The headlines about the December trade deficit, released yesterday by the Foreign Trade division of the Census Bureau (link provided above), sound like bad news, emphasizing a larger-than-expected rise in the trade deficit. Exports were up, but imports were up more. Here’s the charts:
But dig deeper and you’ll find some good news beginning to take shape in the data. Most of that increase can be blamed on a boost in oil imports (with price to blame for much of it) and a corresponding decrease in petroleum exports.
The good news emerges when you strip away trade in petroleum and foods, feeds and beverages – in other words, natural resources – leaving only trade in manufactured goods. (Yes, there are other categories of natural resources – minerals, metals and lumber, to name a few – but trade in these resources is essentially balanced.) I’m adding a new feature to my monthly report on our progress toward Obama’s goal of doubling exports in five years. The real goal is to double exports of manufactured products. So I’ll begin presenting a new chart that gives a broader picture of what’s happening in the trade of petroleum products; food, feed and beverages (identified in the chart as simply “food”); and, most importantly, manufactured products.
Imports of manufactured products have leveled off since June, while exports of manufactured goods have risen almost steadily since the beginning of 2010 at a pace sufficient to nearly meet Obama’s goal of doubling exports in five years. The trade deficit in manufactured goods has now fallen four months in a row to its lowest level since May.
The time has come to consider the possibility that this isn’t merely a short-term blip, but that something is actually driving a real change in trade. There are a couple of possibilities:
- The slowdown in imports and rise in exports may be nothing more than the result of an economic rebound taking hold in the rest of the world, increasing demand for U.S. products, while a stagnant economy in the U.S. has kept a lid on imports. This doesn’t seem to be a scenario likely to persist for long (if it’s even real), since so much of the world is dependent on U.S. demand.
- The Obama administration’s trade talks with the rest of the world, aimed at rebalancing the global economy and boosting American exports, may have had more teeth than I gave them credit for. Is it possible that other nations are (at least so far) living up to commitments to boost their imports of American products? If so, what is the source of this new demand? Or are American products simply being stockpiled somewhere? More likely, these new American imports are eating into domestic production in foreign countries. How long will such under-the-table trade deals stand up to political pressure when they start eating into manufacturing employment in those countries?
I remain a skeptic, but the data speaks for itself, and we can no longer ignore the possibility that some under-the-table trade deals have sparked the beginning of a renaissance in American manufacturing. Other economic data have suggested the same thing. For example, the manufacturing sector of the economy added 49,000 jobs in January, more than the total number of jobs created within the entire U.S. economy.
A few months of data, especially at a time when the economy is balanced at the edge of a double-dip precipice, isn’t proof of anything and certainly doesn’t undo three-plus decades of enormous trade deficits and the gutting of the manufacturing sector, but it’s possible that we’ve taken a step in that direction.