The US has a long history of exporting its products to other countries, but how the US makes sure those products stay where they’re made and that they stay within its borders is the subject of a major new book by University of California Berkeley economist Nicholas Bagley.
He argues that the US is “diversifying” its supply chain by importing products from more than two dozen countries, and he argues that US companies are doing this without ever passing on the risk to consumers.
Bagley uses data from the US Census Bureau and the Bureau of Labor Statistics to show how the number of US companies that import from countries outside of the US jumped from 1,722 in 2010 to 1,853 in 2016. “
The US is a multinational business that has grown up around the world, with an economic structure that has largely served the interests of US corporations.”
Bagley uses data from the US Census Bureau and the Bureau of Labor Statistics to show how the number of US companies that import from countries outside of the US jumped from 1,722 in 2010 to 1,853 in 2016.
The US was the largest importer of foreign-made goods in 2016, importing nearly $300 billion.
Bagley estimates that US businesses have invested nearly $5 trillion in global manufacturing since 2000.
While the US economy is growing, Baglay argues, the costs of exporting products overseas are growing even faster.
The authors estimate that each time a US company imports a foreign-manufactured product, it loses $3,200 in manufacturing costs, and those losses translate into $3.7 trillion in lost exports.
This loss of revenue translates into lost consumer spending, he writes.
In the process, US corporations are also moving away from domestic manufacturing and into overseas production.
“Foreign-made products are less expensive to manufacture in the US and are more attractive to foreign firms than domestic products, especially if they are more complex and more costly,” Bagley says.
This, he argues, has been happening for decades, even though the US was one of the few countries to adopt free trade agreements, such as NAFTA.
“We’re moving from a manufacturing-first economy to a manufacturing–only economy.
Our manufacturing industries are being left behind by foreign competitors, and it’s a bad strategy.”
As part of the book, Bagly also explores the effects of these global shifts.
US manufacturing is now at a crossroads, Bagleys analysis suggests. “
While the US lost about $5.4 trillion in GDP in the decade after World War II, we’re losing $3 trillion in revenue.”
US manufacturing is now at a crossroads, Bagleys analysis suggests.
The economy is still recovering from the financial crisis, and some economists expect that the unemployment rate will remain low for years.
But as the country has become more reliant on imports and as foreign competitors have moved into the domestic manufacturing sector, it’s not clear how the country can remain competitive without imports.
The economic impact of these changes, he warns, will be significant, and the US will continue to lose money on the international market.