. All this activity has also let the U.S. make some inroads on its trade deficit in July.

Still, many ask what happens when the dollar starts to recover. Recently the Euro sank a little as analysts in Europe noted that its central bank is getting nervous about growth. So, will there be an export boom when the dollar regains some of its luster? Yes. And here are four reasons why as cited by the FMA economic update newsletter, Fabrinomics:

Energy Costs

Years ago, decisions as to where to source manufacturing were simpler because there were all kinds of advantages to having things made in low-cost labor countries such as China, Thailand, and Indonesia, where U.S.- based manufacturers established lucrative business relationships. However, rising transportation costs are changing the landscape with manufacturers placing a greater emphasis on being closer to their supply chains. This means that the U.S. will see more business across its borders as Latin American nations become more complete customers for U.S. companies.

Increased sophistication of U.S. manufacturers overseas

Companies that started with tradeshow and Internet orders are taking manufacture expertise to the next level. Sales organizations are in place, contacts have been made, and overseas consumers now have experience and familiarity with U.S. products. The weak dollar allowed a foothold, and companies have leveraged that. The demand for U.S. goods by international buyers is focused on high-value manufacturing. This creates ongoing demand for U.S.-made higher value equipment as international customers are more likely to remain loyal due to the high costs associated with switching to a different system and machine.

Changes among foreign manufacturers

Manufacturing bases in countries with rapid economic expansion are dealing with challenges stemming from developments such as higher inflation, shortage of qualified workers and managers, and societal demands that may affect their competitiveness. In the coastal cities of China, for example, wage rates have risen by close to 60% in the last four years while China suffers from inflation rates of 7% and above. Indian companies are paying double the standard local pay scale to lure talent from other countries. Such changes have been wrenching — causing riots in China and even leading a mob in India to kill a plant manager over a wage dispute. The advantages these countries once enjoyed in terms of low production costs continue eroding as they draw closer U.S. and European costs.

More money in overseas markets

Global consumers have the incomes to buy U.S.-made products. Old markets were confined mostly to Europe, but demand now comes from Latin America, South Asia, East Asia, and even parts of Africa. The ability of consumers in most of the world to afford U.S.-made products has expanded and created new opportunities for U.S. manufacturers.

The bottom line: The U.S. export sector has turned a major corner due to the reduction of the dollar's value. Without that reduction the factors mentioned would not be nearly as significant. There is little chance the dollar will return to the level of strength it enjoyed five to six years ago. This means its position will remain a major motivator for U.S. exports for some time.

Mix in other factors promoting U.S. export growth, and the prospect for expansion into overseas markets remains solid for manufacturers.

MORE ABOUT THE FMA

Fabricators & Manufacturers Association (FMA) International, Rockford, Ill., has more than 2,300 members working to improve the metal forming and fabricating industry. Founded in 1970, FMA brings metal fabricators and fabricating-equipment manufacturers together through technology councils, educational programs, networking events, and the Fabtech International & AWS Welding Show. FMA also has a technology affiliate, the Tube & Pipe Association, International, which focuses on the needs of companies engaged in tube and pipe producing and fabricating.