{"id":39458,"date":"2025-05-12T11:45:00","date_gmt":"2025-05-12T11:45:00","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=39458"},"modified":"2025-05-13T06:03:42","modified_gmt":"2025-05-13T06:03:42","slug":"if-you-really-want-to-close-the-us-trade-deficit-try-boosting-innovation-in-rural-manufacturing","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/if-you-really-want-to-close-the-us-trade-deficit-try-boosting-innovation-in-rural-manufacturing\/","title":{"rendered":"If you really want to close the US trade deficit, try boosting innovation in rural manufacturing"},"content":{"rendered":"\n

Amitrajeet A. Batabyal<\/a>, Rochester Institute of Technology<\/a><\/em><\/p>\n\n\n\n

President Donald Trump has long been preoccupied by the trade deficit<\/a> \u2014 the gap between what the U.S. sells to the rest of the world and what it buys from it. He recently declared the issue a national emergency<\/a> and used trade deficit data<\/a> to calculate so-called \u201creciprocal tariffs\u201d targeting nearly 100 countries. Although those specific tariffs are now on pause<\/a>, Trump\u2019s concern with the trade deficit persists.<\/p>\n\n\n\n

As an economist<\/a>, I know there are two basic ways for a country to reduce a trade deficit: import less or export more. While Trump has focused on the former strategy<\/a>, a more productive path may lie in the latter \u2013 especially by looking at untapped opportunities in rural America.<\/p>\n\n\n\n

Economists have long studied the differences between rural and urban<\/a> regions. But while research shows<\/a> that urban areas tend to be more technologically advanced, fast-growing and economically dynamic, economists have historically paid less attention to how regional differences affect export performance<\/a>.<\/p>\n\n\n\n

New research<\/a> is starting to fill that gap. Economists recently found that urban businesses export significantly more than rural ones \u2013 a difference with significant implications for national trade.<\/p>\n\n\n\n

The urban-rural export gap<\/h2>\n\n\n\n

Looking at data from the Census Bureau\u2019s Annual Business Survey<\/a> as well as trade statistics<\/a> from 2017 to 2020, researchers used econometric techniques to measure the urban-rural export gap. They also examined two categories of potential causes \u2013 \u201cexplained\u201d and \u201cunexplained.\u201d<\/p>\n\n\n\n

The first is due to differences in what economists call \u201cendowments<\/a>\u201d \u2013 for example, a region\u2019s digital infrastructure, its access to renewable energy and its opportunities for high-tech employment. These endowments can be observed and therefore explained.<\/p>\n\n\n\n

The second is due to what economists call \u201cstructural advantage<\/a>.\u201d This refers to attributes of a region that matter for export performance but can\u2019t be observed and, as a result, remain unexplained.<\/p>\n\n\n\n

They found that most of the urban-rural export gap is due to explained differences. That means rural businesses could close the export gap if they were provided with similar endowments \u2013 meaning comparable access to renewable energy, similar digital infrastructure and analogous opportunities for high-tech employment \u2013 to their urban counterparts.<\/p>\n\n\n\n

Even more strikingly, the unexplained component was negative \u2013 which means rural businesses outperform expectations given their characteristics. That suggests rural regions have significant untapped export potential.<\/p>\n\n\n\n

Several factors collectively account for the urban export advantage. First, urban regions have a greater concentration<\/a> of highly educated science and technology workers. Urban businesses also tend to be larger and more tech-savvy, and because they have better access to broadband<\/a>, they use cloud technology more frequently<\/a>. Urban areas also have more foreign-born business owners<\/a> who may leverage their international networks.<\/p>\n\n\n\n

However, many of these differences suggest possible policy solutions. For instance, since cloud adoption depends on broadband availability, it follows that investing in digital infrastructure could boost rural exports. Also, rural manufacturers, especially in sectors like metals manufacturing<\/a>, show comparable or higher export intensity per worker than their urban counterparts. So encouraging rural manufacturing would be one way to reduce the urban-rural export gap.<\/p>\n\n\n\n

Rethinking trade and rural development<\/h2>\n\n\n\n

I think this research has important policy implications.<\/p>\n\n\n\n

First, it shifts some of the focus away from other countries as the root cause of the trade deficit. And second, it bolsters the case for what economists call \u201cplace-based policies<\/a>\u201d targeting specific geographic areas \u2013 as opposed to \u201cpeople-based policies<\/a>,\u201d which provide support directly to individuals.<\/p>\n\n\n\n

Even though many economists dislike place-based policies<\/a>, they are increasingly attracting both academic<\/a> and governmental attention<\/a>. https:\/\/www.youtube.com\/embed\/cuEKU2xN3d0?wmode=transparent&start=0 The 2022 CHIPS and Science Act had special significance to rural areas.<\/p>\n\n\n\n

During the Biden administration, three major laws \u2013 the Inflation Reduction Act<\/a>, the CHIPS and Science Act<\/a> and the Infrastructure Investment and Jobs Act<\/a> \u2013 directed significant federal funds to rural areas. About 43% of funds from those laws \u2013 or US$440 billion \u2013 was designated<\/a> as either \u201crural relevant\u201d or as \u201crural stipulated,\u201d meaning the funds were either geographically targeted or designed to address disproportionately rural challenges.<\/p>\n\n\n\n

Such massive investments in rural regions have led researchers and policymakers<\/a> to question whether rural export underperformance stems from differences in observable endowments \u2013 in other words, things like access to broadband \u2013 or from inherent disadvantages that are much harder to deal with.<\/p>\n\n\n\n

In my view, this research provides compelling evidence that much of the urban-rural export gap is due to unequal distribution of productive assets, rather than inherent rural disadvantages. With appropriate investments in digital infrastructure<\/a>, human capital<\/a> and support for export-capable industries, America\u2019s rural regions could play a much larger role in global trade. These findings also suggest the value of continued federal support for rural development efforts.<\/p>\n\n\n\n

In other words, if the U.S. wants to shrink its trade deficit, one answer could be more innovation in rural manufacturing.<\/p>\n\n\n\n

Amitrajeet A. Batabyal<\/a>, Distinguished Professor, Arthur J. Gosnell Professor of Economics, & Interim Head, Department of Sustainability, Rochester Institute of Technology<\/a><\/em><\/p>\n\n\n\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Amitrajeet A. Batabyal, Rochester Institute of Technology President Donald Trump has long been preoccupied by the trade deficit \u2014 the gap between what the U.S. sells to the rest of the world and what it buys from it. He recently declared the issue a national emergency and used trade deficit data to calculate so-called \u201creciprocal […]<\/p>\n","protected":false},"author":56,"featured_media":39459,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5,277,1862,46,25,296,4],"tags":[450,172,1011,885,891,886,860,3176,1882,10674,16385,2775,1558,16388,16387,16386,16389],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/39458"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/56"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=39458"}],"version-history":[{"count":1,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/39458\/revisions"}],"predecessor-version":[{"id":39460,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/39458\/revisions\/39460"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/39459"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=39458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=39458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=39458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}