U.S. manufacturing employment is rising at its fastest pace in 18 years.
February 18, 2015
THE NUMBERS: Shares of world manufacturing output, by value-added, 2013*
* Major components of “All Other” include Russia 1.6%, Canada 1.5%, Taiwan 1.5%, Turkey 1.3%, Australia/New Zealand 1.0%, Switzerland 0.9%.
WHAT THEY MEAN:
From 2005 to 2010, the U.S. share of world factory output fell from 22 percent to 19 percent. Since the millennial decade’s disastrous end they’ve revived – the UN’s Industrial Development Organization’s most recent quarterly review, in fact, finds American manufacturing the bright spot in a gloomy industrial world:
“European economies lost their momentum of growth amid weak consumer demand, the threat of deflation and geopolitical tensions, while East Asia was negatively affected by tax hikes in Japan. Most of the growth of industrialized economies was attributable to US manufacturing. The pace of growth of developing and emerging industrial economies was relatively slow, primarily due to the falling growth rate of Chinese manufacturing and the slowdown in Latin America.”
Turning to dollar figures, according to the Bureau of Economic Analysis, since 2009 American manufacturing output – cars, satellites, planes, medical equipment, metals, and so on – has grown from $1.73 trillion to $1.93 trillion, including an apparent $60 billion real-dollar jump from 2013 to 2014. This rate of growth is about 50 percent faster than other rich countries, and about equals the rate of growth for the personal computers, jackets, smart-phones and computers put out by developing economies. For 2014, manufacturing output is up by 4.4 percent in the U.S., but down by 1.1 percent worldwide, pushed down by slumps in China, Japan, and Latin America.
For a more ‘static’ and ‘absolute-number’ total, the UN counts in constant 2005 dollars. As of 2013, their figures make the U.S. the largest manufacturing economy at $1.72 trillion in value-added output, followed by China at $1.58 trillion, Japan at $1.04 trillion, then Germany, Korea, the U.K., France, India, Mexico, and Brazil. By country, the figures look like this:
|United States||$1,719 billion|
|All Other||$2,643 billion|
At a more human level, good news for factory output is starting to show up in employment. The Bureau of Labor Statistics reports a net gain of 222,000 factory jobs last year – the largest jump since 1997, completing the first five years of consecutive factory job gains since 1992-1997. (Samples: 20,000 more making furniture, 54,000 more in auto and auto parts plants, 38,000 in machine manufacturing, 6,000 in pharmaceutical labs, 17,000 in wood products shops, and – with construction also turning up – 5,000 in cement and 11,000 in steel, copper, aluminum and other metals.) Should factory employment rise again in 2015 (so far, it has, but only for one month – January added another 22,000), the six-year stretch would be the longest run of continuous manufacturing job gains since the 1960s.
UNIDO has country-by-country data: http://www.unido.org/en/resources/statistics/statistical-country-briefs.html
And quarterly reports on the factory world: http://www.unido.org/en/resources/statistics/quarterly-report-on-manufacturing.html
While the Commerce Department’s Bureau of Economic Analysis has a “GDP by Industry” database back to 1997; even with the crisis, since then real-dollar factory production has grown from $1.37 trillion to a likely : http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=2&isuri=1
The Commerce Department’s manufacturing site, 2015: http://www.manufacturing.gov/welcome.html
From Congress, the New Democrat Coalition’s Trade, Critical Infrastructure & Manufacturing Task Force: http://newdemocratcoalition-kind.house.gov/issue/critical-infrastructure-and-manufacturing
A note on trade -
Manufactured goods are the largest traded product, making up $1.2 trillion of the U.S.’ $2.3 trillion in exports for 2014, and $11.8 trillion of the world’s $22 trillion in annual exports for 2013. One of Congress’ major trade decisions this year, and major manufacturing policy decisions, will be on renewal of authorization for the U.S.’ export finance agency, the Export-Import Bank. ProgressiveEconomy Director Ed Gresser explains: http://progressive-economy.org/2014/09/16/reauthorize-the-export-import-bank/
More on jobs –
An oddity – The U.S.’ strong net factory job growth these days reflects less a very high pace of hiring than an extremely low rate of layoffs. Total hires in 2014 were likely about 3.1 million, still well below the 4.4 million a year before the crisis. On the other hand, in 2012, 2013, and 2014 factories appear to have set three consecutive records for the lowest layoff rates ever. (Though there’s some uncertainty, as the BLS’ figures for total layoffs go back only to 2000.) Broken down, the net gain of 222,000 jobs over 2014 looks like this:
3.11 million factory hires;
- 1.45 million voluntary quits (i.e. to take new jobs, go back to school, etc.)
- 1.14 million layoffs;
- 0.30 million retirements
= 0.22 million net new jobs.
The still-relatively-slow hiring pace could indicate (a) continuing post-crisis caution in HR departments; (b) structural changes reducing the number of human workers factories need as compared to robots, 3D printers, computers, and so on; (c) relatively faster growth in capital- and tech-intensive industry as opposed to labor-intensive industry; or (d) some simultaneous combination of all three. In BLS’ database, go to “Job Opening and Labor Turnover” for total layoffs and hires, and to “Employment, Hours, and Earnings” for net job increases and declines by industry: http://www.bls.gov/data/
Find a factory job –
Satellite assembler, Boeing/El Segundo: http://jobs-boeing.com/el-segundo/aircraft-assembly/jobid6967017-assembler-space-electronic-sr-jobs
Frozen food preparation, Rich Products/Georgia: http://richcareers.silkroad.com/richext/Operations.html
Automotive production, Honda/Ohio: http://ohio.honda.com/job-opportunities#production
Brass mill rolling, Olin/Illinois: https://jobs-globalbrass.icims.com/jobs/1739/production-supervisor—brass-mill-rolling—cleaning/job
World R&D spending - ~$1.7 trillion.
February 11, 2015
THE NUMBERS: Scientific research & development spending, 2013* -
|World||~$710 billion||~$1,700 billion|
|U.S.||$269 billion||~$470 billion|
|EU (28)||$184 billion||$345 billion|
|China||$33 billion||$336 billion|
|Japan||$99 billion||$160 billion|
|All other||~120 billion||~$390 billion|
* Figures from OECD and National Science Foundation. The 2013 figure for the U.S. is an estimate based on OECD’s overall calculation, as the U.S. has not yet published a final 2013 result. EU figures for 2000 include all 28 current members, including the Central and Eastern European states joining in after 2004.
WHAT THEY MEAN:
Endless Frontier, the 1945 civilian-science manifesto by wartime research chief Vannevar Bush, cites information technology, life-science, and consumer-product breakthroughs of the 1930s (radar and radio, sulfa drugs and penicillin, rayon and air conditioners) as evidence of a possible brilliant future:
“More jobs, higher wages, shorter hours, more abundant crops,” “learning to live without the deadening drudgery which has been the burden of the common man for ages past,” “control of our insect enemies,” “means of defense against aggression,” “prevention or cure of diseases” and so forth.
To bring these dreams to earth, Endless Frontier suggested a permanent government commitment to scientific research and education: federal investment in basic research, scholarships for science and engineering students, transparent patent laws, a research and development tax credit, and so on. Bush – unrelated to the political family of the same name – seems to have worried that idealistic hopes and predictions of better lives might not be enough to get all this done. So he adds a mildly nationalistic warning:
“A nation which depends upon others for its new basic scientific knowledge will be slow in its industrial progress and weak in its competitive position in world trade.”
Seven decades later, the Obama administration hopes to win approval for a $135 billion science budget, replete with interesting follow-ons to the 1930s breakthroughs: deep-space exploration, carbon capture, anti-viral medicine, nano-engineered materials, cyber-security and more. Apart from the merits of this work, how does it fit into the 21st-century scientific world?
The OECD’s annual Main Science and Technology Indicators provides figures for research spending, scientific employment, and more in the 31 OECD member countries plus Argentina, China, Taiwan, Russia, Singapore, and South Africa. Their most recent estimates find the U.S. home to 1.25 million working researchers, out of roughly 6.3 million worldwide.* This would be 16 percent of world researchers; by comparison, the U.S. has about 4 percent of all world workers.
Measured by spending, the OECD finds about $1.6 trillion in R&D worldwide as of 2013, with the U.S.’ roughly $470 billion commitment the world’s largest. National Science Foundation figures allow us to add 15 more countries – India, Pakistan, Brazil, Colombia, Malaysia, Thailand, Indonesia, Iran, Egypt, Morocco, Tunisia, Ukraine, Belarus, and Serbia – which would bring the total to $1.7 trillion, or about 1.65 percent of world GDP. The U.S. would then account for 28 percent of the total. The striking fact in the OECD tallies, though, is not the American figure (nor the European one), but Asia’s post-millennial research boom. Korea, spending 4.15 percent of GDP on research, is now nearly level with Israel as the world’s top scientific investor; China’s spending, having soared from $32 billion to $336 billion since 2000, now makes up 20 percent of the world total. As shares of one region rise, the shares for others must fall: the U.S.’ share has accordingly dropped from 38 percent in 2000 to 2013’s 28 percent.
Bush’s first justification for public science is, of course, more important than his second. Most scientific advances are not national prizes but general benefits, and wherever the 21st-century analogues of Endless Frontiers’ 1930s wonders crop up – ultra-broadband Internet, HIV vaccines, nano-robots, intelligent clothing, zero-emission factories and planes – the world will be better off. Nonetheless, as the 2015 R&D budgets maneuver through the reefs of sequesters and short-term savings, Bush might be thoughtfully concerned about the longer trends.
Endless Frontier, 1945: http://www.nsf.gov/od/lpa/nsf50/vbush1945.htm
The White House’s Office of Science and Technology Policy explains R&D budget priorities, 2015: http://www.whitehouse.gov/blog/2015/02/02/investing-america-s-future-through-rd-innovation-and-stem-education-president-s-fy-2
OECD’s Main Science and Technology Indicators 2014 counts researchers, research spending, and more for its own 31 members plus China, Russia, Taiwan, and South Africa: http://stats.oecd.org/Index.aspx?DataSetCode=MSTI_PUB
And the National Science Foundation has counts of research spending, scientists, Ph.D. grants and students, and more in its S&E Indicators 2014: http://www.nsf.gov/statistics/seind14/index.cfm/etc/tables.htm
Israel’s 4.2 percent of GDP remains the world’s highest rate, though just barely above Korea’s 4.15 percent. The Weizmann Institute of Science: http://www.weizmann.ac.il/
And, drawing on NSF and OECD, an illustrative spectrum of R&D commitments relative to GDP, by country:
A distressing multi-country science poll –
The NSF’s 2014 report polls the U.S., the “European Union” (as a group, not including Bulgaria and Romania), Russia, China, Japan, Korea, and Malaysia on awareness of basic scientific and medical facts and concepts. Samples:
(a) Americans edge Koreans for the overall best score, with especially good scores on knowing that (i) lasers are a way of focusing light, (ii) radiation is a natural occurrence, (iii) antibiotics will not kill viruses, and (iv) atoms are bigger than electrons. But Americans were next-to-last for awareness of evolution, with only 48 percent realizing (or agreeing) that humans evolved from earlier species. For this question, Russians were last with 44 percent, and Malaysians weren’t polled.
(b) Koreans are more aware of the Big Bang than anyone else. Japanese are tops in awareness of plate tectonics and evolution, but puzzlingly bad at guessing whether atoms or electrons are bigger.
c) Malaysia should brush up a bit on medicine: only 8 percent knew that antibiotics won’t help you with a virus.
(d) Only 74 percent of Americans know that the earth goes around the sun! No country in the poll can take much pride in its response to this question, though. Koreans did best at 86 percent, which isn’t all that great. EU residents fared laughably worst – only 66 percent got it right – meaning 150 million Europeans are wandering around thinking the sun is a little glowing ball circling a giant stationary earth.
See Table 7.8 for the results: http://www.nsf.gov/statistics/seind14/index.cfm/etc/tables.htm
And for dim-witted Europeans, the Copernicus historic site at Poland’s Frombork Cathedral is a chance to visit and learn: http://frombork.art.pl/en/
And last, two updates on Bush’s hopes from 1945 –
(a) Control of our insect enemies – After the 1960s’ overuse of pesticides, Bush’s weirdly paranoid vision has been replaced by a wary human-arthropod détente. The USDA’s lab for natural and biological pest control: http://www.ars.usda.gov/main/site_main.htm?modecode=60-66-25-00
(b) Living without deadening drudgery – In some unreported good news for workers, Bush’s prediction has worked out better than most probably realize. The Conference Board says that while the average American worker of 1950 spent 1,909 hours on the job, the average for 2013 was 1,707 hours. This is in the mid-range for the wealthy world, 350 hours more than the apparently slothful Dutch, 500 fewer than hard-pressed Mexicans, and 700 fewer than Singapore’s 2400-hour working year. The 200-hour savings means 25 fewer 8-hour working days than in 1950 each year. The Conference Board has annual work hours for 61 countries: https://www.conference-board.org/data/economydatabase/index.cfm?id=27762
Today’s workers are also a lot safer than their grandparents. In 1950, 8,300 of the year’s 43 million employed Americans were killed in workplace accidents. 2013 saw 4,406 fatal accidents among 141 million workers – the lowest absolute number on record, and an 85-percent decline in workplace fatality rates since the Endless Frontier era. Data from the BLS: http://www.bls.gov/iif/oshcfoi1.htm
American families have cut their bills for food & home goods by 40 percent since the 1970s.
February 4, 2015
THE NUMBERS: Average family purchases per year,* 1973-2013 -
|2013||62 garments, 7.5 pairs of shoes|
|2005||69 garments, 7.8 pairs of shoes|
|2000||66 garments, 6.6 pairs of shoes|
|1991||40 garments, 5.4 pairs of shoes|
|1973||28 garments, 4.8 pairs of shoes|
* Figures from American Apparel & Footwear Association; using 1991 as figures for 1993 are unavailable.
WHAT THEY MEAN:
In 2005, the Peterson Institute calculated that “integration of the U.S. with the world economy” from the 1940s to 2004 had added $9,000 to the purchasing power of each American household. To disentangle the various components of “integration” with the larger world –agreements to lower trade barriers, replacement of copper submarine cables by fiber-optics and break-bulk steamers by container ships, the Internet, supply-chain efficiencies – and all international factors from domestic innovations like big-box stores and on-line shopping, would require computers more powerful than anything ProgressiveEconomy has got.
But this admitted, the Bureau of Labor Statistics has figures on the ways families spend their money, and the American Apparel & Footwear Association, automobile associations, and government agencies offer useful figures on how much it buys. All we need to work it out is a calculator. Here are five sample years, focused on the cost of home goods. The conclusion is at the end:
1973: As inflation and energy crises brought the ‘60s boom to its melancholy end, America’s 71 million households spent an average of $8,270 per year. Of this total, $616 – 7.4 percent of their annual budgets – went to buy clothes, shoes, towels and bedsheets. On average, according to the AAFA’s records, this bought 28 shirts, pairs of pants, brassieres, and 4.8 pairs of shoes. (Nothing available for towels, bedsheets, etc.) Another $1,596, or 19 percent, covered food. Other home goods – appliances, soap and detergent, silverware, cups, rugs, etc. – took up $472 or 5.7 percent.
1991: The post-Savings and Loan crisis recession was biting down, and trade negotiators planning out the WTO and the North American Free Trade Agreement. Since 1973, food had dropped to 14.5 percent of the $37,134 in average family spending. Clothes, shoes, and home linens had gone down to 6.1 percent of family budgets, which bought 40 garments and 5.4 pairs of shoes. The other home goods claimed 5.4 percent.
2000: By the peak of the Clinton boom, with the two big post-Cold War trade agreements in place and the World-Wide Web seven years old, food took up 13.5 percent of family budgets, while clothing, shoes, and home linens were at 5.1 percent and the other 5.3 percent.
2005: With the pre-crisis bubble looming up toward its ominous peak, families spent 12.7 percent of their budgets on food, 4.2 percent on clothing and linens, and 5.0 percent on other household goods.
2013: The most recent reports from BLS and AAFA cover the year before last, after elimination of the textile quota system, introduction of on-line shopping, etc. Food took the same 12.7 percent in 2013 as in 2005, of a total budget now averaging $66,855. Spending on clothing, shoes, and home linens claimed $2,200 – or 3.3 percent of the total – and brought home an average of 62 garments and 7.5 pairs of shoes. Somewhat less shopping than in 2005, then, but less money spent as well. Other household goods were down to 4.2 percent.
Conclusion: What does all this mean? A quick summary table finds food, clothes, and home goods claiming these combined shares of family spending over the past two generations:
|2013||20.2 percent of spending|
|2005||21.9 percent of spending|
|2000||23.9 percent of spending|
|1991||26.0 percent of spending|
|1973||32.4 percent of spending|
So a considerable drop, sustained at a relatively steady pace over time. Since 1973, families have cut their food bills by 35 percent, and their clothing and home-goods bills by over 40 percent. And since more shoes and shirts are filling up closets, modern families aren’t simply worried savers, choosing to wear frayed pants and stay out of restaurants and malls so as to build up their rainy-day accounts. Instead, they’re spending less of their money while buying more with it. In actual dollars, the shift from 32.4 percent of annual spending in 1973 to 20.2 percent in 2013 means an extra $8,156 to save and spend on other things. Compared with 1991, the savings is about $3,878. Since 2005, it is – not a huge sum, but far from trivial – $1,136.
BLS’ Consumer Expenditure survey: http://stats.bls.gov/cex/
AAFA’s ApparelStats and ShoeStats reports for 2013: https://www.wewear.org/aafa-releases-apparelstats-2013-and-shoestats-2013-reports/
Side note – our calculation of $8,156 in added purchasing power since 1991 is quite close to the Peterson Institute’s calculation for the effects of “integration with the global economy” from 1945 to 2004. But it’s basically a coincidence since (a) we’re not attempting to pluck out domestic supply-chain and communications from international factors, and (b) we’re not taking into account additional savings on car purchases, Internet-based services, and so on where international integration plays a part. The Peterson Institute’s conclusions, 2005: http://www.iie.com/publications/newsreleases/newsrelease.cfm?id=107
Three more things –
1. Trade & the single mom: The statistics above are for all households, averaged out. But maybe very rich families are getting most of the benefit? Actually this does not seem to be true. Though calculating spending patterns for low-income families through the Consumer Expenditure Survey turns out to be harder than one might guess – the BLS’ ‘low-income’ families include working families, but also affluent college students and retirees who have a lot of money – single-parent family spending patterns, offer useful comparisons.
As of 2013, the U.S. was home to 6.78 million single-parent households, of which about 6.4 million are single-mom families. On average, they earned $35,012 per year – about 40 percent of the overall average – and spent $35,553 per year. Their clothing, shoe, and home linen bills came to $1,595 per year or 4.4 percent of spending in 2013.
This share of spending remains higher (relative to income) than those of middle-class and wealthy families, but has fallen faster over time – from 11.6 percent of annual spending in 1973, to 8.1 percent in 1991, 6.8 percent in 2000, and finally the 4.4 percent of 2013. From 1973 to 2013, this savings is the equivalent of $2,559, and just from 2005 to 2013, it is $711. Not as many dollars as $1136 average for all households, but a larger bonus as a share of annual income. Across the 6.78 million families, this represents $4.8 billion in extra purchasing power as compared to 2005, and $17.4 billion as compared to 1973.
P.E.’s Ed Gresser explains how tariff reform can give shoppers another $35-$40 billion of purchasing power: http://progressive-economy.org/the-rebirth-of-pro-shopper-populism-affordable-shoes-outdoor-apparel-and-the-case-for-tariff-reform/
2. Is financial stress a myth? If budgeting has grown easier, why do people feel stressed? Since 1991, as $3,878 has come in from savings on home goods and another $602 from savings on cars, a lot of the money has flowed back out to pay for health insurance, mortgages, and property tax. Health insurance rose from 2.2 percent of family budgets in 1991 to 4.5 percent in 2013; and for the 70 percent of families who own homes, mortgage payments and property taxes have risen from 10.3 percent to 11.3 percent. Together this takes back $2,206, about half of all the money saved on home goods and cars. Rising college costs add more. So, no, financial stress is not a myth.
3. And the really big picture: The Consumer Expenditure Survey is one of the world’s oldest continuous social-science surveys in the world, launched shortly after the Bureau’s creation in 1884 by the otherwise unmemorable Cleveland administration. Their long look back finds that in times remembered as opulent, sunny and calm – the Gilded Age, the post-war boom, etc. – Americans lived pretty close to the bone. Only during the 2000s did the three big life necessities – food, clothing, shelter – fall below half of a typical family’s budget. Over time, families have actually been spending a bit more on their homes, but have cut food budgets by 70 percent and clothing by 80 percent. A summary of life-necessities spending for all households over 110 years of American life:
|Year||Food + Shelter + Clothes||Combined Share of Spending|
|1901||42.5 + 23.3 + 14.0||= 79.5%|
|1950||30.0 + 27.2 + 11.5||= 68.7%|
|1973||19.3 + 30.8 + 7.8||= 57.9%|
|1985||15.0 + 30.4 + 6.0||= 51.4%|
|1991||14.5 + 30.1 + 5.7||= 50.3%|
|2003||13.1 + 32.8 + 4.2||= 50.1%|
|2013||12.7 + 32.0 + 3.1||= 47.8%|
The Bureau of Labor Statistics looks back on a century of consumer spending: http://stats.bls.gov/opub/uscs/home.htm
78 percent of U.S. imports from developing countries are duty-free.
January 14, 2015
THE NUMBERS: U.S. merchandise imports from developing countries, 2014* -
|Permanently Duty-Free||$550 billion|
|Duty-Free Via FTAs & Preferences||$245 billion|
* Estimate based on the 11 months of data now available.
WHAT THEY MEAN:
Anticipating Congressional debate on the Trans-Pacific Partnership, Sen. Bernie Sanders (an independent Socialist from Vermont) took a dire view last New Year’s Eve:
“The TPP will make the race to the bottom worse because it forces American workers to compete with desperate workers in Vietnam where the minimum wage is just 56 cents an hour.”
This argument has a long history in American trade debates, as the rhetorical staple of a century-long line of economic nationalists from Whig Party eminences Clay and Webster, who loved to warn of the “cheap pauper labor,” and “unpaid and half-fed labor” of Britain and continental Europe in the 1830s and 1840s, through Gilded Age pols James Blaine and William McKinley, down to Jazz Age isolationists Harding, Coolidge, and Herbert Hoover, whose 1928 platform argued for tariff hikes to support “industries which cannot now successfully compete with foreign producers because of lower foreign wages and a lower standard of living abroad.”
Is reviving their fears a useful guide for modern Americans? By way of background, the “TPP” (full name Trans-Pacific Partnership) is a 12-country trade agreement now in the late stages of negotiation, which if successful would join the U.S. with Canada, Mexico, Peru, Chile, New Zealand, Australia, Singapore, Brunei, Malaysia, Vietnam, and Japan. It is a complex agreement with features covering Internet and data flow, enforcement of rules banning trade in endangered species and limiting fishery subsidies, customs and port rules, tariff rates, new-technology approvals, automobile trade, market-opening for American products, and lots more. But as far as competition with Vietnam (and by extension lower-wage countries in general) here are the basics:
(1) U.S and Vietnam: The modern U.S. trade relationship with Vietnam dates to the Bilateral Commercial Agreement in 2000, which ended the post-1975 trade embargo. Last year, Hanoi and Mekong Delta farms, factories, and fishing fleets shipped $30.6 billion worth of goods to the United States. This is about 1.0 percent of America’s $3.2 trillion in total imports, 3.4 percent of the $815 billion in imports from the TPP countries, and the equivalent of 30 days’ worth of U.S. imports from Canada, which are about $350 billion. Vietnam’s relatively small share of U.S. trade suggests that even a big jump in Vietnamese imports will have only minor effects on overall U.S. imports, and therefore would have only minor ‘competitive’ effects.
(2) Do U.S. trade barriers block poor-country goods? Sen. Sanders’ implicit argument, though, seems to be against competition with developing-country workers in general, rather with Vietnamese workers per se. Setting aside the merits of this view as economics, its relevance to policy rests on a premise: the U.S. now has an effective existing set of barriers blocking poor-country goods, which TPP or other agreements will breach.
But in fact U.S. trade barriers are generally low, mostly nonexistent, and usually ineffective where they do exist. About 78 percent of last year’s goods imports from developing countries arrived with no tariffs, quota limits, or other barriers. (Apart of course from consumer safety rules, anti-counterfeiting laws, and other limits imposed for public-good reasons.) About 5 percent did come in with high tariffs, but these often applied to goods not made in the United States. Vietnam’s trade patterns illustrate, with the $30.6 billion in imports dividing roughly into two groups:
(a) Zero-tariff goods: For about 40 percent of Vietnamese goods, the U.S. abolished all tariffs long ago and has no other form of trade barrier apart from product-safety and food-safety rules. These include $3.5 billion worth of cell phones and personal computers, for which tariffs vanished in 1997; $500 million in coffee, which hasn’t had any tariffs since the 1920s; $3 billion in furniture, where tariffs were abolished in 1994; $1.7 billion in shrimp, catfish, and other seafood; $600 million in cashew nuts; $200 million in toys, and so on. In these categories of products, as there are no barriers to remove, TPP isn’t likely to have a competitive effect.
(b) High-tariff goods: Vietnam is also a large supplier of high-tariff goods, mainly $14 billion worth of mass-market clothes, running shoes, handbags and luggage. These have tariffs, mostly unchanged since the 1950s, which average about 15 percent and peak at 48 percent for cheap sneakers. In many cases, however, these tariffs are entirely ineffectual. For example, about 99 percent of shoes, and all cheap sneakers, sold in the U.S. are imported anyway. In these cases, tariffs operate only as a way to tax shoppers. Overall, American employment in these high-tariff industries makes up about 1 percent of the U.S.’ 12.2 million factory workers, and 0.1 percent of the 140 million employed American workers. Vietnam’s stake in eliminating tariffs of this sort is mainly for competition with other suppliers – China in particular, but also neighboring Southeast Asian countries outside the TPP, and other suppliers with duty-free status via FTAs and preference programs.
(3) Labor standards: Finally, an area where TPP is doing genuinely new and innovative things is in labor standards, where it will likely be the most elaborate, enforceable, and ‘liberal’ agreement the U.S. has ever concluded. Assuming U.S. negotiators are reasonably successful, this will cover laws, implementation of laws, and capacity-building programs in labor rights, child labor prevention, minimum wage policies, and workplace health and safety policies. In this sense, for those worried about the ‘desperation’ of Vietnamese workers, TPP looks more like a progressive solution than a cause to worry.
TPP background & perspectives –
The U.S. Trade Representative Office explains the TPP and the Obama administration’s hopes: http://www.ustr.gov/tpp
Vietnamese academics Truong-Minh Vu and Nguyen Nhat-Anh look to TPP as a way for Vietnam to compete with China: http://thediplomat.com/2014/09/the-potential-of-the-tpp-for-vietnam/
And Sen. Sanders brings the New Year’s Eve gloom: http://www.commondreams.org/views/2014/12/31/ten-reasons-why-tpp-must-be-defeated
Some systematic analysis –
Are Vietnamese workers ‘desperate’? The ILO’s Global Wage Report 2014/2015 (released last month) is quite optimistic, finding Vietnamese wage rates rising quickly, in part because of a shift of clothing and electronics manufacturing out of southern China, and in part due to three consecutive 10 percent increases in the national minimum wage in 2013, 2014, and 2015: http://www.ilo.org/asia/whatwedo/publications/WCMS_325219/lang–en/index.htm
And how ‘effective’ are U.S. trade barriers? Every two years the U.S. International Trade Commission does a check, with computer-model analysis of the effects of U.S. tariffs and other import limits. The most recent version of the report, Economic Effects of Significant U.S. Import Restraints, came out in December 2013. It found that simply abolishing all of them (i.e. without any negotiations or reciprocal market-opening) would raise U.S. imports by about 0.2 percent above trend. In practical terms this would be an additional $5 billion or so, matched with an 0.3 percent increase in U.S. exports. In practice, then – and again setting aside the question of whether import barriers are good economics – with a few idiosyncratic exceptions, the tariff system is mostly a form of taxation, not a meaningful deterrent to imports or an effective way to block foreign competition. The study:
And long-ago trade-policy talking points, from conservatives, liberals, and radicals -
Sen. Sanders’ fear of low-wage competition would have been familiar a century ago, but as an argument associated with business-minded conservatives in the Webster/McKinley/Harding/Hoover tradition, rather than with liberals or radicals.
Their proto-liberal Democratic rivals worked from a 19th-century faith in low tariffs, consumer benefit, and growth led by farm exports (Jackson and Polk before the Civil War, Cleveland and Bryan in the 1880s and 1890s), augmented by Woodrow Wilson and Louis Brandeis to encourage international agreements and address low-wage competition fears in a constructive way by inventing the International Labor Organization in 1919. TPP is a recognizable descendent of this program. (The final piece of it, the Trade Adjustment Assistance program for dislocated American workers, came 40 years later during the Kennedy administration.)
Radicals of the era, through the Populist Party of the late 1880s and early 1890s and the Socialist Party of the late 1890s to the 1920s, took a third approach, insisting that the R’s and D’s were both wrong (or more likely both liars). They maintained trade debates were frauds meant to distract the public from the real issues, and in the Socialist case that workers should unite across borders rather than seeing one another as rivals. A blistering sample from Eugene Debs’ 1912 Presidential campaign:
“So long as the present system of capitalism prevails and the few are allowed to own the nation’s industries, the toiling masses will be struggling in the hell of poverty as they are today. To tell them that juggling with the tariff will change this beastly and disgraceful condition is to insult their intelligence. The professional politicians who have been harping upon this string since infant industries have become giant monopolies know better. Their stock in trade is the credulity of the masses. The exploited wage-slaves of free trade England and of the highly protected United States are the victims of the same capitalism; in England the politicians tell them they are suffering because they have no protective tariff and in the United States they tell them that the tariff is the cause of their poverty. And this is the kind of a confidence game the professional politicians have been playing with the workers of all nations all these years.”
Some incendiary stuff from Debs (scroll to the “Capitalism and Socialism” speech from August 1912, or just search for ‘tariff’): http://www.gutenberg.org/files/34012/34012-h/34012-h.htm
Herbert Hoover warns against low-wage competitors, 1928: http://www.presidency.ucsb.edu/ws/index.php?pid=22067&st=tariff&st1=hoover
And Woodrow Wilson’s Fourteen Points (see #2 and #3 for trade): http://avalon.law.yale.edu/20th_century/wilson14.asp
The U.S. embargo on Cuba has been in place for half of Cuba's independent history.
January 7, 2015
THE NUMBERS: American goods imports in 1955, from world and top 9 sources–
WHAT THEY MEAN:
Launched with the Eisenhower administration’s cancellation of Cuban sugar quotas in the summer of 1960, the U.S. embargo on Cuba has been ratcheted up over five decades to include nearly full bans on trade,investment, travel, and small financial transfers. Having lasted for 54 of the 112 years since Cuba’s independence in 1902, the embargo policy is now older than 9 million of Cuba’s 11.3 million people.
The Obama administration’s December shift in course involves some scaling back of sanctions – credit card and financial links, telecom business, travel – and, on the grounds that “American businesses should not be put at a disadvantage, and increased commerce is good for Americans and for Cubans,” a call for Congress to consider “an honest and serious debate about lifting the embargo.”
What would this mean? The consequences for politics within Cuba, family relationships, and so forth are of course unknowable. But in the limited world of trade flows, here are three non-scientific measuring sticks for the potential scale:
(1) Top estimate, from comparisons with the pre-Castro era: In 1955, the $455 million worth of goods Cubans bought from the United States – including some cars still running today – accounted for 3 percent of America’s $15.5 billion total exports. This placed Cuba 8th as an American export market, below Canada, the U.K., Mexico, Japan, Germany, Venezuela, and the Netherlands, but above France, Italy, Brazil, and Korea.
Cubans, meanwhile, sold $422 million in goods to the U.S, out of $11.4 billion in total imports. (Mostly sweets – Cuba supplied about 2.9 million tons a year in the 1950s, a third of all the sugar Americans were using at the time – plus some cigars and metal ores.) Cuba ranked 7th in the world as an exporter to the U.S., outdoing Germany’s $366 million and Mexico’s $397 million, and just barely below Japan’s $432 million.
Conclusion: Given some noticeable changes in the trading world since the 1950s – end of the embargo on China, creation of the European Union, etc. – Cuba probably isn’t likely to regain its 1950s-era share of U.S. commerce at roughly 3 percent of U.S. imports and exports. If it did, though, with the annual U.S. merchandise trade levels now about $3 trillion, two-way goods trade would be $100 billion or so, probably with some U.S. surplus. This would place Cuba in the neighborhood of the United Kingdom and Korea, and a bit above Saudi Arabia and Brazil.
(2) Low estimate, from current levels of Cuban trade and analogies with other Caribbean islands: Cuban imports in 2013 were about $15.8 billion, and exports $5.8 billion. The $21.6 billion total is standard for the larger Caribbean islands: the Dominican Republic is at $27 billion, Trinidad $25 billion, Jamaica $8 billion, and Haiti $4.6 billion. The U.S. supplies about 28 percent of Trinidadian imports, 35 percent for Haiti, and 40 percent for Jamaica, Haiti, and the Dominican Republic.
Conclusion: At current levels of Cuban trade, and assuming the U.S. share might be similar to the shares for Jamaica, Trinidad, Haiti, and the D.R., U.S. exports to Cuba might be $6 billion or so, and imports $4 billion.
(3) Medium estimate, using recent evidence from agricultural trade: In 2001, Congress poked a small hole in the embargo by legalizing sales of food and medicine. Farm exports to Cuba rose from minimal figures to a $685 million peak in 2007 (setting, for whatever it’s worth, a nominal-dollar record for total U.S. exports to Cuba.) The Bush administration however did not welcome the idea, and tried with some success to frustrate it by (a) refusing to permit financing of exports and (b) barring ships carrying goods to Cuba from leaving port without payment in advance. This cut exports to $350 million a year after 2008, about the same as farm sales to Jamaica and Haiti, and a bit above the sales to Nicaragua. The U.S. International Trade Commission, looking at these numbers in 2090, guessed at a likely potential U.S. farm export total of $1.2 billion.
Conclusion: Agriculture is about 8 percent of all U.S. exports. If this ratio held for Cuba, with farm goods at $1.2 billion, total goods exports would be around $15 billion, comparable with Chile, Israel, and Italy.
* Note: The U.K. would rank much higher, about $180 billion, with services trade counted in. We haven’t included services in this fact, not out of laziness but because no services-trade-by-country figures, for Cuba or otherwise, are available for the 1950s.
Then and now -
Pres. Eisenhower announces the revocation of Cuban sugar quotas, July 1960: http://www.presidency.ucsb.edu/ws/?pid=11866
And Pres. Obama outlines scaling back of sanctions, & calls for “an honest and serious debate about lifting the embargo,” December 2014: http://www.whitehouse.gov/the-press-office/2014/12/17/statement-president-cuba-policy-changes
Secretary of State Kerry on reopening diplomatic relations: http://www.state.gov/secretary/remarks/2014/12/235352.htm
The Treasury Department’s Office of Foreign Asset Control explains the state of the embargo: http://www.treasury.gov/resource-center/sanctions/Programs/pages/cuba.aspx
And the Vatican comments on its role in renewal: http://en.radiovaticana.va/news/2014/12/18/cardinal_parolin_on_holy_see%E2%80%99s_role_in_us_cuba_agreement/1115269
The U.S. Interest Section/Havana explains policy to Cuba’s hard-pressed Internet users: http://havana.usint.gov/
And the BBC reports from Havana on Internet access, cost, censorship, and the occasional open wi-fi network: http://www.bbc.com/news/magazine-27033208
…. And meanwhile, the Cuban Interest Section in Washington apparently hasn’t updated its page since November: http://www.cubadiplomatica.cu/sicw/EN/Mission/InterestsSection.aspx
Reporting on U.S.-Cuba normalization from –
Jamaica’s The Gleaner: http://jamaica-gleaner.com/gleaner/20141219/lead/lead2.html
Colombia’s El Tiempo: http://www.portafolio.co/internacional/estados-unidos-cuba-una-nueva-era-opinion
El Pais (Madrid), from Miami: http://elpais.com/elpais/2014/12/29/inenglish/1419863556_530205.html
The China Daily: http://usa.chinadaily.com.cn/world/2014-12/23/content_19143505.htm
And last -
A National Public Radio photo-essay on Cuban cars: http://www.npr.org/2014/06/28/325602703/we-said-no-car-pictures