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Import Price Data Threaten Obama Manufacturing Plans
Alan Tonelson
Wednesday, February 13, 2013
Photo of Alan Tonelson
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 January import price figures released this morning by the Labor Department belie widespread claims that surging production prices are seriously eroding China’s manufacturing competitiveness.  

Therefore, they undercut a major premise of the plans to revive U.S. domestic manufacturing voiced again by President Obama in last night’s State of the Union.  And they signal that the major reindustrialization urgently needed for a healthier U.S. economy will require more dramatic steps, especially in trade policy, than President Obama has been willing to take so far.

Indeed, without forceful measures to combat currency manipulation and other predatory practices by China and numerous other trade competitors, Mr. Obama could become known as a deindustrialization President, not a reindustrialization President.  

Like many politicians, pundits, and specialists, the President has repeatedly contended that domestic industry is embarking on a historic competitive comeback, partly due to falling domestic prices for labor, energy, and other inputs, and partly due to rising prices in competitor countries – especially China.  

These changes, the President and others insist, are dramatically changing the economics of factory location, increasing America’s attractiveness, and especially reducing China’s.
If true, China’s strengthening currency and reportedly soaring wages should be increasing the prices of Chinese-made goods – overwhelmingly manufactures – entering the U.S. market.

But recent import price figures have contrasted strikingly with these claims, and this morning’s data were no exception.

The Labor Department reported that the prices of Chinese imports fell 0.1 percent from December to January.  Yet the import prices for manufactures as a whole – the cloest global proxy for Chinese import prices – actually rose 0.3 percent in January.

The longer-term trends are similar.  On a January-to-January basis, Chinese import prices fell by just over 1 percent, according to the Labor Department.  Prices for all manufactures imports dropped by only 0.3 percent during this period.

From December, 2011 to December 2012, Chinese import prices decreased 0.7 percent.  During this period, too, prices for all manufactures imports fell considerably less – by only 0.4 percent.

Chinese import prices have fallen on net since last March.  But import prices for all manufactures have risen on net since last June.

Of course, U.S. trade figures released last week also challenged the President’s apparent belief that domestic manufacturing is reviving and Chinese manufacturing is weakening.  They showed that the manufacturing-dominated U.S. goods deficit with China hit a new annual record in 2012 of just over $315 billion – up 6.65 percent from the previous record set in 2011.  The new trade data also revealed that America’s own manufacturing deficit hit its second straight annual all-time high in 2012 as well, rising to $684.45 billion – 6.98 percent higher than the 2011 total.

The President’s aim to strengthen U.S.-based manufacturing is admirable and vitally important.  But it can only result from new, effective policies, not wishful thinking about China’s industrial demise and a U.S. manufacturing boom.  



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).
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