Current and Future Challenges for U.S. Manufacturing

65. The Trade Gap Widens for Manufacturers

Trade has been rising faster than the overall economy for decades. Just a dozen years ago, imports made up about 31 percent of domestic consumption; they are now 40 percent. Exports’ share of non-duplicative output has also edged up. The reasons for this rising trade intensity remain unchanged from those of centuries past. Manufacturing stays highly productive while merchandise commerce becomes more cost-effective over time. For example, with transportation costs, advances in intermodal shipping allow goods to move quickly and inexpensively virtually across the globe. Cross-border manufacturing and sourcing bring the production process closer to the ultimate consumer. As a result, the variety of products offered increases while their prices tend to decline relative to those products that are not traded across borders. Movements in exchange rates shape trade direction in the short term. For example, the past decade’s steady rise in the percentage of domestic production that was sold abroad can be traced to trends in exchange rates. From 2003 until 2011, the dollar depreciated 15 percent; the share of manufacturing production exported, though, rose from just over 20 percent to about 27 percent between 1998 and 2011.

To Trade

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The Trade Gap Widens for Manufacturers

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Minimal Change in Share of Federal R&D Funding at Public Universities and Colleges Allocated to Engineering and Science Fields

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Minimal Change in Federal Funding for Engineering and Science Fields