The state of U.S. international competitiveness: a study of the impact of trade performance indicators.(Report)

EXECUTIVE SUMMARY

This study examines the conclusions regarding the state of international competitiveness for the United States based on Its trade performance internationally. We examine the relationship between trade performance and international competitiveness, and the inadequacies of using trade performance measurements criteria alone. We offer a definition and formula for determining a country's trade performance index. We then test the model empirically using historical time series trade data for the United States. Our findings indicate that trade performance alone may not be an adequate indicator of the state of US. international competitiveness. Its impact on competitiveness may be largely influenced by factors beyond competing firms' ability to control

Keywords: international trade, competitiveness

JEL Index: F14

INTRODUCTION

In an integrated world economy, the achievement and maintenance of a competitive position is vital for the growth and sustainability of the U.S. economy. In fact, the ability of any country to be internationally competitive is now considered an important indicator of its economic health. The concept of competitiveness has gained importance in recent decades from perspectives of growth and development, and has become one of the central preoccupations of government and industry in every nation (Porter, 1990). It is a particularly fundamental subject for the United States considering the role it plays on the world economy. A combination of several factors makes the U.S. an attractive marketplace for the rest of the world. As a result, U.S. businesses are under immense pressure to outperform rival lower cost firms both at home and abroad.

Attention to international competitiveness would tend to follow from the huge trade deficits realized by the U.S. economy in recent decades. Over the last two decades, the U.S. has rapidly changed from the world's largest creditor to the world's largest debtor nation. As a result, much public attention has been generated concerning the U.S. relative performance on the global economy. Many programs and much rhetoric have accompanied the concerns about U.S. global competitiveness; yet it is seldom clearly defined, and has not been addressed by policy makers in a meaningful way (Lenz, 1991).