Here is the summary for this month’s Global Manufacturing Economic Update:

The new year has begun with some stronger economic data worldwide. While persistent challenges remain—most notably in Europe, but also some lingering fiscal worries in the United States—the overriding trend has been for some modest gains in new orders, production and hiring in a number of key markets for U.S.-manufactured goods. Seven of the top 10 export markets have economies that are expanding, and there were signs that the pace of the contraction in Europe and Japan eased a little. The Purchasing Managers’ Index (PMI) for the Eurozone rose from 46.1 in December to 47.9 in January. The largest improvements in manufacturing, however, were in Asia, where the pace of industrial production has picked up some steam in the past few months. This news spreads beyond China and into other parts of Asia as well.

Our largest trading partners are Canada and Mexico. Much like the United States, Canada’s economy appears to have stalled of late. This is not surprising given the closeness of our two nations in terms of commerce. U.S. frustrations with the fiscal cliff and upcoming federal budgetary battles tend to resonate beyond our borders, with the effects most felt in Canada. Real GDP is expected to grow around 2 percent this year in Canada, mirroring the forecasts for the United States and essentially repeating last year’s rate. Reflecting these trends, Canada’s PMI suggested very slow growth in January, unchanged from December. Mexico’s economy, meanwhile, decelerated throughout much of the second half of 2012, both leading up to and after its presidential elections. Some of the slowdown involved a wait-and-see approach as business leaders assessed the impact of possible new policies coming from the new presidential administration. Industrial production and PMI values tend to reflect this easing, but Mexican real GDP is still expected to grow 3.8 percent in 2013, which is a solid number.

Even with the progress in foreign markets, the most recent international trade figures were a bit of a surprise. The U.S. trade deficit declined sharply from $48.6 billion in November to $38.5 billion in December. Changes in the petroleum balance partially contributed to the decline, but in general, it was a healthy increase in goods exports corresponding with a decrease in goods imports. For the year as a whole, U.S.-manufactured goods exports rose 4.9 percent in 2012 at the non-seasonally adjusted rate, well below the 15 percent rate necessary for the United States to double exports by 2015. While we were on pace for that in 2011, a number of headwinds globally—including a recession in Europe and slowdowns elsewhere—eased the growth of new export sales significantly in 2012, frustrating manufacturers in the United States. Perhaps the improvements noted in this document more recently will bode well for better export figures in 2013.

Next week, we will be closely following industrial production and GDP releases worldwide. Provisional GDP in the Eurozone is expected to show continental output shrinking around 0.3 percent, with data from a number of member countries reflecting weaker conditions as well. Similarly, Eurozone industrial production is forecasted to fall 1.4 percent. Outside of Europe, China will release its trade figures at the beginning of the week, and if recent surveys are accurate, its exports should be improving. In the United States, the Federal Reserve Board will unveil its latest industrial production figures, with an expected slight gain in January.

Chad Moutray is the chief economist, National Association of Manufacturers.

Stephen Harper’s Conservatives were re-elected as the government in Canada this week, gaining more seats in the Parliament, a success that merits close attention in the United States. For one thing, voters resoundedly defeated the opposition Liberals’ call for a carbon tax. With Canada relatively untouched by the global financial crisis, voters did not punish Harper for being in power.

Most notably, Harper is a strong advocate of free-trade agreements, so Canadians explicitly rejected the protectionism that can be found in other political parties, especially the leftist New Democrats.

Today, preliminary talks open in Quebec City between Canada and the European Union on a free-trade agreement, or an “economic partnership” as it is being described, a meeting that included Prime Minister Harper, French President Nicolas Sarkozy headed the meeting — Sarkozy currently holds the EU’s rotating chairmanship — and EU President  José Manuel Durão Barroso.

The case is compelling, especially in light of the current financial crisis. From The Ottawa Citizen.com:

OTTAWA – Business leaders say the stars are aligned for Canada and the European Union to begin talks on an “ambitious” trade liberalization deal that could see both economies reap combined benefits of nearly $40 billion a year.

The $40-billion figure will emerge from a joint Canada-EU study to be released Friday, when Prime Minister Stephen Harper meets with French President Nicolas Sarkozy and Jose Manuel Barroso, the European Commission president, in Quebec City. At present, two-way trade between Canada and EU countries stands at $100 billion.

The study, say people familiar with its contents, will suggest a wide-ranging trade liberalization deal would boost Canada’s annual real income, up until 2014, by $16 billion. That translates into 0.8 per cent of Canada’s GDP. The EU would realize a gain of $22.5 billion a year, or 0.1 per cent of its GDP.

The Globe and Mail reports the focus will be on services:

Both sides are expected to emphasize the benefits of removing barriers to trade in services, as opposed to goods, based on the study, which concluded that tariffs on most goods are already relatively low. Canadian officials had repeatedly pressed for the negotiations to be called “free trade” discussions, apparently because it is a term Canadians understand, according to a source from a European nation.

Quebec Premier Jean Charest has pushed hard for the arrangement, and the statement will be issued when French President Nicolas Sarkozy, who currently holds the rotating presidency of the EU, is in Quebec City for the Francophonie Summit.

“The financial crisis makes this deal even more likely,” said Jason Langrish, the executive-director of the Canada Europe Roundtable for Business (CERT), an association that tries to boost trade and business links between the two economies. “We need to create liquidity between these markets.”

Powerful arguments for a Canada-EU Free Trade Agreement….or even more.

The Manufacturing Extension Partnership program has helped small and medium-sized manufacturers stay competitive and create jobs for almost 20 years. Despite its benefits, MEP supporters often have to scramble to get federal funds.

Rep. Joe Knollenberg (R-MI), a guest on this week’s edition of “America’s Business with Mike Hambrick” radio program, explains how he and other program supporters recently pushed to get the program funding.

“We did it by having individuals with the MEP talk to people in their district, wherever it might be, whatever state it might be in,” he says. “And that drummed up a lot of support because those members of Congress living in those states did not want to lose out.”

Higher energy prices are putting a financial pinch on manufacturers and made more Americans eager to embrace alternative energy sources. Sen. John Ensign (R-NV) will discuss his plan to extend tax credits that encourage development of alternative fuels such as solar and wind.

High energy prices also make shipping more expensive. CIBC World Markets Chief Economist Jeff Rubin will talk about his recent report on how energy costs affect global trade flow.

Canada is one of our nation’s closest allies. Canadian Ambassador to the United States Michael Wilson will join Mike to discuss the trade and other economic ties that bind the United States to its neighbor to the north.

In our regular segments, Renee Giachino of American Justice Partnership gives us the latest on tort reform and commentator Hank Cox recalls “The Way It Was.” This week “America’s Business” is launching a new regular segment featuring NAM Executive Vice President Jay Timmons. Jay, who has been intimately involved in politics for years, will give us his take on 2008 political races that manufacturers should watch.

And our program will close with “The Last Word” from the National Association of Manufacturers President Gov. John Engler will close the program with “The Last Word.”

For more about “America’s Business with Mike Hambrick” and to listen to the program online, please click here. And for video highlights and more, check out www.americasbusiness.org.

There are lots of urban legends we encounter and the one that seems most enduring is that nothing is made in America anymore.  Too many people refuse to see the reality that is shown in government data:  manufacturing output in the United States is at an all time high.  More is made here now than ever before.  

The U.S. manufacturing sector is dynamic and a major contributor to the high-tech economy that too many take for granted.  There are plenty of hurdles, though, that could drive this successful industry off the track.  In the global economy, there are other nations are trade blocs ready to seize the lead in global manufacturing.  In light of the global manufacturing marketplace, we surveyed manufacturers last fall to see how they thought North America stacked up. 

Those results are in.  Today The Manufacturing Institute, the National Association of Manufacturers (NAM), the Canadian Manufacturers and Exporters (CME)  and Deloitte Touche Tohmatsu released a report — Made in North America – that takes a look at manufacturing from a North American perspective:  the United State and two of its major trading partners, Canada and Mexico.  North American manufacturers consider the United States the most desirable country for expansion over the next three years and nearly 60 percent of U.S. manufacturers say they will become more competitive over the next five years across the board in sales, marketing, engineering and information technology.

Made in North America breaks new ground in several ways:

• manufacturers said that the North American Free Trade Agreement (NAFTA) was a net plus for them with only ten percent finding that it had hurt their business;
• nearly 40 percent said that they would expand R&D in the United States, with China and Canada as the next runners up with 20 percent and 18 percent, respectively;
• the top three barriers to competitiveness are labor costs, work rules and tax policy;
• the top three priorities survey respondents recommend for government action:  labor costs (including health care and pensions), tax policy and the availability of skilled labor.

The report is another reminder that the strong export performance of U.S. manufacturers this year is keeping the economy out of recession.  How much better we would be doing if a range of overseas barriers and tariffs to U.S. products were eliminated through trade agreements like NAFTA.  Candidates for public office should take a good look at this report and help keep U.S. manufacturing strong with their votes in Congress and state legislatures.  As this survey and news reports about it show, we’ve got too much to lose to ignore manufacturing.