3D printing is quickly becoming a buzz word when it comes to life-changing technologies, but will the invention affect exchange rates?
Christopher Barnatt of ExplainigTheFuture.com gives an overview of the kind of impact 3D printing can have on our lives, stating; ‘In an age in which the news, books, music, video and even our communities are all the subjects of digital dematerialization, the development and application of 3D printing reminds us that human beings have both a physical and a psychological need to keep at least one foot in the real world. 3D printing has a bright future, not least in rapid prototyping (where its impact is already highly significant), but also in the manufacture of many kinds of plastic and metal objects, in medicine, in the arts, and in outer space.’
Exporting Countries Suffer from Homebrew Manufacturing, Euro (EUR) and Chinese Yuan (CNY) Decline
So given that the technology for desktop 3D printing has improved to such an extent that the machines are rapidly dropping in price, the likelihood of domestic manufacturing has increased dramatically. For example, why would a company import paperclips if they could make their own? India is one of the largest paperclip exporters, so this scenario could see the Indian Rupee (INR) decline as a result of dampened demand.
Two of the largest exporting countries are Germany and China. As of 2013, exports accounted for 50.67% of the German Gross Domestic Product and 26.40% of China’s GDP.
China accounts for 29.4% of the total global export of plastic item. In 2012 China exported $19,653,454,000 worth of plastic products. If and when 3D printing becomes commonplace, those plastic item exports will diminish considerably to near 0. If you require plastic cutlery, for example, you print it rather than buy it in. Therefore, demand for the Chinese Yuan (CNY) would drop considerably, and plastic manufacturing factories would become obsolete.
Similarly, Germany accounts for 12.5% of global plastic exports. In 2012, Germany exported $8,375,039,000 worth of plastic items. The prospect of nations printing their own plastic goods would see demand for the Euro (EUR) drop significantly. This is especially true when you consider Italy, France and Belgium are in the top ten for plastic exporting countries.
Importing Countries Gain from 3D Printed Goods, US Dollar (USD) and Chinese Yuan (CNY) Up
As discussed above, those countries which have export-led economies are likely to struggle amid an increase in domestic manufacturing. It is therefore logical to suggest that those countries which import the most goods will benefit from 3D printing.
Two of the largest plastic goods importers, for example, are China and the United States. It would be safe to assume, therefore, that both the Chinese Yuan (CNY) and the US Dollar (USD) would appreciate from fewer imports.
However, that is not necessarily the case with all currencies when you compare the amount gained from exports compared to the amount spent on imports.
A good example of this deviation can be found with British plastic imports versus exports. The UK exported $12,777,471,712 worth of plastic goods in 2010. British plastic imports amounted to $20,401,456,363 in 2010. Exports account for a lot less than imports which creates a negative trade balance. However, should 3D printers become commonplace, both imports and exports of plastic goods would become unnecessary in the main. Therefore the Pound (GBP) would appreciate because the money saved would outweigh the money made.
So, those countries which import more than they export could see a dramatic appreciation in the exchange rate of their domestic currencies. The Chinese Yuan (CNY) and the US Dollar (USD) are two such currencies.
Moving Away from Export Led Economies and Towards Services Based Economies, Pound Sterling (GBP) Up
Although the full extent of how this fresh technology could impact the world we live in is currently unknown, there will be obvious changes in global trade. Therefore, those economies that rely on exports as a massive proportion of their gross domestic product will struggle amid domestic manufacturing.
With this in mind, it is likely that those economies which are led by services should enjoy the benefit of the changes to global trade. The services sector is the dominant force in the makeup of British GDP, accounting for around 77.8%. In a world with as many 3D printers as there are regular printers today, the British economy is likely to dominate and Sterling (GBP) would hold a high exchange rate.
Less Global Trade could result in Less Foreign Exchange
The vast majority of demand for foreign exchange trading is as a result of importing and exporting goods worldwide. With the very real possibility that 3D printing could see demand for foreign manufacturing decrease dramatically, it is also possible that currency trading would decline.
If we revisit paperclips as an example, if a British company could manufacture its own paperclips it would have no need to import from India. Therefore there would be no need to trade currencies. In this scenario the Pound (GBP) would appreciate and the Indian Rupee (INR) would decline, but will that matter? Obviously there will be some commodities and goods which can’t be domestically manufactured, and in those cases foreign currency exchange will still have a place in global economics.
