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August 09, 2018 02:00 AM

Two views of US manufacturing anchor trade debate

Steve Toloken
Assistant Managing Editor
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    Cal Dooley of the American Chemistry Council addresses members of Congress April 12 during a hearing on potential tariffs.

    There are two very different views of how manufacturing is doing in the United States lurking under the increasingly heated trade debate we're having.

    There's the view shared by the Trump administration and its supporters, that unfair trade, particularly with China, is responsible for millions of lost factory jobs and has really hurt domestic manufacturing.

    U.S. Trade Representative Robert Lighthizer, for examples, argues that trade deficits in goods with China ($375 billion), the European Union ($151 billion), Japan ($68 billion) and within NAFTA ($90 billion) mean that "sometimes the global rules of trade make it harder for U.S. companies to export."

    In that view, U.S. factories need tariff protections to help them recover, or at least to use as leverage to pry open foreign markets.

    But the opposite view, expressed by reports like "Myth Busting Manufacturing" from the Manufacturers Alliance for Productivity and Innovation, is that U.S. factories are actually doing pretty well.

    In the MAPI view, U.S. manufacturing remains globally competitive. It's the second largest in the factory sector world, accounting for 17 percent of global manufacturing output, behind China's 24 percent.

    MAPI notes that the U.S. manufacturing sector has a GDP larger than the entire economies of Canada or India, and contends it's a major driver of innovation in the country, despite being "the most globally exposed segment of the U.S. economy."

    Ah, but what about those lost manufacturing jobs? That's a big motivator for the Trump administration and some manufacturing advocates.

    And that's where the two views converge, at least partly. This Wall Street Journal story takes a deep dive into the arguments around China joining the World Trade Organization and argues that critics of China's WTO entry in 2000 had it right, as far as risk to U.S. manufacturing jobs.

    It notes studies from MIT economist David Autor calculating that Chinese competition cost the U.S. 2.4 million manufacturing jobs between 1999 and 2011.

    And it quotes a former Clinton administration senior trade negotiator who believes China's WTO membership only helped big businesses, not workers. It's a well-reported piece.

    MAPI's report takes another view on what's responsible for falling employment.

    It says U.S. factories shed 5.7 million jobs between 2000 and 2010 (current manufacturing employment is 12.3 million), but the report argues things like productivity growth and automation are more responsible.

    MAPI pointed to studies saying that trade and outsourcing are responsible for just 20 percent of lost factory jobs in that decade.

    If I do the math, that's a little under 1.2 million jobs lost to trade and outsourcing in general, not just China, although I'd imagine China would be a significant part of that.

    You certainly get both views in the plastics industry today. The industry's trade groups like the Plastics Industry Association have pushed against the Trump administration's tariffs, telling the U.S. government that supply chains are much more global and complex than they were 20 years ago, and they would prefer other ways to address trade imbalances with China. That group notes that while the number of manufacturing jobs have "declined significantly" since the 1990s, U.S. manufacturing output is up.

    The plastics industry's trade picture is complex, with surpluses within NAFTA, and an overall deficit (quite large) with China, but a surplus in the U.S. resin sector, even as overall industry job numbers have dropped.

    The American Chemistry Council told a recent U.S. government hearing that the the U.S. plastics industry "is highly competitive and does not need protective trade policy," and that it faces risk from loss of access to overseas markets.

    Those of us around manufacturing know the U.S. maintains a very competitive factory sector, but it's especially good to keep that in mind as the tariff wars heat up.

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