USBIC study data: Imports still assail U.S. manufacturers

Despite price advantages created by the weakening dollar, many U.S.-based manufacturers of high-tech and other capital-intensive products lost share in their home market to global competitors at an accelerating rate in 2006, according to a study by Washington-based U.S. Business and Industry Council (USBIC) issued earlier this year.

“These are industries everyone stresses we should remain strong in: industries like high-tech, semiconductors, aircraft engines and parts, machine tools, telecommunications hardware. It's hard to imagine industries more important to national security,” says Alan Tonelson, research fellow for USBIC and author of the report. “Increasingly they can't compete in the U.S. market, which is the market they know best—where they face no trade barriers.”

The most recent annual report is based on government data for 2006—the latest year data is available—and analyzes import penetration in 114 sectors characterized by high levels of technology- and labor-intensiveness.

Between 2005 and 2006, 79 of the 114 sectors lost share in their home market due to growing import penetration. In addition, 27 sectors faced import penetration of 50 percent or higher—including aircraft engines and engine parts, turbines and turbine generator sets, and machine tools.

Of these 27, eight sectors face penetration losses of 60 percent to 70 percent; for an additional seven sectors, more than 70 percent. For all 114 sectors, the aggregate import penetration grew from a base in 1997 of more than 21 percent to nearly 34 percent in 2006—a growth increase of about 58 percent.

“If I had to single out just one industry between 2005 and 2006, it would be semiconductors, where import penetration jumped about 7 percent,” Tonelson says. “That represents a rate of increase of 18 percent in one year. With semiconductors, we now have foreign-produced semiconductors representing nearly 48 percent of all U.S. consumption.”

Nearly one-third of the 79 industries with rising import penetration rates also saw output fall between 2005 and 2006.

"There’s a huge opportunity being missed in this country because there has been so much government policy emphasis on the magic of exports to foreign markets—and not enough attention on preserving market share in the home market." —Alan Tonelson, research fellow, U.S. Business and Industry Council

“There's a huge opportunity being missed in this country because there has been so much government policy emphasis on the magic of exports to foreign markets—and not enough attention on preserving market share in the home market,” Tonelson continues.

Tonelson believes the U.S. government has done a poor job helping domestic manufacturers deal with predatory trade practices.

“The 114 industries that are the focus of this report are exactly the kind of high-tech, high-value industries that all parties stress we need to keep strong,” he concludes, “but they're increasingly being overrun by products from abroad.”