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Current Trade Deficit:    
Happy Talk Still Dominates White House Line on Manufacturing
Alan Tonelson
Monday, February 11, 2013
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Talk about bad timing.  The day before his Commerce Department released the full-year 2012 U.S. trade figures, President Obama told a major powow of House Democrats that domestic manufacturing “is doing well.”

Not that facts and figures are likely to move the President off his recent narrative that American industry is staging an historic competitive comeback.  But the new trade statistics might at least have stirred some doubts in the White House and among the growing ranks of manufacturing cheerleaders in the political, policy, and media worlds.

After all, as the new figures showed, the U.S. manufacturing trade deficit hit yet another new record last year, with the $684.45 billion total eclipsing the previous record – in 2011 – by nearly seven percent.  This rate of growth, incidentally, is about 75 percent faster than that of the economy as a whole (in pre-inflation dollars).

The internals were lousy as well.  Industries that saw worsening trade balances included semiconductors; semiconductor manufacturing equipment; all major machine tool-related sectors, electro-medical equipment; construction equipment; search, detection, guidance, and navigation equipment; steel; autos and light trucks; heavy duty trucks and chassis; motor vehicle engines and their parts; plastics materials and resins; and relays and industrial controls.

These balances matter because unfettered international trade is supposed to be the way the global economy decides which countries are the most efficient producers of which goods and services, and therefore which countries will be their dominant producers going forward.  And for the above industries and so many others, the answers provided by these trade flows remain, “Not the United States.”

Granted this trade is distorted in almost countless ways by most of America’s competitors, through policies like currency manipulation and other forms of predatory subsidization, tariff and nontariff trade barriers, intellectual property theft, and anti-competitive practices.  

But that’s all the more reason for the President to focus on offsetting or eliminating these impediments to more U.S. industrial growth and hiring, especially given his claims that changing relative global costs are giving U.S.-based industry a major competitive boost.  The manufacturing trade numbers also warn against further expanding American trade ties with chronically protectionist countries and regions like the East Asian states to be included in Mr. Obama’s proposed Trans-Pacific Partnership.

Yet judging from the President’s remarks to House Democrats, nothing like this can be expected in his State of the Union or in the rest of his second term.  Instead, expect more insistence that since domestic manufacturing is anything but broke, there’s no need to fix it – relentlessly whistled in the dark.


(Sources: “Remarks by the President at House Democratic Issues Conference,” February 7, 2013, Office of the Press Secretary, The White House, Speeches and Remarks, Briefing Room, http://www.whitehouse.gov/the-press-office/2013/02/07/remarks-president-house-democratic-issues-conference; calculated from Trade Dataweb, U.S. International Trade Commission, http://dataweb.usitc.gov)

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).