Trade Deficit Details Reveal Continuing Competitiveness and Policy Failures
Tuesday, September 11, 2012
|Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).|
The slight 0.25 percent increase in the overall U.S. trade deficit in July concealed big deficit increases in categories critical to restoring American prosperity and preserving global economic leadership – manufacturing and high tech products. Although U.S. imports in these categories remained little changed over June levels, exports
suffered major declines.
Bilateral American goods deficits with China, the Eurozone, and Korea – where a trade deal with the United States went into effect in March – worsened considerably as well for broadly similar reasons. U.S. merchandise imports from these major trade partners all rose (substantially in the case of Korea), while U.S. sales to these countries either flatlined (in the case of China) or fell significantly.
This worsening trade performance in manufacturing and high-tech, as well as with leading trade rivals, also belied once again the flood of happy talk about an American manufacturing renaissance and improved U.S. global competitiveness. Real improvements will require wholly new approaches to trade and manufacturing policy.
The U.S. trade deficit in manufactures soared by 17.35 percent in July, to $63.93 billion. Manufactures imports were virtually unchanged over June totals, but exports nosedived by 9.43 percent. The high tech goods deficit also jumped by double-digits – 13.44 percent – in July, to $8.14 billion. U.S. high tech imports declined by 2.20 percent, but exports sank nearly three times faster, by 6.40 percent.
America’s $385.23 billion manufacturing deficit this year so far is running 8.86 percent ahead of last year’s comparable figure. The high tech deficit of $50.46 billion is 4.53 percent lower than last year’s January-July figure, but still in an historically elevated zone.
July saw a 7.23 percent monthly increase in the manufacturing-dominated U.S. merchandise trade
deficit with China, from $27.40 billion to $29.38 billion. U.S. goods imports from the PRC increased by 5.60 percent (from $35.92 to $37.93 billion), but exports increased a barely detectable 0.35 percent (from $8.52 billion to $8.55 billion).
So far this year, the goods deficit with China – America’s largest bilateral deficit by far – is topping the 2011 totals by 8.73 percent, despite widespread claims of soaring Chinese wages and other production costs, of progress in reducing China’s currency manipulation, and of many U.S. companies reshoring production from China.
The U.S. merchandise deficit with the crisis-ridden Eurozone rose much faster – by 45.48 percent. U.S. goods imports from the region rose by 2.68 percent, from $24.46 billion to $25.11 billion. But U.S. goods exports plummeted by 14.49 percent, from $17.45 billion to $14.92 billion. So far, the U.S. goods shortfall with the Eurozone is up 9.14 percent on a year-on-year basis – not substantially more than America’s China goods deficit despite China’s continued, though slowing, growth.
America’s merchandise deficit with new free trade
partner South Korea skyrocketed by 68.32 percent in July, from $1.13 billion to $1.90 billion. Washington claims that the new agreement will open Korea’s historically closed markets to U.S. exports and guard against surges of Korean imports. But in July, U.S. goods sales to Korea decreased from $3.64 billion to $3.52 billion (3.30 percent), while Americans goods purchases from Korea rose by 13.63 percent, from $4.77 to $5.42 billion.
As a result, for the four months of data available since the implementation of the Korea-U.S. Free Trade Agreement, the U.S. bilateral goods trade deficit is up 245.45 percent (from $0.55 billion to $1.90 billion), U.S. goods exports to Korea are down 16.79 percent (from $4.23 billion to $3.52 billion), and U.S. goods imports from Korea are up 13.39 percent (from $4.78 billion to $5.42 billion).
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).