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Trade deficit grows; tires vulnerable

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WASHINGTON—The U.S. trade deficit, especially with China, has grown exponentially over the past 15 years, and tires and rubber products have been among the most vulnerable of manufactured goods.

That's the word from a top official with a U.S. industry advocacy group, who backs up his statement with government data.

“(U.S.-manufactured) tires lost U.S. market share more than twice as fast as advanced manufacturing overall,” said Alan Tonelson, research fellow with the U.S. Business and Industry Council (USBIC). “The numbers tell me those products have been unusually easy to offshore.”

Tire imports to the U.S. were $9.64 billion in pre-inflation dollars in 2008, said Mr. Tonelson, quoting figures from the U.S. International Trade Commission. They fell to $8.1 billion in 2009, but grew to $10.6 billion in 2010 and $13.2 billion in 2011, he said.

The value of U.S. imports rose again last year, to an estimated $14.5 billion, based on the January-November data.

The overall import penetration rate in the tire sector declined slightly between 2010 and 2011, from 48.7 percent to 48.6 percent, according to Mr. Tonelson.

Total U.S. tire output in pre-inflation dollars grew 25 percent between 2010 and 2011, compared with the 24.5-percent growth in imports, he said.

However, the import penetration statistics aren't so good when tracked over time, Mr. Tonelson said.

“The 1997 import penetration rate for tires was only 22 percent,” he said. “Between 1997 and 2011, the import penetration rate rose by 121.1 percent—considerably faster than the overall rate.”

Mr. Tonelson is the author of an import penetration survey, issued in January, showing that imports of goods and services to the U.S. captured 37.6 percent of the $2.01 trillion U.S. market in 2011. Advance indicators also signal that import penetration rates increased further in 2012, he said.

“The analysis strongly indicates that, contrary to widespread optimism about an American industrial renaissance, domestic manufacturing's highest value sectors keep falling behind foreign-based rivals,” he said in a summary of the survey's findings. “Imports' gains at the expense of domestic producers continued to undermine the U.S. economy's already sluggish recovery from an historic recession,” he said.

Mr. Tonelson and the USBIC repeatedly have called for forceful, unilateral measures by the U.S. government to combat currency manipulation, trade subsidies and other predatory practices by China and other importing countries.

Other U.S. business associations also have called on the Obama administration to take action on trade.

For example, the Alliance for American Manufacturing (AAM)—a coalition of the United Steelworkers (USW) union and various U.S. manufacturing companies—sent President Barack Obama a letter on the eve of his Feb. 12 State of the Union address, urging him to outline a comprehensive national manufacturing strategy including strict enforcement of trade laws, a multilateral trade meeting to address global trade imbalances and “Buy America” provisions for all federal procurement and federal-aid infrastructure projects.

Also in advance of the State of the Union address, the National Association of Manufacturers (NAM) released its “Growth Agenda” for U.S. manufacturing.

In the area of trade, it called for, among other things, the negotiation of new trade and investment agreements, modernizing export control and customs rules, and ensuring that manufacturers have access to competitive export credit financing.

Mr. Tonelson, however, said some of the AAM and NAM recommendations would prove useless or even detrimental to balancing U.S. trade. “Some of the ideas have displayed little or no promise for many years,” he said, citing stronger enforcement of existing trade laws as an example. “Still others appear to call for more of the kinds of negotiations that have long gotten domestic manufacturers nowhere.”

Mr. Tonelson was similarly unimpressed by the manufacturing promotion plans President Obama outlined in his State of the Union address. In a press release issued Feb. 14, he said the president's proposed manufacturing tax credit for helping communities regain manufacturing would total $6 billion.

By comparison, he said, planned Chinese state investments in strategic industries would total $1.5 trillion between 2010 and 2015.

“The president's aim to strengthen U.S.-based manufacturing is admirable and vitally important,” Mr. Tonelson said Feb. 13. “But success can only result from new, effective policies, not wishful thinking about China's industrial demise and a U.S. manufacturing boom.”
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