Trade and the American Worker: A Primer

Manufacturers are thriving:  While critics of NAFTA and the WTO say that they have harmed U.S. manufacturing, U.S. industrial production - 78% of which is manufacturing - rose by 57% between 1993 and 2007.  This performance significantly outpaced the 28% increase in U.S. industrial production between 1981 and 1993.  (Source: U.S. Federal Reserve)

 

The United States is still the world's workshop:  Contrary to popular perception, the United States remains the world's largest manufacturer, accounting for over a fifth of world manufacturing value added.  Drawing on data from the United Nations Industrial Development Organization, the Cato Institute's Daniel Ikenson has noted that the U.S. share of world manufacturing output, on a value-added basis, has remained steady for more than a decade.  In 2005, U.S. factories accounted for 21.1% of the world's manufacturing output, which was only a very small decline from their 1993 share of 21.4%.  (Source: Cato Institute, "Thriving in a Global Economy," August 2007)

 

Europe and Japan are slipping:  Over the 1993-2005 period, the Japanese and EU shares of world manufacturing fell by about 3% each.  The output of the U.S. manufacturing sector is still more than double that of China's.  (Source: UN Industrial Development Organization)

 

Manufacturers set new records despite growth in services:  In the face of rapid growth in America's booming services sectors - which employ some 80% of U.S. workers - the share of U.S. GDP represented by manufacturing has declined from 15.6% in 1993 to about 12% today.  Nonetheless, recent years have seen U.S. manufacturers set new records for output, revenues, profits, profit rates, and return on investment.  (Source: U.S. Bureau of Economic Analysis)

 

A productivity revolution:  U.S. manufacturers shed about three million jobs between 2000 and 2003, despite the dramatic growth in output since NAFTA and the WTO came into being.  A productivity revolution has allowed manufacturers to greatly increase output with fewer workers.  Technological change, automation, and widespread use of information technologies have allowed firms to boost output even as some have cut payrolls.  (Source: U.S. Bureau of Labor Statistics)

 

"A country called productivity":  Where have the lost manufacturing jobs gone?  Not to Canada or Mexico, nor to China or India.  Rather, they've been lost to a country called "productivity."  The productivity revolution is a worldwide phenomenon: in fact, China shed 25 million manufacturing jobs in 1994-2004, ten times more than the United States lost in the same period.  As a case in point, 25 years ago it took General Motors about 500,000 workers to make 5 million cars and trucks.  Today it takes fewer than 150,000 workers to make that same number of vehicles.  (Source: RAND Corporation; U.S. Chamber of Commerce)

 

Manufacturing employment peaked nearly 30 years ago:  This productivity revolution is a complex phenomenon.  Critics of NAFTA and the WTO are correct when they say that manufacturing employment "did hit a peak and then begin a steady decline.  The problem is that the peak was in 1979, 15 years before NAFTA came into force," as Philip I. Levy at the American Enterprise Institute points out.  (Source: "Doing a job on NAFTA," March 6, 2007, The American)

 

Revenue from exports of manufactures is critical:  Approximately 13.9 million Americans are employed in manufacturing.  These workers exported $870 billion worth of manufactured goods in 2007.  In other words, exports generate more than $62,000 of revenue for each and every American factory worker.  Compare this to the salary of the average U.S. manufacturing worker - about $37,000.  How could manufacturers make their payroll without their huge and growing exports?  The short answer is, they couldn't.  (Source: U.S. Bureau of Labor Statistics; U.S. Department of Commerce)