U.S. Exporters Feel Favorable Trade Winds

Companies Lifted by Rising Tide of Foreign Sales, Particularly in China

A dock in Hong Kong. Including Hong Kong, China is the No. 3 U.S. export market. (By Paul Hilton -- Bloomberg News)

EDEN PRAIRIE, Minn. -- Inside the factory, engineers tinkered with machines that test how well tires hug slick roads while others trained customers on running additional gear.

Only a few years ago, MTS Systems sold its testing equipment mainly to American automakers. No longer. The tire-testing machine was bound for South Korea. A road simulator was headed to a Formula One auto-racing team in Europe. The customers were visiting from Shanghai.

"We have been growing by exporting things to China," said Chip Emery, chief executive of MTS, headquartered here in the suburbs of Minneapolis. "It would be wonderful if all I had to do to survive was sell to Americans, but the earth is round. We survive as a worldwide business."

On Capitol Hill, some lawmakers portray Chinese imports as a threat to national prosperity, and Democratic leaders argue that free-trade pacts have sold out American workers; a hearing is scheduled in the House for today. Last year's election reflected anxiety about the strength of American companies in a global economy. But the nation's shop floors present an alternate view: The United States is in the midst of an export boom, with foreign sales chipping away at the country's enormous trade deficit while providing a modest cushion against the declining housing market.

In the first 11 months of 2006, U.S. exports reached $1.31 trillion, a jump of 13.1 percent over the corresponding period in 2005, the Commerce Department said. That was an improvement over the 10.7 percent gain of the year before.

Exports to China -- whose dominance on American store shelves stokes worry -- increased by 33 percent in the first 11 months of 2006. Combined with Hong Kong, China now stands as the United States' third-largest export market, behind only Canada and Mexico.

President Bush is scheduled to travel today to Peoria, Ill., to visit Caterpillar, the giant maker of construction equipment, as he presses Congress to approve new trade agreements. Caterpillar is one of the companies having notable success selling American-made gear abroad.

To be sure, the export surge is nowhere close to balancing the nation's trade. For the first 11 months of 2006, Americans imported $2 trillion worth of goods and services, or about 50 percent more than they exported, resulting in a trade deficit of about $700 billion. Once statistics for all of 2006 are released next month, they're expected to show that the nation shattered the all-time-record trade deficit of $717 billion, set in 2005. The high price of American oil imports accounts for part of the imbalance.

Still, recent monthly figures show exports growing nearly three times as fast as imports. Economists say exports are being propelled by a falling dollar, which has lost nearly 10 percent of its value compared with other currencies since 2002, making U.S. goods cheaper on world markets. Sales have also been fueled by renewed growth in once-stagnant economies in Japan, Europe and parts of Latin America, increasing demand for U.S. products such as engines, heavy equipment and telecommunications gear.

For the Bush administration, fending off Democratic accusations that it has harmed American workers by allowing jobs to shift overseas, the strong export data have become a prime talking point in its campaign to persuade Congress to approve trade pacts with Peru and Colombia. Commerce Secretary Carlos M. Gutierrez noted that the countries with which the United States has struck trade agreements make up only seven percent of the global economy outside the United States, yet they absorb 42 percent of American exports.

"We are opening up more markets," Gutierrez said. "Our businesses are taking advantage."

John Frisbie, president of the U.S.-China Business Council, said the success of American firms in selling to China is the result of that country's entry to the World Trade Organization six years ago. "It totally changed U.S. companies' ability to reach that market," he said.