Monthly Improvement but Ongoing Weakness on the Trade Front
Friday, February 08, 2013
|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 new monthly (December) and annual 2012 trade figures make clear that the U.S. economy remains stuck in the dangerous trap of relying on spending, borrowing, deficits, and debt-creation to produce any significant growth – or job creation.
Although the December and annual U.S. trade deficits both fell (the latter for the first time since 2009), the lower figures stem from domestic output levels that remain stubbornly weak despite unprecedented (and unsustainable) government stimulus.
Even during the current historically feeble recovery, the only periods of significant growth have been accompanied by spurts in the trade deficit, and therefore in debt creation.
The new trade figures also further undermine the already dubious claims of a domestic U.S. manufacturing renaissance being made by President Obama and many others, as well as contentions that the nation is steadily gaining industrial competitiveness over China. Today’s data shows that the major reindustrialization so urgently needed by the U.S. economy will require major policy changes, especially on the trade front, not the wishful inshoring thinking emanating from the White House.
The December manufacturing deficit did crater by a jaw-dropping 23.23 percent, from a record $66.03 billion to $50.69 billion. Manufactures imports were down 9.50 percent, and exports
advanced by 1.36 percent. This shrinkage of the December manufacturing deficit was faster than the overall trade deficit decline of 20.72 percent, and the nearly $15 billion improvement was nearly 50 percent greater than the overall deficit’s improvement in dollar terms.
But for all of 2012, the manufacturing trade deficit set three new monthly records (including in November), despite anemic growth by the entire economy. Moreover, the full-year 2012 manufacturing trade deficit set another new record – $684.45 billion – eclipsing the previous (2011) all-time high by nearly seven percent.
Last year, American manufacturing exports rose by 4.95 percent – just slightly faster than the overall export increase of 4.40 percent. But the much greater amount of manufactures imports increased considerably faster. Indeed, their 5.76 percent rise was greater than the overall 3.98 percent increase in overall gross domestic product (measured, as is the case with all the figures in this release, in pre-inflation dollars). And it was more than twice as fast as the increase in combined goods and services imports.
Similar trends keep driving the manufacturing-dominated U.S. merchandise trade
deficit with China. The monthly trade shortfall with the PRC dropped by fully 14.48 percent, from $28.95 billion to $24.45 billion. U.S. goods exports to the still rapidly growing Chinese economy actually declined by two percent in December, to $10.38 billion. But U.S. goods imports from China sank by nearly 12 percent, to $34.84 billion.
Nonetheless, the annual U.S. merchandise deficit with China hit another high-watermark of just over $315 billion, surpassing 2011’s old record total of $295.42 billion by 6.65 percent. That’s only slightly less than the 6.98 percent 2012 rise in the overall manufacturing trade deficit.
The volatile U.S. trade deficit in high tech goods nosedived by 54.45 percent in December, from $11.76 billion to $5.36 billion. Exports in this category increased 5.90 percent, to $27.58 billion, while imports decreased by 12.87 percent, to $32.92 billion.
On an annual basis, U.S. high tech goods producers performed better than manufacturing as a whole. Their trade deficit declined by 8.12 percent, from 2011’s record $99.61 billion to $91.52 billion. But the 2012 total still represented the second largest on record.
From 2011 to 2012, the goods and services trade deficit decreased by 3.49 percent, from $559.88 billion to $540.36 billion. The 4.40 percent increase in total exports – from $2.103 billion to $2.196 billion – was accompanied by a 2.74 percent rise in total imports – from $2.663 billion to $2.736 billion.
Whereas the overall deficit shrank by nearly $20 billion in 2012, the oil deficit fell by nearly $36 billion, from $326.10 billion to $291.32 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).