- - Tuesday, July 5, 2011


Too bad Americans can’t monetize the happy talk surrounding U.S. manufacturing these days. The resulting new wealth could supercharge economywide growth and hiring, and even pay down the national debt.

During the past month alone, American manufacturing has trounced expectations in two leading surveys. Scores of U.S. companies reportedly have been “reshoring” factories back to the USA. And the Boston Consulting Group and McKinsey & Co., two blue-chip consulting firms, have predicted the imminent flowering of an American manufacturing renaissance.

How positively weird, then, that for more than a decade through 2009, this same domestic manufacturing sector has been flunking a vital test of competitiveness - maintaining shares of its own home markets. And how logically impossible is it that U.S. industry’s ills could have been cured since then?

The evidence appears in a new report from the U.S. Business and Industry Council, revealing how American-based producers have fared against foreign competitors in the battle for U.S. customers from 1997 (the first year government statistics were available) through 2009 (the latest data available).

The study examined 111 of the advanced manufacturing sectors that practically every American politician and expert claims to value — semiconductors and machine tools and pharmaceuticals and power-generation equipment and construction machinery. As a group, it found, their share of their own home markets fell during this period from nearly 76 percent to less than 64.5 percent.

Worse, the 2009 figure clearly was propped up by a Great Recession that hit international trade even harder than domestic production. As revealed by the U.S. trade figures for 2010, even last year’s feeble growth was enough to trigger a major rebound in U.S. imports, and no doubt further steep market share losses for U.S.-based manufacturers.

Further, from 1997 to 2009, only nine of the 111 industries examined gained U.S. market share against foreign competition. The 102 that lost share included such economic crown jewels as semiconductor production machinery, electro-medical equipment, pharmaceuticals, turbines and turbine generator sets, construction equipment and machine tools.

No less than 28 of these sectors saw their import penetration rates at least double — including pharmaceuticals, electricity measuring and testing equipment (essential for manufacturing information technology hardware), broadcast and wireless communications equipment, turbines and turbine generator sets and advanced navigation and guidance instruments.

As a result, by 2009, fully 26 of the 111 sectors had lost half or more of their home markets to imports, including turbines and turbine generator sets, machine tools and electricity measuring and test equipment. Import penetration rates of 40 percent to 50 percent were registered by sectors such as semiconductors, construction machinery, laboratory instruments, basic inorganic chemicals, and mining machinery and equipment.

Did export success offset failure at home for these critical industries? By and large, no. Official inflation-adjusted growth figures dont exist for these industry categories. But the current-dollar data show that output fell from 1997 through 2009 in 64 of the 111 industries studied. Among these “losers”:semiconductors, semiconductor production equipment, machine tools, environmental controls, and ball and roller bearings.

This lackluster performance is sending a crucial message about economic recovery that President Obama keeps ignoring. Recapturing merely some of these lost home markets would generate more growth and employment than is plausibly possible through his favored strategy of boosting exports.

For example, had these advanced domestic industries simply not lost any further home market-share after 1997, total U.S. output in 2009 would have been 1.3 percent bigger. Exports for these sectors would need to have been a thoroughly unrealistic 47.5 percent higher that year to achieve this kind of boost.

Nothing mysterious lies behind this conclusion. After all, America is the market domestic manufacturers should know best. And unlike foreign markets, it’s an arena where they face no trade barriers whatever. What’s genuinely mysterious is why Democrats and Republicans keep ignoring a major recovery recipe lying right under their noses.

Alan Tonelson is a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 2,000 members are mainly small- and medium-sized domestic manufacturers. Author of “The Race to the Bottom,” Mr. Tonelson also is a contributor to the council’s website www.AmericanEconomicAlert.org.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide