As the dollar reaches near-record lows against the yen and other major currencies, many Bush administration officials and private economists are practically cheering the slide, saying that it will spark a U.S. export boom.
Yet the drop in the dollar so far isn't translating into immediate new business for many exporters, especially small and midsized companies. Many of those firms say they expect to benefit over the long term, but they don't anticipate the easy business that some economists seem to see.
"We'll see it [the benefit] more in 1991 -- if the trend keeps up," says Mark Ryvola, manager of international business for Emulex Corp., a communications-equipment manufacturer in California.
In theory, the U.S. exporter's advantage from the dollar's sinking value should work like this: At the start of the year, it took 1.69 German marks to buy one dollar. Now, it takes only 1.50 marks, as currency traders' faith in the U.S. economy -- and in its investments -- has plummeted.
Say a U.S. firm was selling a product in Germany for a price of
1.69 marks early this year. Each sale thus brought the exporter $1 when the firm exchanged currencies. Today, if the exporter sells the product for 1.69 marks in Germany, it reaps $1.13 when it exchanges currencies, because each mark buys more dollars.
Rather than take the windfall, the firm could cut its product price in Germany to 1.50 marks, and still bring home the same $1 it received early in the year. The advantage in cutting the price, of course, is that it should gain market share over competitors.
But the pricing equation rarely is that simple, experts say. Stanley Epstein, who heads American Export Trading Co. in Los Angeles, says that the immediate benefit of a falling dollar goes to the "items that the U.S. has been strongest in -- the items not available from other countries." For example, aerospace companies may gain because a dollar-driven cut in prices could attract buyers who have long wanted certain products but couldn't afford them.
The majority of U.S. manufacturers face a much tougher time exporting, even with the lower dollar, Mr. Epstein says. He says many U.S. businesses still don't understand the highly competitive nature of world markets. Prices that U.S. companies think are fair won't fly in many markets, he says.