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Weekly Trade Spotlight: America's Manufacturing Sector

07/06/2010 - 5:27pm

In honor of Independence Day, USTR.gov is highlighting America’s strong and storied manufacturing sector. From the Industrial Revolution to the present, the United States has remained a manufacturing “superpower.”

Containing less than 5 percent of the world’s population, the United States produced more than 19 percent of global manufacturers in 2008 according to the World Bank. The United States is the world’s largest producer of manufactured products, producing 18 percent more than the second largest producer China—a country with a population more than four times greater than that of the United States. Indeed, exports from our manufacturing sector supported jobs for more than 6.8 million Americans in 2008.

Despite the recent recession, the longer term path of U.S. manufacturing is one of solid growth. For example, from 1998 to 2007 or just before the current recession, manufacturing output grew at an average annual rate of 3.6 percent, compared to a growth rate of 2.9 percent for the overall economy. The recession hit U.S. manufacturing very hard. Output fell by more than 17 percent between July, 2007 and June, 2009, according to Federal Reserve data.

The good news is that U.S. manufacturing production is helping to lead economic recovery. Between June 2009 and May 2010 output grew at a greater than 10 percent annual rate Also, manufacturing has accounted for roughly 20 percent of overall job gains so far in this early stage of recovery.

As manufacturing experiences solid longer-term growth overall, there can be marked differences among the growth rates of individual industries. For example, production of computer and electronic products, now America’s largest manufacturing industry, grew 543 percent between 1998 and 2007, accounting for 45 percent of the total growth in U.S. manufacturing output over that period. In addition, motor vehicles and parts production in the United States, grew by better than 36 percent over the period, in line with the overall increase in U.S. manufacturing production.

While manufacturing jobs are increasing as the economy recovers, there is no denying that over the last three decades total manufacturing employment has been trending down. Manufacturing job loss has sometimes been attributed to declining U.S. production caused by an excess of imports over exports in the U.S. trade balance. However, U.S. manufacturing production grows regularly. What especially characterizes U.S. manufacturing is its high rate of productivity growth: 3.4 percent a year over the last 22 years, a rate one and a half times faster than productivity growth in the overall U.S. business economy. This productivity growth has meant that U.S. manufacturing production could expand despite a decline in total work needed to produce the output. Plainly, the United States is producing more goods, more efficiently.

Increasing U.S. exports is necessary to foster job creation in our manufacturing sector. In accordance with President Obama’s National Export Initiative (NEI), USTR is taking steps to double U.S. exports in the next five years. Free Trade Agreements (FTAs) provide manufacturing companies access to global markets, and exporting our manufactured products abroad helps small and medium-sized businesses create jobs here at home.

In fact, there are nearly 3.7 million American manufacturing jobs supported by exports of goods and services, which account for 27 percent of all employment in the manufacturing sector. One chemical manufacturing company in Georgia, which employs 35 people, supports up to 30% of its gross sales through exports. A Texas pipe manufacturing firm was able to hire seven more workers at home by exporting just five percent of its production. All across the United States, small and medium-sized manufacturing companies like these are creating jobs and increasing revenue by exporting their goods abroad. However, high tariffs in some countries threaten this success. That is why USTR is working diligently to establish FTAs that grant our manufacturing firms the market access necessary to compete in the global economy.

The U.S.-Korea FTA presents our manufacturing industries with huge potential export increases. According to a report from the International Trade Commission, the implementation of a U.S-Korea FTA will result in an increase of more than 13 percent in the U.S. automobile industry’s exports to Korea. Chemical manufacturers accounted for 14.6 percent of average U.S industrial exports to Korea in 2006-2008, totaling $5.2 billion. Korean tariffs in this sector average six percent. According to Department of Commerce analysis, tariffs on high-trade U.S. goods will be eliminated within three years of implementation of the U.S.-Korea FTA. The Agreement will be a fundamental and positive step toward achieving the goals of the National Export Initiative.

The United States is recognized by the international community as a nation of innovators, especially in our robust manufacturing sector. However, the vast expenditures on research and development needed to invent the manufactured products of tomorrow are more easily undertaken by American industry when these products can be sold around the world rather than in the U.S. market alone. Manufacturing is important to America and opening world markets through international trade is vital to American manufacturing sector and its workers.