Posted on 12/27/2006 5:22:07 AM PST by ProCivitas
Tuesday, December 26, 2006
Everybody knows that the loss of huge portions of their home U.S. market to imports has decimated U.S.-owned automakers Ford and GM (as well as Chrysler, which is no longer U.S.-owned, but shares many of Detroit’s biggest problems). What everybody doesn’t know is that literally dozens of U.S.-based manufacturing industries have suffered the same kinds of losses since the late 1990s. The clear bottom line, as revealed by the U.S. Business & Industry Council’s latest annual survey of domestic manufacturing’s competitiveness: The United States is a military superpower, but is steadily becoming an industrial also-ran.
The Council’s new study of import penetration in the manufacturing sector shows that 111 of 114 U.S.-based industries examined lost customers to foreign-produced goods between 1997 and 2005. From 2004 to 2005 alone, import penetration rates rose for 83 of these sectors and fell for just 31.
The industries chosen, moreover, are exclusively the kinds of high-value, capital-intensive sectors that make up the industrial and technological backbone of any advanced economy. Lower-value, labor-intensive sectors that were long ago overwhelmed by foreign competition, like apparel and toys and low-end consumer electronics, were not included.
In many cases, import shares of these critical U.S. manufacturing markets surged dramatically. Between 1997 and 2005, 26 of the 114 industries studied lost 50 percent or more of their U.S. sales to foreign-produced goods, including pharmaceuticals, computers; telecommunications hardware; navigation and guidance equipment; broadcasting and wireless communications equipment, and motor vehicle power train and transmission equipment.
Eight more sectors lost nearly half their U.S. market to imports to imports during this period, notably tires; switchgear and switchboard apparatus; and commercial and service industry machinery.
From 2004 to 2005 alone, import penetration rose by 15 percent or more in 14 sectors, including industries such as semiconductor production equipment; aircraft engines and engine parts; and telecommunications hardware.
As a result, as of 2005, imports represented at least 50 percent of sales in the United States of 24 of the 114 industries studied, such as telecommunications hardware; heavy duty trucks and chassis; and broadcast and wireless communications gear.
In eight more industries, imports have captured between 60 and 69 percent of the U.S. market, including autos; environmental controls; and aircraft engines and engine parts. And in six sectors, imports control 70 percent or more of the American market, including machine tools and electric resistors and capacitors. If current trends continue, imports will account for the majority of U.S. domestic sales in sectors such as electricity measuring and test equipment; X-ray equipment; turbines and turbine generator sets; laboratory instruments; and construction machinery.
Rising import penetration in American markets means that U.S.-located producers are flunking the most important test of competitiveness – winning and keeping customers. It’s true that American manufacturing output has been growing since the 2002 recession. All this means, however, is that domestic manufacturers are receiving some of the new business created by the unsustainable debt-fueled growth on which the nation’s prosperity increasingly relies. Their foreign-based competitors, however, are meeting even more of this new demand. When the debt tide recedes and growth slows, these surging foreign producers are likeliest to be the survivors.
Just as revealing, surging imports are already replacing and depressing U.S. production throughout domestic manufacturing. Between 1997 and 2005, output actually fell in nearly two thirds of the 53 industries where import penetration is highest or grew fastest, and stagnated in many of the rest
These import penetration figures are especially worrisome because the American market is the market in which U.S.-based manufacturers should do best. After all, they should be most familiar with local tastes, and they face no trade barriers at home. If domestic industry can’t even defend its home turf, how can it hope to compete abroad?
The import penetration data also show that American manufacturing’s woes even extend to the high-tech sector, supposedly the nation’s best hope for future prosperity and an area of natural advantage for the United States. Yet some of the biggest losers of home market share in recent years include such mainstays of the so-called New Economy as semiconductor production equipment, electricity measuring and test equipment (critical for all high-tech manufacturing), telecommunications hardware, navigation and guidance devices, and pharmaceuticals.
Of special importance, the import penetration rate numbers make crystal clear the limited significance of devaluing the dollar – portrayed by analysts from the outsourcing-enamored National Association of Manufacturers to the labor-supported Economic Policy Institute as a near cure-all for solving America’s trade problems.
Obviously getting exchange rates right matters, and currency manipulation by foreign governments in particular must be offset by Washington. Yet America’s domestic industries have lost shares of their home market whether the dollar has been relatively strong or relatively weak.
Between 1997 and 2002, when most analysts agree the greenback was way overvalued, import penetration rates for the 114 industries studied combined rose from 24.49 percent to 30.80 percent – an increase of 25.76 percent, or an average of 5.15 percent annually. The following three years were a weaker dollar period. Nonetheless, the combined import penetration rates for the sample industries rose from 30.80 percent to 34.52 percent, an average annual increase of 4.03 percent.
So maybe exchange rate policy eventually could enable domestic manufacturing to regain lost market share at home – but only by cheapening the dollar so dramatically as to trigger numerous major dangers to U.S. and global economic stability.
Why are such critical U.S. industries faring so poorly? Two major failures of U.S. international trade policy bear much of the blame. First, Washington has done a terrible job of combating numerous predatory trade policies, ranging from manipulating currency values to handing out illegal subsidies, pursued by other major trading powers, precisely to gain industrial supremacy at America’s expense.
Second, too many U.S. trade agreements since NAFTA have encouraged the export of too much America-based manufacturing production and knowhow. These agreements were sold as levers for opening up new foreign markets for U.S.-based industry. But their chief supporters knew all along that they would be most effective as outsourcing agreements. They would help U.S.-owned multinational companies supply their existing American markets more profitably from new, state-of-the-art manufacturing bases they would build in foreign countries.
As a result, USBIC’s latest analysis makes clear, the great expansion of U.S. foreign trade that Washington began to encourage starting in the early 1990s has been a raw deal for most U.S.-based producers. Not only has America-based industry been shedding domestic market share the entire time – as revealed by more limited data going back to this period. Most of the growth registered by U.S.-based manufacturing during the 1990s economic expansion – widely touted as a time when American industry staged a remarkable competitive comeback – came in high-tech hardware. Today, of course, nearly all observers admit that this sector had turned into an unsustainable bubble. Its explosive growth had nothing to do with economic fundamentals, and indeed never should have occurred.
The core manufacturing sectors suffering these mounting losses at home lead the U.S. economy in productivity and innovation, generate America’s best-paying jobs on average, and undergird the nation’s security. If imports’ growing domination of American industrial markets is not reversed soon, scores of these critical industries could be pushed past the point of no return.
'Economic Patriotism' Ping
"Paging Mr. Smoot and Mr. Hawley! Report to Congress, stat!"
Yes, we absolutely need tariffs.
And higher taxes across the board, because our government spends more than it takes in.
Right...
GM and Ford need protected so they can continue to build crappy cars...
Funny how Toyota can build cars in the US and people want to buy them.
This reads like it was written in the 1920s.
Smoot-Hawley was the answer then. It is the answer now.
Better to bring on world depression and demagogs than to deal with reality.
What Would Duncan Hunter Do?
Has anyone seen this report yet? I'm getting a funny feeling that included in "imports" are "products domestically manufactured by foreign companies."
Well I bought my Jeep Liberty. Given that Chrysler is now under Berlin, I'm not sure if it counts as a domestic purchase.
Socialism since the 50's both at the government level as well as the labor sector,has got to take a bow along with bad trade policies for the current trend !!!
"W.W.D.H.D?" What Would Duncan Hunter Do?
Per the Humphrey-Hawkins bill that defined unemployment levels, the USA is at inflationary levels of full employment. If industrial production were to increase in the USA, from where would the employees come? prisons? drug rehab centers?
And this overseas activity is not limited to industrial production. Software production is also going overseas. Why?
1) Lousy public education system is not turning out Americans capable of doing the critical work.
2) Pride, arrogance abounds in the work force. Many people are not willing to do "third world" work.
3) Not enough immigration. I work beside highly paid immigrant software developers because not enough Americans can be found who are willing and able to do the work.
Immigration is the enemy of outsourcing. Outsourcing is the enemy of immigration. It is that simple. Increase immigration and the production will be in the USA. Stop immigration and production will go overseas.
Solution: Petition Congress to
. . . . . . . REPEAL THE LAWS OF ECONOMICS
The answer is so simple. Bring in more illegals and put them to work building Fords.
We are shipping out our jobs and shipping in cheap workers.
Great news for our economy.
Thank You Congress.
It worked for Harley-Davidson.
And higher taxes across the board, because our government spends more than it takes in.
Did I check into the DUmmy site by mistake?
Let's have Hillary fix healthcare while we're at it.
Milton Friedman, we miss you!
LOL--I hope you considered the possibility that I was joking.
What worked for Harley? It still makes over-priced, crap products. Although I respect the fact that it gets people (even overseas) to buy.
Willie Green, Jr.
agreed.
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