Data points to loss in U.S. manufacturing marketshare despite strong and weak dollar periods

Is American manufacturing flourishing or floundering? While the optimists like to point to the rebound in manufacturing output—which has reached new levels since the 2001 recession—the pessimists point to a rapidly rising manufacturing trade deficit.

A new analysis tends to support the latter, with increased penetration by international competitors hitting many U.S. manufacturing sectors hard.

As with the auto industry over the last decade, U.S. Census Bureau data; information out of the U.S. Business and Industry Council (USBIC); and comparative analysis of data from 1997 through 2005 reveals “more than 100 U.S. based manufacturing industries lost major chunks of their home U.S. market to imports,” says the USBIC.

“Of the 114 industries we studied, 111 lost share in their home U.S. market to imports,” says Alan Tonelson, research fellow at the Washington-based industry group. “This is deeply discouraging to those wanting a bright future for U.S. manufacturing. These penetration figures show head-to-head comparisons in the U.S. market, where U.S. manufacturers face no trade barriers. It's the market they know best, and they're still losing share.”

Of particular note is that industries evaluated did not include labor-intensive segments such as toys, apparel, furniture, and consumer electronics, which have been dominated by imports for decades. Rather, the analysis focused on capital- and technology-dependent industries.

“The biggest single surprise was in aircraft engines and aircraft parts,” especially between 2004 and 2005, says Tonelson. “Imports in engines and engine parts shot up from 51.5 percent in 2004 to just fewer than 62 percent in 2005. In non-engine parts, it increased from just fewer than 35.5 percent in 2004 to nearly 46 percent in 2005. These are absolutely stunning rates of increase in import penetration in industries where the U.S. traditionally has been seen as the world leader,” he asserts.

USBIC indicates other measurements of share erosion between 1997 and 2005 as follows:

• 26 of the 114 U.S. industries lost 50 percent or more to imports;
• Another eight industries lost nearly 50 percent of their share to imports; and
• In that same period, penetration rates at least doubled in 26 industries.

“Everyone knows the problems the U.S.-owned automotive sector is experiencing, failing to hold onto its own market. Yet we see dozens of capital-intensive industries with the same kinds of losses of market share that caused problems for Detroit,” Tonelson says.

Many of the products being imported are from offshore partners that American companies have outsourced to, Tonelson adds. “We have sent offshore much of the best of our own production base. This research makes clear that much of this is coming back to haunt us in weakening our own production strength.”