Meltdown 101: US goods that sell well overseas

[December 12, 2008]  WASHINGTON (AP) -- The trade deficit has been so big for so long, you may start to wonder: Do U.S. companies sell much of anything overseas? What sorts of American goods -- if any -- tend to fly off foreign shelves?

Here are some questions and answers about one ingredient in the trade balance: the export of U.S. goods.

Q: Just how long has America's trade performance been a problem?

A: It's been bad for a long time. Over the past three decades, the country has run a deficit in the broadest measure of foreign trade in all but three years; the last surplus happened 17 years ago. A trade deficit occurs when the value of U.S. goods, services and investments sold overseas is less than the value of foreign goods, services and investments sold here.

Q: Does that mean we are not selling anything overseas?

A: No, to the contrary, America's exports have been doing well in recent years. Starting in 2006, sales of U.S. products have topped $1 trillion each year. Even with the global slowdown, exports of U.S. goods through October total $1.1 trillion, up 17 percent compared to the same period a year earlier.

Q: So what are foreigners getting for that money?

A: America's biggest export in recent years has been commercial aircraft. In 2007, the United States sold $103 billion worth of aircraft, jet engines and aircraft parts.

Even though American automakers are going through hard times, the second largest export last year was autos and auto parts, totaling $80 billion -- a figure that includes products made by foreign auto companies in the United States for shipment to other countries.

Other big export categories were semiconductors, computers and telephone equipment.

Q: Does this mean American manufacturers aren't doing so badly?

A: It depends on how you measure it.

U.S. manufacturers still make more than any other country in the world, a fact that's not so surprising given that the United States is the world's largest economy.

But while U.S. manufacturers used to export more than other nations, that hasn't been true for some time. The U.S. is now third in manufacturing exports, behind Germany and China.

Q: How has this shift affected manufacturing jobs? Critics of the Bush administration's free-trade policies say millions of these jobs have been lost to low-wage countries.

A: It is true that the United States has lost more than 3 million manufacturing jobs since 2000. But those losses can only partly be blamed on trade competition -- after all, the output of U.S. manufacturers is actually higher now than in 2000.

The other key factor is increased productivity, which means manufacturers can make more goods with fewer workers.

Q: If we are exporting over $1 trillion worth of goods each year, why does it seem like we are losing our manufacturing base?

A: It's partly a perception problem.

The United States is still doing well with high-end manufacturing, but individual consumers don't buy many jet aircraft, large earth-moving equipment or MRI scanners. The items that they do buy -- clothing, toys, televisions and cell phones -- are overwhelmingly made overseas, often in China.

Q: If we're still selling a lot of American good overseas, why is the trade deficit so huge?

A: That mostly has to do with American consumers, who tend to buy an enormous amount of stuff -- much of it made in other countries. Yes, U.S. goods exports totaled an impressive $1.15 trillion last year, that number is dwarfed by the value of goods imported into the U.S. -- $1.97 trillion.

The trade imbalance is trimmed a bit by the fact that we run surpluses in the sale of services. But still, the total deficit in goods and services combined was $700.3 billion last year. When Americans' earnings on overseas investments get added, the broadest measure of the trade -- the current account deficit -- totaled $731 billion last year, down from an all-time high of $788 billion in 2006.

Q: What is the outlook for the future?

A: Economists think the gap will continue to shrink. Brian Bethune, an economist with HIS Global Insight, predicts the current account deficit for this year will fall to $300 billion -- the smallest imbalance in more than a decade.

Q: What is the reason for such a big improvement?

A: Two factors: The recession in this country will reduce consumer demand for imports. And economists are predicting a big decline in the foreign oil bill. The global downturn, by trimming demand, is expected to translate into an average price for crude oil of $43 per barrel, Global Insight predicts, compared to an average this year of around $100 per barrel.

Q: Considering critics' complaints about soaring trade deficits robbing jobs, will a narrower trade deficit be good for the economy?

A: Unfortunately, no. The improvement in the trade balance is in large part a symptom of the recession, which is already the country's longest in a quarter century. The downturn began in December 2007 and many economists believe it will not be over until the middle of 2009.

Once the recession is over and unemployment stops rising, consumers will feel more confident about spending their money. And since much of what they buy will be made overseas, that should push the trade deficit back up again.

[Associated Press; By MARTIN CRUTSINGER]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.