U.S. Trade Policies Hurting Manufacturing States, Says Industry Group

Sept. 23, 2008
Vital industrial states losing not only jobs but growth.

A new study, by the U.S.. Business and Industry Council (USBIC), looking at 10-year growth rates for eight industrial states looming large in this years national elections -- Illinois, Indiana, Michigan, Missouri, North Carolina, Ohio, Pennsylvania and Wisconsin, found that the slowest growers by far were industries most heavily exposed to global economic opportunities and challenges -- the manufacturing sector.

Manufacturing was also the single slowest-growing sector in the nation as a whole during this period, with current-dollar output rising by a mere 26.25% -- barely a third of the overall 66.82% national growth rate, according the study released on Sept. 23.

Moreover, manufacturing's job-creation performance badly lagged that of the rest of the economy as well, indicating that its slow growth as well as its improving productivity were responsible for its 20.3% job loss during the decade.

By contrast, the fastest-growing sectors in these states' economies and the U.S. economy from 1997 to 2007 were sectors with little or virtually no exposure to global economic conditions. Industries in the "partly exposed" sector included finance, retail trade, educational services, and information services. Industries in the "virtually unexposed" sector included health care and social assistance, real estate, construction, administrative and waste services and government.

"With America's most trade-sensitive sectors exposed as growth as well as jobs laggards, its clear that current U.S. trade policies are failing the national economy and the economies of politically crucial industrial states," said Alan Tonelson of USBIC. "The concentration of rapid growth in sectors largely unaffected by the international economy tells us that the nation and the industrial battlegrounds have grown in spite of current U.S. trade policies, not because of them."

Taken together, the most trade-sensitive sectors of the national economy grew by 38.4% in current dollars between 1997 and 2007. Those sectors only partly affected by globalization and trade policies grew by 73.8% in toto. The least trade-sensitive sectors of the economy grew by 72.8% collectively during this decade.

Except for North Carolina, the individual manufacturing-heavy states examined grew more slowly from 1997 to 2007 than the national growth rate of 66.8%. The worst performer in this group was Michigan, with 27.7% current-dollar growth during this decade -- barely one-third the national average. The next-worst performer was Ohio, with 40.4% growth in current dollars from 1997 to 2007. Growth rates for the rest of the states examined were: Missouri, 45.0%; Indiana, 46.6%; Illinois, 50.9%; Wisconsin, 53.8%; Pennsylvania, 54.7%; and North Carolina, 74.5%

The worst-performing trade-sensitive state sector was Michigans, which actually shrank by 2.2% in current dollars from 1997 to 2007. Missouri and Ohio turned in the next-worst records during this decade -- with current-dollar growth of only 4.2% and 8.6% in their trade-sensitive sectors, respectively, over the entire decade.

In two of the states studied, the manufacturing sector shrank in current-dollar terms from 1997 to 2007 -- Michigan (a decline of 5.5%), and Missouri (a decline of 1.1%). Ohio manufacturing was the next-worst performer, growing only by 6.3% in current dollars during the entire decade. Only Wisconsin and Indiana manufacturing grew faster from 1997 to 2007 than the 26.2% national rate.

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