Manufactured Goods Deficit Rises, but Free Trade Records Surplus

By June 10, 2010Trade

Today’s international trade numbers released by the U.S. Department of Commerce (here) show our U.S. manufactured goods trade deficit continues to grow, but that  manufactured goods still retain their dominant position, accounting for 80 percent of  U.S. goods exports.   

April exports of manufactured goods were up 24 percent over April 2009, while April imports of manufactured goods were up 22 percent.  Because imports are considerably larger than exports, the import growth rate boosted the dollar value of imports more than the dollar value of exports.  As a result, the April manufactured goods trade deficit grew to $29 billion, up $4 billion from the previous year.

The National Association of Manufacturers had been expecting the trade deficit to increase over the 2009 levels, as the U.S. economic recovery is outpacing that of major markets such as the European Union and Japan — but we did not forecast a return to the $40-50 billion dollar levels of 2005-2006.   The rate of import growth should slow later in the year, and an added export push can stabilize and begin to reduce the trade deficit further.

The April manufactured goods export rate of 24 percent remains significantly above the 15 percent annual rate of growth that will be needed for the next five years in order to reach the President’s goal of doubling exports by 2014.  The rapid rate of growth so far, however, reflects a continuing recovery from the collapse of U.S. exports in 2009 – and achieving the export goal will require additional policy and program changes in order to keep the growth rate at or above 15 percent annually.

One of the policy changes needed is to open up more foreign markets by having more bilateral trade agreements.  Year-to-date data shows the United States continues to run a manufactured goods trade surplus with its Free Trade Agreement (FTA) partners — $8 billion so far. 

The manufactured goods deficit is with countries that have not entered into such agreements with the United States.  Only about 40 percent of U.S. exports go to the FTA partners that have eliminated barriers to U.S. products.  American manufactured goods still face significant trade barriers in the remaining 60 percent of our markets.

Misplaced Congressional fears about trade agreements are delaying implementation and further negotiation of trade agreements, hurting U.S. manufacturing jobs.  Of serious concern is the fact that the United States sits dead in the water, while the European Union is negotiating with key markets, such as Canada, Brazil, and India.  This is no way to ensure that U.S. exports will continue to drive the manufacturing and economic recovery.

See also Secretary Locke’s statement.

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