21 Feb Trade deficit hits home in Wisconsin
Terry Hicks, president of the AFL-CIO in western Wisconsin, doesn’t expect to see many of his railroad brethren hanging around the union hall these days. They’re all working overtime handling the tremendous volume of freight traveling the nation’s rails.
“The trains arriving from the coasts are full (with foreign-made goods),” Hicks said Feb. 17 at a La Crosse forum on globalization, “but I’m told the returning trains are going back empty.”
To Hicks, those empty boxcars are a symbol of the rising U.S. trade deficit, which increased to $617.7 billion in 2004 from $496.5 billion in 2003. Many economists are alarmed by the surge in the trade deficit, which they see as proof the United States has become an “import-dependent” nation rather than an industrial giant that supplies the world.
Others don’t see as much reason for alarm. They say Americans are trading more with the rest of the world than ever before, with 2004 exports surpassing the previous peak year of 2000 and signaling a mini-boom for U.S. manufacturing. Even as the trade deficit surged in 2003, so did gross domestic product, employment and manufacturing output.
Wisconsin is a neatly packaged microcosm of the national debate over trade and the global economy, which was the topic of the forum sponsored by Western Wisconsin Technical College, Viterbo University and the UW-La Crosse.
State exports rose by 10.4 percent in 2004, to $12.7 billion, marking Wisconsin’s all-time high and the third consecutive annual increase. Canada remained the state’s largest export destination, and Mexico moved into second place ahead of Japan. The list of products shipped from Wisconsin was dominated by industrial machinery, medical instruments, electrical machinery, transportation equipment and paper products.
At the same time, manufacturing employment in Wisconsin is far off the late 1990s peak of about 590,000 jobs and isn’t expected to rise much above 525,000 any time soon, according to Terry Ludeman, chief labor economist for the state Department of Workforce Development.
How can Wisconsin be exporting more goods and services and still have fewer people working in manufacturing?
Productivity gains and new technology are part of the answer. American factories that were lagging in robotics and other high-tech processes are catching up after a shakedown that cost thousands of workers their jobs, but which may have secured the long-term survival of entire industries.
Also, not all of those exported goods and services need fit into a boxcar. Wisconsin’s knowledge-based economy is producing products in the life sciences, information technology and other sectors – products that flow just as easily over the Internet or on an overnight flight as by rail.
The pecking order of Wisconsin trade partners reflects the national shift. Union leaders often lambaste the North American Free Trade Agreement (NAFTA) for destroying U.S. jobs in the past decade, but Wisconsin’s trade statistics reveal that free trade with Canada and Mexico produced $6 billion in sales in 2004. That’s as much as the rest of the top 20 trade partners combined.
China’s rise among Wisconsin trade partners is another startling phenomenon. China ranked fourth on the state’s 2004 list with $583 million in exports. In fact, China’s thirst for imported goods and materials matches some of the state’s historic and emerging strengths.
Still, the rising trade deficit shows Americans are spending more than they are earning, thus eating into saving accounts and running down the value of the dollar against other world currencies. As Ludeman noted during the La Crosse forum, the Chinese government is so interested in keeping American markets open that it is buying U.S. dollars to prop up the price.
A prolonged trade deficit is worrisome. So are trade policies that can be unfair to U.S. workers. But Wisconsin cannot consume all of its goods and services within its borders – nor can they be consumed within the borders of the United States alone. Wisconsin farmers, manufacturers, service providers and technologists must compete on a global stage. It’s painful when the state loses workers, but Wisconsin is creating more jobs in the long run by staking out the high ground of “knowledge-based” jobs and more efficient, tech-based manufacturing.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.