Trade Restructuring in Century's First Decade Will Affect International Economy in the Next

Nov. 18, 2011
The Chinese global share of manufactured exports soared from 7% in 2000 to 20% in 2010, while the U.S. share declined from 19% to 13%. The Japanese share dropped from 13% to 9% while the European Union share held steady at 20%.

The reversal in the global share of trade between China and the United States, particularly in manufacturing, will have a decisive impact on economic relationships among the principal economic powers and on the international economic system, according to a new Manufacturers Alliance/MAPI report, "In A Decade of Transformation in World Trade."

The Chinese global share of manufactured exports soared from 7% in 2000 to 20% in 2010, while the U.S. share declined from 19% to 13%. The Japanese share dropped from 13% to 9% while the European Union share held steady at 20%.

A disturbing trend in the dominant manufacturing sector was the growth of trade imbalances, MAPI notes. China's surplus increased more than tenfold, from $50 billion in 2000 to $582 billion in 2010, in stark contrast to the United States deficit, which increased from $319 billion to $425 billion.

Preeg argues that the harm of the very large and growing U.S. trade deficit in manufactures is a net decline in U.S. production and relatively high-paying jobs.

"A $1 billion trade deficit, based on value-added per worker, is equated to a loss of 4,000 to 10,000 jobs," said Ernest H. Preeg, MAPI Senior Advisor for International Trade and Finance. "Thus, the $80 billion increase in the deficit in 2010 meant a loss of 320,000 to 800,000 jobs, and the projected $50 billion increase in the deficit in 2011 (from $425 billion to $475 billion) means an additional loss of 200,000 to 500,000 jobs."

Preeg notes that on current policy course, global market shares of manufactured exports are headed by mid-decade toward 25% for China and 10 percent for the United States, with broad implications for the two global superpowers.

"There are four key issues that together will likely trigger basic changes in the current policy course: the adverse trade impact on the U.S. manufacturing industry, mercantilist exchange rate policies, the proliferation of discriminatory bilateral trade agreements, and the transition from the dollarized global economy," Preeg said.

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