The August report of US Trade in International Goods and Services released August 13 showed a disturbing trend in the spring of this year. While the trade deficit had managed to remain fairly constant over the last two years, in June of this year, rather than continue in parallel, the export and import figures diverged to the tune of almost $9 billion.
The reason I even noticed this report was that one of my students had identified listening to customers as a way to create high quality goods and services that customers would choose to purchase from US firms, even if the price were a little higher.
Listening is definitely something that makes a great deal of difference, especially when accompanied by some logical thinking on some of the ways that our economic system is evolving as a whole, as well as how we are faring as consumers.
As consumers, listening to the reasons why it makes sense to spend money on American goods and services is also important. I would suggest that we have lost quite a few American jobs based on consumers' obsession with lower prices. We have also seen changes in the quality of some of the products that we pay the same prices for.
For example, my husband wears a well-known brand of cotton t-shirts. I bought several packs and a few single shirts when they were on sale at K-Mart. After they were washed, he asked me if they were different because some of them felt "scratchy." Some of them were ok, though. I looked at the tags on each. The "scratchy" shirts were made overseas with cotton grown overseas. The "ok" shirts were assembled overseas with US grown cotton. The price of the shirts did not go down dramatically when the assembly jobs left the US, but hundreds of people lost jobs to people in third world countries who are paid pennies to the dollars US workers earn and might not earn the price of a t-shirt in one day.
This is just one example. Landmark buildings are built with foreign steel. We depend on foreign oil instead of using alternate energy sources or our own reserves. Call centers are increasingly found offshore for US services. We ship our cotton to Aisa to be sewn into t-shirts, then shipped back for Americans to buy with their unemployment checks.
Americans who once had jobs from which they earned enough to buy the products and services that they and other Americans made longer have the means to buy as much. When jobs are lost, the profits from these Americans' purchases are drained from the economy along with the jobs, which has a ripple effect.
In order to maintain a healthy balance of trade, at minimum, those to whom the jobs went in other countries must be paid enough to afford to purchase at least some American goods and services. At best, new types of service work (the area of the equation where we still sell more than we buy) emerge to re-employ those displaced. Unfortunately, this is not usually the case.
The impact of these changes is dramatically illustrated in the Balance of Trade numbers. According to the US Census Bureau Web site, this spring, the trade deficit was increasing by about $9 billion per month, and even services, the area in which we maintain the lead, decreased. Even scarier, when delving into the detail, halfway through the year we find a trade deficit with Iraq of nearly $3.5 billion which seems quite odd given our investment there, and a trade deficit of nearly $68.5 billion with China.
Some deep thoughts to ponder: To what extent can US companies appeal to patriotism as a reason to buy products made in America versus those made elsewhere? Is this ethical? Would consumers pay a little more if it meant that, in the long run, the economy would be healthier? Is it ethical or realistic to ask executives and shareholders to forgo some margin in favor of economic health? Would that even be enough?
What are some other ways that marketers can expand the economy through their efforts? What does this mean for US marketers that want to tap into foreign markets?
And, finally, how does the Balance of Trade math work when calculating the money one nation spends to rebuild another? What will happen when we actually start spending that $18 billion earmarked for rebuilding Iraq?