The full-year 2011 trade figures released today by the Commerce Department showed that the overall deficit in Goods and Services trade grew to $558 billion, up $58 billion from 2010. The manufactured goods deficit was $450 billion. Petroleum trade was also in deficit, by $150 billion. These deficits were partially offset by surpluses in services trade and agriculture.
As has been the case for the past three years, manufactured goods trade was remarkably different with U.S. Free Trade Agreement (FTA) partners and non-partners. Manufacturers in the U.S. racked up a $50 billion trade surplus with FTA partners – more than doubling the 2010 surplus of $21 billion.
Manufactured goods trade with non-partners, unfortunately was in deficit by $500 billion. Over the past three years, the manufactured goods surplus with FTA partners cumulated to $100 billion. During that same three year period, the manufactured goods trade deficit with non-partners totaled to $1.3 trillion.
Manufactured goods exports to the world reached $1.26 trillion in 2011, up 15 percent over 2010. FTA partners were the highlight, with exports to them growing one-fourth faster than to non-partners.
The rate of growth for the whole year was on the 15 percent annual growth track needed to double in five years, but a troublesome sign was that the growth fell to an annual rate of 12.5 percent in the fourth quarter – the first quarter to be below the needed path. An important part of the reason was that manufactured goods export growth to the important European Union market (second only to NAFTA) slipped dramatically, to only 6.6 percent in the fourth quarter. This shows that the European economic difficulties are already impacting the United States.
Manufactured goods imports in 2011 were $1,715 billion, up $202 billion from 2010, and the manufactured goods deficit rose by $35 billion. While the $450 billion 2011 manufactured goods deficit was the highest in three years, it was still lower than the peak deficit of $525 billion in 2006.
Trade with China continued to be dominate the U.S. manufactured goods deficit – being $319 billion in 2011, up $27 billion from 2010. Manufactured goods exports to China grew $7 billion while imports grew $34 billion. China accounted for 71 percent of the global U.S. manufactured goods deficit.
In terms of percentage growth, South America was the star performer, with U.S. manufactured goods exports up 21 percent over 2010. In terms of dollar growth, NAFTA was by far and away the stellar market – with manufactured goods exports up $58 billion.
Exports are very important to manufacturers, as global markets for manufactured goods grew faster than the domestic U.S. market. Last year, U.S. manufactured goods shipments for exports grew 60 percent faster than shipments for the domestic market. The domestic market by itself will not grow fast enough to produce the job expansion we want: we are going to have to get more job growth from exports.
But the United States still has a long way to go. The NAM calculates that the United States exports less than half as much of its manufacturing production as the world average, and of the 15 major world manufacturing economies the United States ranks 13th in the proportion of its output that is exported.
Particularly with world trade growth slowing, the NAM urges the Administration and the Congress to move quickly on actions that would boost export growth. Key actions that are needed include:
- Immediately renewing the Export-Import Bank and increasing its lending ceiling so it can continue to offset the support other governments give our competitors and create thousands of new manufacturing jobs at no cost to the taxpayer, since the bank earns money for the Treasury;
- Passing a Miscellaneous Tariff Bill to prevent import taxes on U.S. manufacturers from rising and adding to the already 20 percent cost disadvantage U.S. manufacturers face compared to major competitors;
- Passing Permanent Normal Trade Relations with Russia so U.S. manufacturers are not the only ones frozen out from Russia’s trade liberalization; and
- Quickly concluding and implementing the Trans Pacific Partnership that would open Asian markets to U.S. exporters.
Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.