Jan 15, 2013
To improve the country’s trade imbalance, President Obama has set a target of doubling U.S. exports by 2015, a goal he first laid out in his 2010 State of the Union. But while U.S. companies have become marginally more successful abroad, they continue losing ground at home.
As of 2011, imports accounted for 38 percent of advanced manufactured goods sold in the U.S., up from 37 percent in 2010 and 24 percent back in 1997. That figure comes from Alan Tonelson, a research fellow (and data guru) at the U.S. Business & Industry Council, a manufacturing trade group. Tonelson is skeptical of the popular notion that U.S. manufacturing is reviving significantly—as am I, mostly because U.S. manufacturers are becoming less competitive at home.
November’s expanding trade deficit reveal that the slippage continues. For the third time since August, U.S. manufacturing set a record for monthly trade deficits, rising more than 1 percent and passing $66 billion.
Tonelson’s results come from crunching trade and output data for 106 high-end manufacturing sectors, from semiconductors to mining equipment to turbines, pharmaceuticals, and farm machinery—the “crown jewels,” he says, of America’s high-end manufacturing industry. Which is what makes them so troubling: This isn’t the U.S. becoming less competitive at making t-shirts and tube socks. These are the most advanced parts of U.S. manufacturing, industries that require lots of technology and big capital investments and that drive productivity and wage growth. This is Caterpillar (CAT). This is Deere (DE) and General Electric (GE) and Pfizer (PFE) and Merck (MRK). This is exactly the segment that U.S. manufacturing is supposed to be winning as it charts a more promising course. And this is exactly what happened to less-advanced industries, such as textiles, that are now gone.
Tonelson calculates that by increasing from 37 percent to 38 percent from 2010 to 2011, imports robbed domestic manufacturers of more than $89 billion in output, which is far more than the $57 billion of extra output gained through increased exports. More than a quarter of manufacturing sectors (29 of 106) have by now ceded half their U.S. market to imports, including construction equipment and automotive supplies, household refrigerators and freezers, even heavy trucks. Since so much of this involves capital goods industries, there’s a big knock-on effect to the rest of the economy. All this lost domestic market-share ultimately reduces the potency of fiscal and monetary stimulus by wielding a smaller impact on employment and output. Instead, those effects get passed on to foreign producers, who reap the benefits of higher domestic consumption. You’re welcome, China, Korea, and Japan.
Let’s be clear: This isn’t about a foreign company making a product in the U.S. and selling it there, as with Toyota (TM) building cars in Tennessee; this is foreign companies sending advanced manufactured parts and fully formed goods into the U.S. for sale. Which means it’s all about price and the competitive advantage foreign companies have over domestic producers selling in the U.S. To that point, the industry facing one of the lowest import penetrations is plastics and resins, at 17.3 percent. Hard to say how much of that is due to cheap natural gas, but the contribution it makes to lower costs for plastics producers is certainly as high as for any other advanced manufacturers. Of course, back in 1997, imports accounted for only 11 percent of the plastics industry. So even the winners are losers over the long-term.
There’s no easy fix here and unfortunately, most solutions lie down the road of restrictions on free trade. Tonelson says the only solution is to impose aggressive tariffs on foreign goods. I’m not sure I buy that—or at least, I don’t want to. A better fix, though certainly a tougher one, would be to convince other countries to remove subsidies and be more aggressive about labeling trade cheaters and import-dumpers. U.S. industry leaders contend it’s all about rolling back restrictive regulations and lowering taxes at home.
Or maybe the U.S. just has to get used to the rest of the world climbing the manufacturing food chain and selling more valuable stuff in the world’s biggest consumer market.
Source：businessweek.com