The global economy is extremely important for US manufacturers. In its recent publication, “The Facts about Modern Manufacturing,” The Manufacturing Institute and the National Association of Manufacturers (NAM) report that total US exports topped $900 billion in 2005, with over 60% of these exports being manufactured goods. This is twice as much as was exported just ten years ago. One of the main reasons for increased US exports is that many developing nations have transitioned into market economies and now buy nearly half of US exports. These countries tend to import capital equipment and intermediate products, the kind of products in which US manufacturers are most competitive. Manufacturing accounts for 77% of global trade with food and agriculture making up a small 9% of all goods traded. Fuels comprise 8%, and ores and minerals 3% of global trade. In 2004 Germany claimed the position of top exporter from the United States. China is the third largest exporter, having recently overtaken Japan. The US manufactured goods trade deficit in 2005 was more than $500 billion doubling in size since 1999. Between 1999 and 2005 imports have increased by 25% while exports have remained relatively unchanged. Interestingly enough, the US exports and imports many products in the same categories. Trade in chemicals, non-electrical machinery, food machinery, food manufacturing and printing were each nearly in balance with near-equal amounts of exports and imports. Those Americans who work in trade-intensive industries earn an average compensation package worth $80,000. This is 60% more than average compensation in the least trade engaged sectors of manufacturing. The middle group of trade-engaged industries pays about $58,000 a year in wages and benefits. Industries in this category comprise one-third of US manufacturing trade. Those industries least dependent on trade pay an average package worth $51,000 a year and make up 12% of US manufacturing trade. Suppliers to these trade-engaged industries also enjoy higher pay than their peers at domestic-only companies. Ninety-seven percent of all exporting manufacturers have fewer than 500 employees according to the US Department of Commerce. Large companies account for 70% of the value of exports, but smaller companies also benefit from trade. The increase in exports of smaller companies doubled after 2001 and has exceeded the growth rate of the 1990s. Since the 1970s US imports have risen much faster than exports. In 2004, more than one-third of all manufactured products bought in the US were imported, compared to 11% in 1972. This trend is due to an exchange rate that made imports relatively inexpensive to US consumers with the opposite effect on exports in the late 1980s and early 1990s. From 1997 to 2002 the dollar surged in value again, further widening the gap between exports and imports. The US trade deficit is most remarkable with those countries with which we do not have a free trade agreement. Less than 10% of our manufacturing deficit is with partners with which we have a trade agreement. The majority of our deficit is with Asian countries and 40% of it is with China. The US has lost market share in China to the European Union’s block of 25 countries. While actual US exports to China have grown in the past few years, American exports to China should have doubled had the US maintained its 1998 import market share. US tariffs on manufactured goods average less than 2 percent while US exports face an average tariff of around 10% globally. In addition, floating exchange rates that are determined by market forces (rather than pegged by governments) help keep trade in balance. Foreign direct investment (FDI) also plays a crucial role in the US economy. The United States still remains the number one destination for foreign investors because of a large and open market, dynamic, stable economy and government, enforcement of intellectual property laws and a healthy financial system. US manufacturers also invest abroad with more than half of our manufacturing in Europe, one of our largest trading partners. Factors that determine where a company invests include the skill and education level of the workforce, a low-inflation economy, and a transparent regulatory process. Productions costs are also an important factor. The US is at risk of becoming a less attractive destination for foreign investment because of structural costs, such as energy and taxes. Foreign investment in the US, also known as “insourcing” is an important source of jobs for Americans. One in twelve American manufacturing workers is employed by a foreign-owned firm. It is estimated that as many as 5.3 million Americans are directly employed by foreign-owned firms with wages averaging $63,000 a year, or about 50% more than the average US wage. It is not low-wage labor that attracts foreign investment so much as access to large and growing markets. More than three quarters of US manufacturing foreign investment is in Europe, Canada, Japan, Australia, New Zealand and Singapore, all of which are high-wage countries. Only 3% of American direct investment is in China.
 American Wire Producers Association |
