Instead of mischaracterizing the significance and meaning of the U.S. trade deficit and assuming that the loss of 3 million manufacturing jobs four years ago requires a tough response today, policymakers should try to attain a better understanding of the condition of U.S. manufacturing, Cato Institute policy analyst Daniel Ikenson pointed out in a Capitol Hill briefing that the think tank held recently.
While the U.S.-China trade deficit for goods and services combined has been growing at approximately 23% per annum, the United States remains the world’s most prolific manufacturer, producing two and half times more output than those vaunted Chinese factories in 2006, Ikenson noted. He has analyzed the data and emphasized that U.S. producers still churn out 2.5 times the product coming from Chinese factories although China’s share of world manufacturing output more than doubled between 2000 and 2005.
“The U.S. is the world’s largest manufacturer,” said Frank Vargo, VP from the National Association of Manufacturers. “We’ve emerged from the worst recession decades and production is now at record levels.”
“Two-thirds of what we consume is from the U.S.,” Ikenson said. “China imports a lot of raw materials,” he observed. As Vargo sees it, the factors that hurt America’s competitiveness are:
1) A growing shortage of skilled workers
2) Excessive corporate taxation
3) Escalating health and pension costs
4) Out-of-control litigation costs
5) Soaring energy costs
6) Developing and using technology and innovation.