New Research: Thriving in a Global Economy: The Truth about U.S. Manufacturing and Trade

Executive Summary

Reports of the death of U.S. manufacturing have been greatly exaggerated. Since the depth of the manufacturing recession in 2002, the sector as a whole has experienced robust and sustained output, revenue, and profit growth. The year 2006 was a record year for output, revenues, profits, profit rates, and return on investment in the manufacturing sector. And despite all the stories about the erosion of U.S. manufacturing primacy, the United States remains the world’s most prolific manufacturer—producing two and a half times more output than those vaunted Chinese factories in 2006.

Yet, the rhetoric on Capitol Hill and on the presidential campaign trail about a declining manufacturing sector is reaching a fevered pitch. Policymakers point repeatedly to the loss of 3 million manufacturing jobs as evidence of impending doom, even though those acute losses occurred between 2000 and 2003, and job decline in manufacturing has leveled off to historic averages.

In the first six months of the 110th Congress, more than a dozen antagonistic or protectionist trade-related bills have been introduced, which rely on the presumed precariousness of U.S. manufacturing as justification for the legislation. Justification for those bills is predicated on the belief that manufacturing is in decline and that the failure of U.S. trade policy to address unfair competition is to blame. But those premises are wrong. The totality of evidence points to a robust manufacturing sector that has thrived on account of greater international trade.

from the conclusion:

U.S. manufacturing is generally in superb health, and increasing international trade has a lot to do with that condition. Accordingly, lawmakers should back away from their hostile rhetoric about trade before they adopt policies that will damage the sector. Despite all of the bluster about “saving” U.S. manufacturing, the truth is that the sector is in robust health. Record output, record sales, record profits, record returns on equity, and record compensation define the most recent year’s performance. Rather than being aberrational, one-time blips, those records are all the latest data points of a gradually ascending trend line that has been evident since the beginning of the sector’s recovery.

…The evidence points to a U.S. manufacturing sector that is thriving in a global economy.

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