Petroleum and manufactured goods dominated the U.S. trade deficit during the first half of 2011 according to data released today by the Commerce Department.
Of the $288 billion dollar goods and services deficit accumulated so far this year, the deficit in petroleum was $169 billion and in manufactures was $213 billion – together they account for more than the entire deficit. Partially offsetting these deficits were surpluses in services and agricultural commodities.
The petroleum deficit in the first half of 2011 was $32 billion larger than in the first half of 2010, and the manufactured goods deficit was up $38 billion.
Total U.S. exports of goods and services were up 16 percent over the first half of 2010, staying ahead of the 15 percent annual rate necessary to reach the goal of doubling exports by the end of 2014. Manufactured goods exports, however, have slipped below this target rate, rising 12.8 percent over the first half of 2010.
Manufactures outperformed services, which grew only 9.9 percent. Overall export growth was spurred by agricultural goods and mineral fuel exports.
Manufactured goods imports for the first half of the year grew more rapidly than exports, up 15.1 percent over the first half of 2010. The growth was fastest in capital goods, where imports were up 17 percent. Consumer goods imports rose 10 percent and automotive imports were up 13 percent. Fully 70 percent of the manufactured goods deficit in the first half of the year was in the consumer goods category.
On a monthly basis, June exports of goods and services fell slightly from May, marking the second straight month of decline. Manufactured goods exports, seasonally-adjusted, dropped 1.5 percent from May, the second straight month of decline. Of particular concern is that exports of capital goods, the largest U.S. export category, fell 3.6 percent in June – putting capital goods exports back to the level of December 2010. While this could be a one-month aberration, the decline was quite widespread with two-thirds of capital goods export groups showing declines. The only major growth was in exports of civilian aircraft.
While U.S. exports are being aided by the competitive range of the U.S. dollar, industrial machinery and other capital goods exports are being hampered by slower than expected growth in traditional U.S. markets, such as Europe and increasing competition from foreign firms.
The trade figures show the Administration needs to examine its actions to reach the goal of doubling U.S. manufactured goods exports and enable their more rapid growth.
A key concern is the greater extent to which competitor firms are receiving export support from their governments. Export financing is particularly important for capital goods, and as Congress considers reauthorization of the U.S. Export-Import Bank, priority must be given to expanding its capabilities – particularly since the bank is self-financing and does not cost taxpayers a dime.
Another cost-free export expansion tool that must be given immediate priority is passage of the pending trade agreements with Colombia, Korea, and Panama. As our traditional markets are growing more slowly than in the past, faster growth in U.S. exports necessitates focusing on the faster-growing markets of South America and Asia.
Confirming the importance of more trade agreements, the year-to-date data show that American manufacturers are on track to register a more than $30 billion dollar surplus with existing trade agreement partners this year – the entire manufactured goods deficit is with countries that have not agreed to be U.S. trade agreement partners.
Today’s data also underscores the necessity for reducing dependence on imported oil, by accelerating offshore drilling, increasing access to natural gas in shale formations, and taking other steps to increase domestic energy production.
Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.
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