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PPI’s Trade Fact of the Week: A quarter of Ohio’s manufacturing workers work for international businesses

Posted on January 10, 2024September 18, 2024 by Max Sherrill

FACT: PPI’s Trade Fact of the Week: A quarter of Ohio’s manufacturing workers work for international businesses.

THE NUMBERS:

U.S. private-sector employment, 2021:	124.38 million
… at foreign-owned businesses:	7.94 million
… U.K.-owned:	1.22 million
… German-owned:	0.92 million
… Canadian-owned:	0.87 million
… Japanese-owned:	0.96 million
… all other countries:	3.97 million

WHAT THEY MEAN:

Anxiety-filled comment from Sen. J.D. Vance, an Ohio Republican, last month in response to U.S. Steel’s acceptance of a $14 billion purchase offer from Tokyo-based Nippon Steel:

““Today, a critical piece of America’s defense industrial base was auctioned off to foreigners for cash …”

In fact of course the company was not at “auction” as a sort of estate sale or distressed asset, Japan is not a random group of unknown foreigners but a core U.S. ally, and Nippon Steel is a long-term participant in U.S. metals production. A more temperate comment from Lael Brainard, running the White House’s National Economic Council, says these sorts of transactions can have implications beyond the capital markets, and that the U.S. government has a well-established process for examining them:

“This looks like the type of transaction that the interagency committee on foreign investment Congress empowered and the Biden Administration strengthened is set up to carefully investigate. This Administration will be ready to look carefully at the findings of any such investigation and to act if appropriate.”

Here’s some background:

Steel Output: The world’s steel mills pour about 1.9 billion glowing tons of metal a year. The World Steel Association’s “World Steel in Figures 2023” summary places China’s 1.018 billion tons at more than half of 2022’s 1.885 billion-ton total, with India a distant second at 125 million tons, Japan third at 89 million tons, and the U.S. fourth at 80.5 million tons. Six of the world’s 10 largest producers are Chinese; the remaining four include two Japanese firms, one Korean company, and the equivocal Arcelor-Mittal, which is based in Luxembourg but Indian by origin and management. Nippon Steel’s 44.4 million tons of output placed it fourth in the world. U.S. Steel’s 14.5 million tons ranked 27th worldwide and third in the U.S. after Nucor’s 20.6 million tons and Cleveland-Cliffs’ 16.8 million.

Foreign Investment in the United States: The Commerce Department’s Bureau of Economic Analysis, meanwhile, tracks U.S. business investment abroad and foreign investment here. Its most recent annual tally, out last August and covering the year 2021, reports that international businesses employed 7.94 million American workers in 2021 – that is, a modest 6.2% share of that year’s 124.3 million private-sector workers. The international role in U.S. manufacturing is a lot larger, though: 2.81 million American manufacturing workers — about 23% of 2021’s 12.35 million total — go to work daily for international businesses. This includes 153,000 of Ohio’s 675,000 manufacturing workers, mirroring the national 23% employment share and the fourth-largest total of any state. In Ohio as nationwide, Japanese firms are the top employer and Germans second. By country of origin, the largest groups are:

All manufacturing workers:	12.35 million
U.S.-based firms:	9.54 million
International firms total:	2.81 million
Japanese firms:	0.54 million
German firms:	0.32 million
British firms:	0.24 million
French firms:	0.21 million
Swiss firms:	0.18 million
Canadian firms:	0.15 million

By industry, the single largest group of workers at international manufacturers — 512,000 — are in automaking, followed by 426,000 in chemicals and 334,000 in food production. In “primary metals” (which in BEA’s reports are combined as a group – steel, copper, aluminum, lead, etc.) BEA finds international firms producing $7.1 billion of 2021’s $74 billion in value-added U.S. output and employing 62,000 of the 357,000 total American metal workers. As an example, the Calvert mill in Alabama, with a 5.3 million ton annual capacity, has operated as a joint venture by Nippon Steel and Arcelor-Mittal since 2014, after its 2010 launch by German industrial conglomerate Thyssen-Krupp.

BEA’s “primary metals” employment figure is actually a bit low in historical terms — noticeably down from the 95,000 workers of 2000 and the 92,000 of 2019. The post-2019 decline appears mainly to reflect Arcelor-Mittal’s 2020 sale of most of its U.S. steel assets (but not the Alabama site) to Cleveland-Cliffs. This event wasn’t especially unusual for FDI transactions, in which ownership occasionally shifts back and forth among the U.S., Canada, Europe, and Japan. In autos, for example, Fiat’s current ownership of the venerable Chrysler Motors factories — now operating under the name “Stellantis”, with French producer Peugeot also a partner – followed a period of sole U.S. ownership from 2007-2014; and this in turn succeeded the company’s 1998-2007 incarnation as DaimlerChrysler.

U.S. Policy & Institutions: With all this in the background, (a) international participation in U.S. heavy industry in general, or metals specifically, isn’t new, and (b) some purchases, of course, are sensitive by the nature of the industry or the prospective buyer. To examine and answer the questions they raise — for the defense industry, critical infrastructure, intellectual property, and research, or other reasons — and take such action as might be necessary (if any is needed), the U.S. government uses the long-functioning interagency group Dr. Brainard’s comment cites.

Known as the Committee on Foreign Investment in the United States, “CFIUS”, this is a permanent executive-branch expert group composed of nine agencies — the Treasury Department as the chair, along with the Departments of State, Justice, Commerce, Homeland Security, Energy, and Defense, plus the U.S. Trade Representative and the White House’s Office of Science and Technology Policy. CFIUS reviewed 154 FDI deals in 2022 (some easily decided to be non-controversial, others requiring more investigation), a total slightly below the 164 reviews of 2021 and a bit above the 120 of 2020. These involved facilities and enterprises ranging from auto parts, metalworking, pharmaceuticals, and boat-building through the information sector such as software publishing and data processing to telecommunications, financial services, and medical labs.

In sum: International businesses are a large and lively part of the U.S. economy, particularly in manufacturing. They carry on lots of research, make lots of cars and a significant amount of metal, and employ about a quarter of the American factory workforce. It’s perfectly reasonable nonetheless to examine new purchase proposals. And given U.S. Steel’s unusually evocative history — sepia-tinged images of Carnegie, Morgan, and Schwab; mid-20th-century black-and-white reels tagged “Rooting for the Yankees is like …” — emotional reactions aren’t surprising. But neither the basic issues, nor Nippon Steel as a particular company given its significant participation in U.S. metals production over time, are novelties. As Brainard suggests, the government has a perfectly functional way to examine any questions the transaction might raise, and a hyperventilating response probably isn’t very useful.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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Looking Forward: Pacific Strategy and U.S. Relations with Vietnam and Thailand

Posted on January 4, 2024September 18, 2024 by Max Sherrill

Thoughts and Conclusions After Consultations in Hanoi and Bangkok, December 2023

Note: A five-person PPI staff group including Marshall and Gresser recently returned from a two-week visit to these two countries, with extensive consultations in Hanoi and Bangkok. The following lays out some of the information and conclusions the group drew from these visits.

Vietnam and Thailand both possess strong and successful relationships with the U.S., but ones we can strengthen — particularly through more ambitious trade policy engagement. As Americans look, in economics, to “de-risk,” “friend-shore,” and reduce single-source reliance on Chinese imports — and in politics to develop diplomatic and security relationships with strong and influential middle-sized Asian powers —both are attractive choices.

These are medium-sized countries by Asian standards, but large by anyone else’s: Thailand’s 70 million people and Vietnam’s 100 million together aren’t far below the 215 million combined for Germany, France, and the U.K. Though their economies are obviously smaller, Thailand is a prosperous upper-middle-income country and Vietnam a fast-growing lower-middle-income state. Both countries, with their very different histories and political cultures, have all but eliminated absolute poverty and developed large and well-educated middle classes. It’s particularly striking to see that Vietnam, with 21,900 students now at American universities, sees the United States as the partner of choice in developing its next generation of leadership.

Both countries likewise have independent and carefully managed foreign policy strategies, whose core concerns are logical and compatible with U.S. goals. Vietnam is engaged in very high-stakes competition with China over maritime territorial claims, the main issue being a Chinese claim to vast areas of water and island chains quite far south of China’s coast and very near those of Vietnam, Malaysia, and the Philippines. Vietnamese policy sees a close political relationship with the United States as a way to ensure that China does not simply impose its view on the smaller countries to its south, and is also a way of reducing the risk that conflicting claims will erupt in crisis. Thailand, a long-time treaty ally of the United States, does not have territorial concerns and worries most about spillovers from instability in neighboring countries. Like Vietnam, and with a deep tradition of bilateral military and intelligence cooperation, Thailand sees the United States as a valuable partner and contributor to regional stability.

Economically, the U.S. relationship with these countries is large and generally successful, but in some ways limited. Vietnam has been the “winner” of the Trump administration’s trade war, with U.S. imports rising from $46 billion in 2017 to a likely $110 billion this year with particularly rapid growth in consumer electronics such as cell phones and personal computers. Much of this is, however, processing work that continues to rely on Chinese components — a business source estimated that only about 20% of Vietnam’s $370 billion in annual exports is local value, mostly in the form of skilled labor. Vietnam’s government and businesses are looking for ways to increase local value, diversify their own component sourcing, and become somewhat more of a “creative” economy and somewhat less of a “processing zone” exporter. And from an American perspective, the United States’ export figures to Vietnam remain quite small, around $10 billion annually.

Thailand is a smaller manufacturing exporter, but one with more developed local industries which add more value to the country’s export trade, especially in automotive and food production. The culturally and intellectually liberal Thai tradition — involving open media, independent universities, a lively civil society and NGO landscape, and close observation of policy trends in major countries — continues to make Bangkok mainland Southeast Asia’s center of transport, media, finance, and culture, and supports a creative class in strong fashion, design, and artistic industries.

The goals of both countries appear to mesh well, though in somewhat different ways, with the program Biden administration Cabinet Secretaries Yellen and Raimondo have laid out: diversification of sourcing, reduction of over-reliance on China especially for products critical to major supply chains, and successful competition with China over the longer term. With this in the background, interlocutors in both capitals were puzzled by the Biden administration’s decision to pull back from conclusion of the Trade Pillar of the “IPEF” (Indo-Pacific Economic Framework) it had launched early in 2022. This decision was particularly startling given the Pillar’s relatively modest goals in particular, the administration’s unwillingness to negotiate on tariff and market access issues. Looking back at the experience, this choice meant IPEF elicited little enthusiasm in America’s exporting industries and farm sectors, and also left American negotiators with little leverage to entice IPEF’s other countries (including both Vietnam and Thailand) to make very sweeping commitments on the labor, environmental, and supply-chain issues the administration placed at the center of the talks.

The good news is that there is a lot of room for change, and still time to make it. U.S. export industries — medical technologies, agriculture, aerospace, machinery, energy — are competitive and successful, but in Southeast Asia, as in many parts of the world, face large market barriers. It is particularly frustrating, in the Vietnamese case, to see U.S. competitors taking advantage of the TPP commitments the Obama administration worked so hard to achieve while we lose ground.

And just as the export sector needs more, the case for avoiding tariffs on defensive grounds is very weak. The actual U.S. tariff schedules (as the New Democrat Coalition suggested last November) are plagued by regressivity and gender bias, ineffectual as job protectors, and ripe for a thorough review and purge even without international negotiations. Meanwhile, the Trump campaign is proposing a radical economic isolationism, with a Hoover-style tariff increase at the core, which rests on deep and groundless pessimism about U.S. workers’ competitiveness and threatens growth and innovation in the U.S. and abroad. The Biden administration, though now entering its fourth year, still has the opportunity to respond with an optimistic, growth-oriented program that returns market access and export industries to the center of policy. Vietnam and Thailand are countries that will likely respond well to this, and they’re probably not alone in that.

PPI’s Trade Fact of the Week: The price of a 40-inch TV set has fallen by 99% in 25 years

Posted on January 3, 2024September 18, 2024 by Max Sherrill

FACT: The price of a 40-inch TV set has fallen by 99% in 25 years.

THE NUMBERS: Price of a 40-inch flat-screen TV –

2023	$150 – $300 (Best Buy and Amazon range)
2005	$4,000 (Sony)
1997	$22,900 (Fujitsu’s first 40″ plasma TV)

WHAT THEY MEAN:

The election year 2024 opens with many questions, but one is basic: Can a person, who has attempted to overthrow a settled election and has called for “termination” of unspecified parts of the Constitution, in good faith take an oath to “faithfully execute the office of President of the United States” and “preserve, protect, and defend the Constitution”?

Policy choices fall pretty far beneath this. (If they’re wrong, they can always be changed.) But they aren’t irrelevant and are sometimes connected to this large constitutional matter. Here, for example, is the former U.S. Trade Representative Amb. Robert Lighthizer, defending Trump campaign proposals for a 10% worldwide tariff and a sharp break in economic relations with China to a team of New York Times political writers by making a more general plea:

“If all you chase is efficiency — if you think the person is better off on the unemployment line with a third 40-inch television* than he is working with only two — then you’re not going to agree … There’s a group of people who think that consumption is the end. And my view is that production is the end, and safe and happy communities are the end. You should be willing to pay a price for that.”

The apparent idea is that if everyone’s cost of living rises and families buy fewer things, the country as a whole will be better off because it will make more things and unemployment will decline. More simply, if Americans are to be “rich” and secure, living standards must fall.

The flaw here is pretty obvious — if people are less affluent they will buy fewer things, and production of things will not rise but drop. Two illustrative examples of how this works, and then a thought on how this might relate to the really basic question:

1. TVs, Efficiency, Productivity, & Innovation: People buy TV sets, and by extension lots of things, on the basis of quality and price. An “efficient” firm will reduce costs through productivity, develop new products through innovation, and offer high-quality sets at low prices. Back in the 1970s, for example, Sony’s 19-inch color Trinitron introduced flatter screens with better visual resolution, and the company’s efficiency and productivity allowed it to sell them at the same prices its competitors charged for blurrier and heavier consoles. Late-1970s anti-dumping suits and import quotas didn’t change these facts. A generation later in 1997, a 10% tariff on Fujitsu’s inaugural $22,900 40-inch plasma might have been daunting even for the few hedge-funders and studio execs interested in showing one off, but wouldn’t have affected production much. Since then, efficiency has cut the cost of a 40-inch TV by 99% to a current range of $150-$300,* making today’s much better versions easily available to Amb. L’s supposedly spendthrift waitresses and bus drivers. The same tariff today would set them back about $20 (or $60 if they wanted to buy three). Over the entire TV-making and -selling world, this would likely put some retail clerks out of their jobs, but likewise wouldn’t affect production.

2. Metals, Tariff Payments, and Production: In the event of a 10% tariff, someone will pay and it’s pretty clear who it will be. The aluminum and steel tariffs the Trump administration imposed in March of 2018 (10% and 25% respectively, with some exclusions) offer a modest case study of the economy-wide effects of higher input prices and consequently reduced efficiency. The U.S. International Trade Commission’s March 2023 report summarizes their effects five years on:

“U.S. importers bore nearly the full cost of these tariffs. The USITC estimated that prices [of the metals] increased by about 1 percent for each 1 percent increase in tariffs. … U.S. production of steel was $1.3 billion higher due to Section 232 tariffs. U.S. production of aluminum was $0.9 billion higher in 2021 due to Section 232 tariffs. U.S. production in downstream industries [Editors note: the ITC’s major examples are machinery manufacturing, auto parts, hand tools, and cutlery] was $3.5 billion less in 2021 due to Section 232 tariffs.”

So the ITC’s finding is (a) a $2.2 billion increase in output of the metals (about 5%), compared to the model’s guess at an economy continuing on the same course without tariffs, (b) a somewhat larger decline of $3.5 billion in the machinery, auto parts, and tool-making industries using metals to make their products, and therefore (c) an overall slightly smaller manufacturing sector, though one in which the modestly diminished machinery- and parts-makers buy somewhat more metal from local mills.

In fairness, the administration’s stated reason for imposing the tariffs five years ago was not a hope for “generally higher manufacturing output.” Rather it was an argument that metals production is important enough to national security to sacrifice the interest of machinery and auto parts makers, plus a hope that tariffs would mean a large increase in metal output and mill capacity utilization. More on this in a few weeks (and a few stats below), but the many metal-tariff experiments over the last half-century suggest some skepticism about the latter point.

3. And the Constitutional issues: Apart from the economics, how exactly would this happen? Constitutionally, only Congress has the right to “lay and collect Taxes, Duties, Imposts and Excises.” Asked by the Times’ political team about how a President could create an entirely new tariff system by himself, the Ambassador cites some existing trade laws that might enable a President to declare a “national emergency” and impose it by decree. Which, sounding pretty consistent with the “termination” of parts of the document, makes these policy issues look quite relevant to the year’s really basic question.

* $200 is about 0.2% of America’s $74,850 median household income. Not an extravagance at all, and even three would be manageable for a lower-middle-income household.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: Pirate attacks are at their lowest in 30 years

Posted on December 20, 2023September 18, 2024 by Max Sherrill

FACT: Pirate attacks are at their lowest in 30 years.

**THE NUMBERS: Annual pirate attacks on shipping* –**

2023	120?
2023	115
2013	264
2012	439
2000	471

* Totals from International Maritime Bureau

WHAT THEY MEAN:

How many ships are on the water? UNCTAD’s Review of Maritime Transport 2023 counts precisely 105,395 large cargo ships, defined as vessels of 100 deadweight tons or more. Other less exact sources find the world’s navies operating about 10,000 boats; wealthy individuals and tourists sailing around in about 10,800 cruise ships and pleasure yachts; and (per the UN’s Food and Agriculture Organization) about 45,000 large factory-style fishing ships. So, altogether about 170,000 large ships.

And how often do pirates attack these ships? Since 1992, the International Maritime Bureau, a consortium based in Kuala Lumpur, has been answering this question with quarterly reports based on notifications by shipowners. In 2022 IMB found 115 attacks, ranging from unarmed burglaries of ships in berth to gunpoint hijacks of ships on the high seas. This year they report 99 attacks from January through October 2023, which is about the same as the 97 attacks reported from Jan.-Oct. 2021, and a bit more than the 90 in Jan.-Oct. 2022. So pirate attacks have been pretty stable over the last three years at about two each week. Some more context on this:

Piracy attack rates have fallen sharply: From 2000 to 2014, IMB was reporting between 300 and 500 pirate attacks per year. The 115 attacks in 2022 were the lowest in its records, down nearly 75% from the 439 reported in 2012. The largest reason for this drop is the near-elimination of attacks off the Horn of Africa, after the suppression of Somalia’s industrial-scale pirate fleet by an international naval consortium, Combined Task Force 151, between 2012 and 2015. Attacks in Southeast Asia and West Africa, always more opportunistic and smaller scale than the Somali pirate industry, have also declined.

High-seas piracy accounts for about 40% of all pirate attacks: Somalia’s pirate industry involved large-scale organized attacks on high-seas shipping passing through the Bab-el-Mandeb strait (separating Yemen and Somalia) and the Gulf of Aden, aiming to take control of the targeted vessels, sell their cargoes, and hold their crews for ransom. This involved operations far offshore, in which pirate gangs used converted fishery vessels to carry fleets of speedboats for attacks on ships using automatic weapons. The typical current attack is much less ambitious, usually involving an opportunistic effort by a small group, often with knives rather than guns, to rob a ship at anchor or sailing close to shore. IMB’s count through October included 51 attacks on ships either anchored offshore or berthed at a dock, and 37 en route. Thirty of these 37 high-seas attacks took place in the Singapore Strait, and three involved actual hijackings – up from one hijacking each in 2021 and 2022m but still far below the 49 hijackings of 2012. A sample report from IMB two weeks ago describes a standard 2023 attack:

22.11.2023: 2135 UTC: Posn: 01:43.20N – 101:26.72E, Dumai Anchorage, Indonesia.
Four robbers armed with knives boarded an anchored tanker. They threatened and took hostage the duty AB while the OS managed to escape and inform the Duty Officer. Alarm raised and crew mustered. Seeing the crew alertness, the perpetrators escaped empty handed.

Pirate attacks are now most common in maritime Southeast Asia: Thirty-three of IMB’s 99 reported pirate attacks took place in the Singapore Strait, a 65-mile stretch of water which (per the Lowy Institute) handles about 1,000 ship transits daily. Maritime Southeast Asia generally is the site of nearly half — 51 of 115 — of this year’s attacks. (And Singapore-based RECAAP has a higher tally, of 98 attacks in Southeast Asia through the end of November.) Elsewhere, IMB reports 23 pirate attacks off Africa, 16 off South America, and none in the Mediterranean or North Atlantic.

Cargo ships are most frequently attacked: Most pirate attacks, by IMB’s count, target large ships carrying cargo, presumably as they are lightly defended — a very large container ship carrying 8,000 or more boxes may have only 20 crew members — and carry potentially valuable goods. The 99 attacks so far this year included 37 on tankers, 40 on bulk carriers, 14 on container ships, and 8 on all other kinds of shipping. IMB has no record of an attack over the last five years on a large fishing boat, a cruise ship or yachts, or a naval vessel.

Special note: PPI’s Trade and Global Markets staff will be on vacation next week, and the Trade Fact service will take the week off. We wish friends and readers a happy holiday season, and will be back next year.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Read the full email and sign up for the Trade Fact of the Week.

PPI’s Trade Fact of the Week: The number of ‘chronically undernourished’ people has grown by 163 million since 2017

Posted on December 13, 2023September 18, 2024 by Max Sherrill

FACT: The number of “chronically undernourished” people has grown by 163 million since 2017.

THE NUMBERS: Estimated count of “undernourished” world population –

2022	735 million; 9.2% of world population
2021	739 million; 9.3% of world population
2017	571 million; 7.5% of world population
2015	589 million; 7.9% of world population
2010	598 million; 8.6% of world population
2005	793 million; 12.1% of world population
1996	825 million; 14.9% of world population

* UN Food and Agricultural Organization.

WHAT THEY MEAN:

Charles Dickens’ A Christmas Carol, marking its 180th anniversary next Tuesday, is more watched on TV than read. The TV versions hold up pretty well to the actual story — after the three Spirits show awful, avaricious Scrooge his past mistakes, his present isolation, and his lonely future grave, he reforms, recovers his own happiness, gives the Cratchits a raise, and so forth. But they do miss some of Dickens’ larger concern, which goes beyond Scrooge’s personal redemption to a more general critique of an affluent society’s indifference to the lives of its poor. A relevant passage at the end, but first a current parallel in the large, recent, and rapid rise in worldwide “food insecurity”:

The UN’s Food and Agricultural Organization defines “undernourishment” as follows:

“Undernourishment means that a person is not able to acquire enough food to meet the daily minimum dietary energy requirements, over a period of one year. FAO defines hunger as being synonymous with chronic undernourishment.”

FAO’s definition of “minimum dietary energy” varies by age, body size, etc. — an 18-year-old girl on average needs 2,500 calories daily and an 18-year-old boy 3,400 — but is about 2,410 calories across the population. By way of context, Americans get about 3,500 calories per day, and the world average is about 2,960. Alternatively, a standard hamburger delivers about 375 calories, a single chapati 70, a pupusa 300, and a serving of jollof rice 390.

The FAO has published annual estimates of the number of people living beneath this threshold since the late 1990s. Its first “Food Insecurity in the World” report, released in 1999 and covering the year 1996, reported 825 million chronically undernourished people. This was 14.9%, or one in seven, of a world population then estimated at 5.6 billion. Divided regionally, the total included 525 million Asians (177 million in East Asia, 284 million in South Asia, 64 million in Southeast Asia), 180 million in sub-Saharan Africa, 53 million in Latin America and the Caribbean, 33 million in the Middle East and North Africa, and 34 million in “developed” countries.

Their estimates steadily shrank for nearly two decades. The 2005 report, by then optimistically retitled “State of Food Security and Nutrition in the World,” estimated a 12.1% undernourishment rate; the 2010 report found 8.6%; and the 2017 report 7.5%, or 572 million of 7.6 billion people. During this time, FAO’s estimate of undernourishment in East Asia fell to nearly zero, and that for Latin America and the Caribbean dropped to 38 million, South Asia’s to 167 million, and sub-Saharan Africa’s to 150 million.

Between 2010 and 2017, though, the picture of a general decline in hunger worldwide (if at different rates in different places) had grown equivocal. FAO’s estimates for undernourishment in Southeast Asia dropped by about half during these years. The estimates for Africa and the Middle East, though, began to rise. And since 2017, the two-generation retreat of hunger seems to have ended. By 2019, worldwide undernourishment had rebounded to 7.9% of the world’s population (613 million people). Then, under the impacts of the COVID-19 pandemic and Russia’s invasion of Ukraine (a large source of corn and wheat in developing countries), the estimate for 2021 came to 9.3% of world population and 739 million people, and the 2022 estimates are only modestly lower at 735 million and 9.2% of the world population. In sum, over the past six years, the count of undernourished people has grown by 163 million, including by 70 million in Africa and 90 million in South Asia.

Back now to Dickens. Most of the Carol’s “Christmas Present” chapter involves the Spirit showing Scrooge the happy parties and friendships he’s missing. Its last passage, though, reveals something that not only Scrooge, but the partiers too, have tried not to see:

From the foldings of its robe, the Spirit brought two children; wretched, abject, frightful, hideous, miserable. They knelt down at its feet, and clung upon the outside of its garment. …

Yellow, meagre, ragged, scowling, wolfish; but prostrate, too, in their humility. Where graceful youth should have filled their features out, and touched them with its freshest tints, a stale and shrivelled hand, like that of age, had pinched, and twisted them, and pulled them into shreds. Where angels might have sat enthroned, devils lurked, and glared out menacing.

Scrooge started back, appalled. “Spirit! are they yours?” Scrooge could say no more. “They are Man’s,” said the Spirit. “This boy is Ignorance. This girl is Want. Beware them both.”

We wish our friends and readers a happy holiday season, grateful for our blessings and mindful of those who have less.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: U.S. clothing tariffs are unfair to women

Posted on December 6, 2023October 30, 2024 by Max Sherrill

FACT: U.S. clothing tariffs are unfair to women.

**THE NUMBERS: Average U.S. tariff rates* for clothing by gender, 2022** –

Men’s	13.6%
Women’s	16.7%
No specified gender	12.0%

* Tariff revenue divided by import value. These calculations includes tariff revenue collected from both imports subject to MFN tariff rates, and from Chinese products subject to “301” tariffs (which often add 7.5% to existing rates). Import value includes clothing from MFN tariff sources, from China, and from countries exempted from tariffs under FTAs and trade preference programs.

WHAT THEY MEAN:

The House New Democrat Coalition’s eight-point trade policy plan — out last month from the NDC’s 11-member Trade Task Force, headed by Rep. Lizzie Fletcher (D-Texas) and co-chaired by Reps. Don Beyer (D-Va.) and Jimmy Panetta (D-Calif.) — has lots of ideas on digital trade, the China relationship, free trade agreements, farm exports, and more. Included in the NDC’s list is a hope to “advance equity in trade policy by considering solutions to reduce gender bias and regressivity in the tariff system.” Here’s some background on the gender piece:

Our Valentine’s Day Trade Fact last February pointed out the strange fact that the U.S. tariff system taxes women’s underwear more heavily than men’s. Examination of the tariff schedules and import data across the clothing universe over the past few months shows that this underwear diss of women is not a weird anomaly. Rather, it is a specific case of a larger systemic issue, which the NDC is very right to highlight: the tariff system in general taxes women’s clothing more heavily than men’s, imposing special charge on American women likely extracting above $2 billion per year. Here are the facts:

1. Tariff rates on average are higher on women’s clothes than on men’s: The U.S. Harmonized Tariff Schedule divides goods into 11,414 “lines,” each with a tariff rate. Chapters 61 and 62 cover clothes. Unique in the Tariff Schedule, they divide most clothes by gender and freely impose different tariff rates for similar items based on this division. For instance, men’s and boys’ cotton suit jackets under line 61033200 are taxed at 13.5%. The corresponding cotton jackets in the women and girls’ heading, at line 61043200, at 14.9%. More generally, 17 “headings” in Chapters 61 and 62 cover comparable clothes divided by gender: men’s overcoats, women’s overcoats, men’s “suits and ensembles,” women’s “suits and ensembles,” men’s “shirts and blouses,” women’s “shirts and blouses,” men’s underwear, and women’s underwear. Here are the tariff rates in 2017* for these items, derived by dividing total tariff revenue by import value:

	Men	Women
Overcoats	12.5%	13.7%
Suits	13.3%	15.1%
Shirts	17.0%	19.7%
Underwear	8.6%	12.8%

* Data is calculated using 2017 tariff revenue. The rates for 2022 would be higher, since additional tariffs on China have raised rates overall.

So in each category, tariff rates are higher on women’s clothes than on men’s. Combining all the categories, tariff rates on women’s clothing are on average 16.7%, 2.9 percentage points higher than the 13.6% average for men’s.

2. Free Trade Agreements Don’t Help Much and Might Accidentally Amplify Disparity: In theory, the U.S.’ free trade agreements and duty-free preference programs for developing countries should moderate and in some cases eliminate this disparity, by eliminating tariffs on both men’s and women’s clothes. In practice, though, FTAs usually have clothing “rules of origin” so complex as to make them difficult to use, meaning they have less impact than most probably guess. Overall, the 14 U.S. FTAs provide 10% of American clothing imports, and the “CBI” and “AGOA” programs, which waive tariffs on Caribbean- and African-produced clothing, another 2%. So about 90% of the clothing brought into the U.S. comes with full tariff payments. Since 96% of clothing sold in American stores is imported, that means the large majority of garments include tariff costs. And on top of this, a group of researchers from the U.S International Trade Commission found that the FTA countries in practice ship more men’s clothing than women’s, meaning that the FTAs are likely saving men more money than women.

3. Women Therefore Pay More than Men for Similar Things: What does this all mean in practice? Last year’s tariff payments totaled $4.7 billion on $31.1 billion worth of women’s clothes, and $3.1 billion for $24.2 billion worth of men’s clothes. Or, in more direct terms, markups and U.S. transport and overhead costs mean that the cost of an average shirt or coat roughly quadruples from arrival at the border to the cashier, the tariff system appears to be raising the price women pay for clothes, relative to men, by an average of an extra dollar per garment. Looking at this another way, a 2018 working paper from the U.S International Trade Commission concluded that the higher rates on women’s clothes — their finding, pre-“301” tariff, was 14.9% for women’s clothes and 12.0% for men’s — plus the fact that women on average tend to purchase more clothing than men, meant that buyers of women clothes shouldered an additional $2.77 billion in tariff burden than buyers of men’s clothes. Gender bias in the tariff system accounted for about $1.8 billion extra burden on buyers of women’s clothing as of 2015, and presumably somewhat more now.

Conclusion: In sum, the US tariff schedule explicitly taxes women more heavily than men for the same sorts of things. In doing so, it imposes a kind of gender surcharge of at least $2 billion a year. This appears to be the only federal tax in which rates differ based on gender. Our V-Day conclusion on U.S. underwear policy — “Seriously?! Boo! Do better! ???????????? — applies in this larger case too. And Rep. Fletcher and the NDC’s Trade Task Force earn enthusiastic applause for bringing this into the Congressional debate.

Special Note: Research and drafting for this Trade Fact by PPI 2023 Policy Fellow Elaine Wei.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: Working-class Americans on trade policy – no clear consensus on past agreements, little support for new tariffs, strong hope for training and apprenticeships

Posted on November 29, 2023September 18, 2024 by Max Sherrill

FACT: Working-class Americans on trade policy – no clear consensus on past agreements, little support for new tariffs, strong hope for training and apprenticeships.

**THE NUMBERS: “Effects of agreements to lower tariffs and other barriers on me and people like me,” among Americans with less than college education* –**

	Positive	Negative	Not much either way
Race & ethnicity
African American	42	13	44
White	25	40	35
Hispanic	33	29	39

Red v. blue
Self-described liberal	45	18	37
Self-described conservative	20	51	29

Youth v. age
18-29 years old	45	24	32
55-64 years old	20	46	34

PPI poll of Americans without college degrees, released November 2023

WHAT THEY MEAN:

PPI’s two 2023 polls, done this past September and October by YouGov, offer in-depth insights on working-class opinion in the United Kingdom and the United States. Some headline findings from the 46-question U.S. version show respondents –

• Are pessimistic about long-term trends, with 66% saying “the working class” has lost ground in the last four decades as against 21% “better off” and 13% “about the same,” with illegal immigration and automation of worksites the most frequently chosen explanations.

• Consider inflation the “most significant challenge facing the U.S. economy,” with 36% citing “high cost of living” and 33% “inflation” per se.

• View e-commerce and tech sector employment (44%) as the top career choice for young people, with less for government and military (14%) manufacturing (13%), and service-sector work (8%).

• Support activist (though not overbearing) government, with especially high hopes for programs that can help non-college workers build careers and enhance wages, especially via short-term training (46%) and apprenticeship (23%).

The poll’s four trade questions ask in various ways about the effects of past trade agreements and about future options. Three findings, on overall views, divergences by political orientation and demographics, and future options:

1. No Overall Consensus: Asked how “trade agreements to lower tariffs and other barriers have affected you and people like you,” respondents split among three options with a slight negative tilt: 29% positive; 35% negative; and 36% (the highest share) as “not much effect either way.” A similarly-worded question about the effects of past trade agreements “on our country” as a whole, as opposed to the respondents as individuals, drew a somewhat different response: 28%, about the same share as in the more personal question, responded positively; a noticeably higher 44% viewing the effects as negative; and “not much effect either way” shrank to 28%. This suggests a substantial group viewed trade agreements as having little impact on themselves or their communities, but being overall negative for the country.

2. Axes of Divergence: PPI’s poll shows working-class Americans splitting over trade along the same ideological, ethnic, and generational axes earlier trade polls (Pew, Chicago Council on Global Affairs, major news organizations) have found over the last decade for the population as a whole. That is, the working class’ center-left contingent is on balance positive about trade agreements, and its right more negative. To wit:

• Race and Ethnicity: African American respondents, among the most upbeat groups in the survey in this area, viewed the effects of past trade agreements as positive for themselves by 42%-13%. Hispanic respondents agreed, though by a less emphatic 33%-29%, while “other” ethnicities split 43%-34%. White respondents were the exception (though a big one, as they made up 70% of the respondents), splitting the opposite way with only 25% “positive” and 40% “negative.”

• Red v. Blue: Self-identified liberals and Democrats viewed the effects of past trade agreements “on yourself and people like you” as positive by 45%-18% and 39%-22% respectively. By contrast, 51% of conservatives and 49% of Republicans viewed past agreements as affecting themselves and people like them negatively.

• Youth v. Age: Young people view trade agreements quite favorably, with 18-29-year-olds on the “positive” side by 45%-24% and 30-44 year-olds by 32%-24%. Their Gen-X parents aged 55-64 were the survey’s least happy age group — 20% positive and 46% negative — and the over-65 boomers weren’t much warmer at 26%-41%.

Perspective from other surveys: These ideological and demographic divisions resemble those appearing in other surveys done for the population as a whole over the past two decades by Pew, the Chicago Council for Global Affairs, and the major news outlets. (PPI’s poll also echoes these in not finding big differences by gender.) While the positive/negative splits in the earlier polls can vary based on the wording of questions, the patterns have been consistent throughout the century: young, ethnically diverse, and liberal America is generally positive about trade and trade agreements, and older, white, and conservative America is less so. As an additional perspective on PPI’s results, the earlier surveys also often include breakouts by education level, and typically found more support for trade and trade agreements among college-educated Americans than non-college.

3. Toward 2024: Finally, the poll suggests that the policy option put forward by the Trump campaign this fall — a 10% global tariff and a sharp break in economic relations with China — is not popular. (The question does not mention Trump’s name or associate the option with his campaign, to avoid skewing the answers.) Asked to choose among three policies — this protectionist approach, a non-trade option in which future policy would focus on other issues such as energy and anti-corruption, and a renewed effort to reduce tariffs through agreements with allies and friendly countries — only 23% selected the Trump-like option. Especially unpopular among young people (14%), liberals and Democrats (9% and 11%), and African Americans (16%), this option didn’t elicit much enthusiasm elsewhere either, as the favored choice of only 26% of white voters, 19% of political independents, 20% of respondents in union households, and 38% of conservatives.

4. And where to from here? As earlier trade polls found for the American population as a whole, PPI’s poll of working America yields mixed views; a plurality of the electorate’s ‘blue’ side upbeat about trade agreements and the opposite on its ‘red’ side; and little support for new tariffs, while other sections of the poll underline this by showing high sensitivity to inflation. The answers don’t yield any simple ‘here’s what to do’ conclusion.

But another section of PPI’s poll may, indirectly, suggest a response. One way to view trade policy is as a branch of economics that creates complex choices which carry both benefits and stresses: export opportunities and competitive challenges, lower inflation but sometimes accelerated change in the job mix. The poll’s questions on labor policy does seem to find strong and in fact near-consensus views on how best to manage the stress. That is, rather than traditional ‘adjustment’ programs for competition or automation on one hand, or long-term college commitments on the other (or for minimal-government ideologies), the respondents express strong hope for a third activist approach which doesn’t now exist on a large scale: direct support for workers trying to build careers and raise their wages through easily available short-term training, certification, and apprenticeship programs. If workers have confidence they will receive support as the economy changes, and that it will be the kind of support they want, solutions to divisions – not only in trade policy but in other complex fields – may be easier to find.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: ‘American’ foods are the base of som tam, goulash, vindaloo, Swiss chocolate, and French fries

Posted on November 21, 2023September 18, 2024 by Max Sherrill

FACT: ‘American’ foods are the base of som tam, goulash, vindaloo, Swiss chocolate, and French fries.

THE NUMBERS: Sample agricultural commodities –

North America: Squash, pumpkins, blueberries, cranberries
Central America: Tomatoes, chocolate, vanilla, peanuts, chili peppers
South America: Cashews, potatoes, vanilla, corn, chilies, etc.

WHAT THEY MEAN:

The Thanksgiving holiday commemorates a specific event — a three-day autumn “entertainment and feast” held somewhere near Plymouth, a more conceptual reminder of mutual regard and common benefit among people of very different backgrounds, and also of western hemisphere food. Some examples of this 402nd observance week:

North America and Thanksgiving: Only two first-hand accounts describe the 1621 “First Thanksgiving,” and both are brief. Edward Winslow, Plymouth Governor several times in the 1630s, notes codfish and bass, plus corn and the five deer Massasoit and his 90 Wampanoag sagamores brought to the event. William Bradford, the first Governor, mentions ducks, turkey, and “meal” as well. Both are silent on cranberries and pumpkin pie, though that doesn’t mean they didn’t have any. Here’s Winslow’s report (via Pilgrim Hall Museum):

“Our harvest being gotten in, our governour sent foure men on fowling, that so we might after a speciall manner rejoyce together, after we had gathered the fruits of our labours ; they foure in one day killed as much fowle, as with a little helpe beside, served the Company almost a weeke, at which time amongst other Recreations, we exercised our Armes, many of the Indians coming amongst us, and amongst the rest their greatest king Massasoyt, with some ninetie men, whom for three dayes we entertained and feasted, and they went out and killed five Deere, which they brought to the Plantation and bestowed on our Governour, and upon the Captaine and others. And although it be not always so plentifull, as it was at this time with us, yet by the goodness of God, we are so farre from want, that we often wish you partakers of our plentie.”

And Bradford’s:

“They begane now to gather in ye small harvest they had, and to fitte up their houses and dwellings against winter, being all well recovered in health & strenght, and had all things in good plenty; fFor as some were thus imployed in affairs abroad, others were excersised in fishing, aboute codd, & bass, & other fish, of which yey tooke good store, of which every family had their portion. All ye somer ther was no want. And now begane to come in store of foule, as winter approached, of which this place did abound when they came first (but afterward decreased by degrees). And besids water foule, ther was great store of wild Turkies, of which they tooke many, besids venison, &c. Besids, they had about a peck a meale a weeke to a person, or now since harvest, Indean corn to yt proportion. Which made many afterwards write so largly of their plenty hear to their freinds in England, which were not fained, but true reports.”

Forty-one decades later, the turkey, cranberries, and pumpkins traditionally served for Thanksgiving remain New England and North American specialties. Crops, fruits, and roots originating further south have often spread more widely. Some illustrative lists, with two glamor products:

Mexico & Central America: The middle swath of the western hemisphere is home to the peanuts used in West African groundnut stew, the tomatoes flavoring Italian pasta sauce, and chocolate, vanilla, and corn. Chile peppers are still more “globalized”: the ancestral ones grew in Mexico (though there’s a case for Brazil too), and their descendants now routinely provide the spike for som tam in Khon Kaen, goulash in Budapest, bean curd in Chongjing, momo (usually in oil) in Lhasa, vindaloo in Goa, berbere in Addis Ababa.

Those looking for more heat this weekend than Bradford, Winslow, and Massasoit had in 1621 can consult the “Scoville Heat Scale” which, named for an early 20th century Massachusetts pharmacist, attempts to organize all the chili pepper varieties by heat content. It runs from zero Scoville Heat Units to two million in the case of artificially amped-up “bear spray equivalent” peppers bred over the last decade. Assuming these — Carolina Reaper, Trinidad Scorpion, etc. — are basically inedible stunts, sample Scoville ratings* from the feeble bell to the mighty habanero look like this:

Habanero	150,000
Thai prik kee nu	75,000
India byadgi	75,000
Ethiopian berbere	40,000
Ghanaian kpakpo	35,000
Peruvian Amarillo	35,000
Lhasa red pepper	23,000
Jalapeno	10,000
New Mexico “Hatch”	2,000
Paprika	500
Pepperoncini	100
Bell Pepper	0

* Using averages rather than the more technically correct range; the generally accepted range for the habanero, for example, is 100,00-350,000 Scoville units.

South America: Cash crops like cashews, staples like cassava and quinoa, and fruits such as avocado and pineapple. A nominee for the “most globalized” South American crop is the potato. Often disrespected with terms like “humble” (BBC) and “lowly” (Smithsonian Magazine), potatoes are the world’s sixth-most-produced crop at 376 million tons a year and root up in at least 150 of the world’s 197 countries. The top seven producers account for two-thirds of annual potato tonnage:

China	94 million tons
India	54 million tons
Ukraine	21 million tons
United States	19 million tons
Russia	18 million tons
Germany	11 million tons
Bangladesh	9 million tons

U.S. producers grow about 100 variants including russets, fingerlings, purple-blues, whites, and so forth. By comparison, farmers in the original Andean potato-cultivation areas manage 4,500. By volume, though, the U.S.’ 19 million tons are about three times the output of the 14th-largest producer Peru’s 5.7 million tons, and 39th-place Bolivia’s 1.2 million tons combined. Having been carried to Europe by Spanish entrepreneurs in the 1500s, the potato returned east across the Atlantic to be served boiled or mashed at Thanksgiving events that, though more complex than the impromptu 1621 event, still mean something similar.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: U.S. Internet policy is suddenly uncertain

Posted on November 15, 2023September 18, 2024 by Max Sherrill

FACT: U.S. Internet policy is suddenly uncertain.

**THE NUMBERS: U.S. export growth, 2012-2022*-**

Energy	176%
Information & “potentially digitally-enabled” services:	59%
All goods and services:	34%
Agriculture	34%
Manufactured goods:	19%
Other (non-digitally deliverable) services	-10%

*Sources: WTO for all goods and apparel; UN Food and Agricultural Organization for fish; Stockholm International Peace Research Institute (SIPRI) for arms sales. SIPRI data covers known transfers of “major conventional weapons.”

WHAT THEY MEAN:

A cryptic late-October comment from the American delegation to the World Trade Organization in Geneva quietly withdraws a set of long-held U.S. “digital trade” policy goals — and in doing so raises questions about whether the U.S.’ traditional “open internet,” “pro-consumer,” “internet freedom,” and “public-interest regulation” approach has changed. The brief and impressively opaque comment:

“Many countries, including the United States, are examining their approaches to data and source code, and the impact of trade rules in these areas. In order to provide enough policy space for those debates to unfold, the United States has removed its support for proposals that might prejudice or hinder those domestic policy considerations. The JSI [“Joint Statement Initiative”, the WTO’s name for the relevant discussion] continues to be an important initiative and the United States intends to remain an active participant in those talks.”

How to interpret this? Background first on the big picture, then the “data and source code” in trade policy more specifically; and finally, lacking anything more to go on than the three-sentence comment above, some questions about what this actually means:

1. Larger context: “Digital trade” issues are part of a larger U.S. policy pretty consistently pursued since the launch of the World Wide Web, meant to encourage the preservation and future development of an open, universal Internet, with a foundation in user rights and liberty, impartial public-interest regulation, and due process. Several digital trade issues get mentioned, for example, in the “Declaration for the Future of the Internet,” posted in August 2022 by the U.S. and 64 other Internet- and speech-friendly countries in the Western Hemisphere, Europe, Asia, Africa, and the Pacific and still up on the White House and State Department websites. This is a 3-page set of principles and goals for next-generation Internet governance, which along with promoting universal access, privacy, consumer protection, common programs to fight electoral disinformation and online bigotry, and other valuable ideas involves commitments to “ensure that government and relevant authorities’ access to personal data is based in law”, “promote our work to realize the benefits of data free flows with trust,” and “refrain from blocking or degrading access to lawful content, services, and applications.” These are, incidentally, contested ideas which have opponents: other governments, inter alia and perhaps most prominently China’s, envision a quite different future with more rights for surveillance and service interruption, less multistakeholder-ism, and fewer limits on government rights to limit access, data transfers, and privacy.

2. Nature of issues: The now-‘paused’ “data and source code” proposals refers to four topics, which the U.S. until last month had been discussing with 76 other WTO members in a venue called the “Joint Statement Initiative on Electronic Commerce.” They include (a) cross-border flows of digital data in the course of business, shopping, gaming, email, etc.; (b) guidelines for the circumstances in which governments can require local storage of data and when they shouldn’t; (c) cases when governments can direct businesses to disclose their software codes; and (d) ensuring that trade rules don’t discriminate against digital products.

If one were to look for an analogy in “trade policies for goods” like cars or wine, a useful though not exact comparison would be to “trade facilitation” and agreements on Customs procedures. Typical U.S. trade agreements require Customs agencies to provide online access to import and export forms, accommodate express delivery shipments, and ensure that other governments don’t use different inspection procedures for containers carried by different shipping lines or cars delivered to different ports. These sorts of rules reduce costs and delays, help toys and flowers move through airports and seaports rapidly and easily, encourage the countries and businesses that make or grow them to compete on quality and price as opposed to hidden policy favoritism, and help port officers focus on law enforcement and public health inspections. In the same way, rules encouraging free flows of data, or discouraging mandatory in-country storage and server construction, help make legitimate services trade — say, email connections, exchange of architectural planning, news and entertainment streams, etc. — easier and cheaper while helping government officials focus their work on cyber-security violations, spam prevention, and other threats.

3. Economics and trade flows: Digitally delivered services arriving via submarine cable or satellite — software, entertainment, computer technologies, professional stuff such as architecture, new earners like telemedicine and distance education — have a plausible claim to be the fastest-growing form of trade. In the U.S. case, they totaled $720 billion in 2022. By various metrics this was (a) up about 60% in the past decade, roughly twice the growth rate of overall U.S. exports; (b) a quarter of the $3 trillion in total U.S. exports in 2022, and a few hundred billion dollars more than the $380 billion for energy and $195 billion for agriculture, (c) easily the largest digital export figure for any country in the world, and (d) a thirtieth of the U.S.’ $26 trillion GDP. More subtly, digital data flows underpin lots of high-end manufacturing sales. Examples include cars that notify owners of the need for brake repair or oil change; medical devices providing diagnoses and filling prescriptions for rural clinics, agricultural machinery planting rice when the weather is right, etc. So by whatever measurement, digital trade flows support a large and highly remunerative part of the American economy and it’s quite logical for the government to care about them.

4. Current Agreements and Rules: The U.S. “digital trade” ideas are not actually experimental, but are live parts of several currently active U.S. agreements as well as the WTO’s incomplete “Joint Statement” discussions. These are Chapter 15 of the U.S.-Korea FTA, which “entered into force” as the jargon puts it in 2012; Chapter 19 of the “U.S.-Mexico-Canada Agreement” which revised the North American Free Trade Agreement in 2020; and a 19-page U.S.-Japan digital trade agreement signed in 2019. Their substance:

(a) People and businesses in participating countries have the right to move data across borders freely (e.g. for an online shopper ordering a set of toothbrushes, or an auto manufacturer whose car corresponds digitally with the home office to request software updates or notify police about an accident), with an exception for any government action “necessary to achieve a legitimate public policy objective” (e.g. anti-spam, cyber-security, protection against disinformation campaigns, etc.).

(b) Government power to require companies to turn over software code to agencies (or, often more the point, to local competing firms) is limited to public-policy regulation and good-faith investigations as opposed to arbitrary and/or discriminatory rules.

(c) Governments can’t be required to store data and build servers within a country, so as to reduce costs (and along with this, the power consumption and consequent carbon emissions) of constructing redundant servers and data centers in numerous countries.

5. What’s going on? What, finally, does the withdrawal of these ideas at the WTO mean? The three-sentence statement quoted above doesn’t explain. So rather than speculating, we offer a few questions that pretty badly need an answer:

* Does the administration want “policy space,” so as to be able to limit Americans’ data flows or require exposure of source codes for reasons that go beyond “measure[s] needed to achieve a legitimate public policy objective.” If so, what sort of things are they thinking about, and what law would authorize it?

* If the data and source code ideas are out of favor at the WTO, are the USMCA, Korea-FTA, and U.S.-Japan Digital Agreement provisions now insufficient? If so, is the administration thinking about changes to them?

* Or is the concern more about foreign governments’ “policy space”? If so, what are these governments hoping to do that Mexico and Canada (and Japan and Korea) are managing to do without?

* And how do any of these concerns relate to the larger hopes for the next-generation digital world — access and technical interoperability, innovation and economic growth arising from future rises in data flow, public-interest regulation, user privacy, and liberty — set out in the Declaration for the Future of the Internet?

Answers awaited, here and in lots of other places.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: Military spending was 2.3% of world GDP last year

Posted on November 8, 2023September 18, 2024 by Max Sherrill

FACT: Military spending was 2.3% of world GDP last year.

**THE NUMBERS: World exports, 2022*-**

All goods $24,000 billion
Clothes $315 billion
Fish $151 billion
Arms transfers $32 billion

WHAT THEY MEAN:

What place does the military hold in the world economy? Statistical snapshots from 2022 on world military spending and arms trade, and then three cautions about the data:

World defense spending at modern-history lows: A widely-used calculation by the Stockholm International Peace Research Institute (SIPRI) finds world military spending — procurement, pay, military construction, and so on — at about $2.24 trillion in 2022. According to the International Monetary Fund, world GDP was $100.15 trillion that year. So SIPRI’s figure suggests that about 2.2% of world income went to military budgets, and a World Bank table for the same year yields a very close 2.3% of world GDP.

This figure captures the policies governments set down in 2021, just before the Russian invasion of Ukraine, and by historical standards, it is very low. Tallies from earlier decades report military spending rates above 6% of world GDP in the 1960s; in a range from 3.8% to 4.5% in the 1970s and 1980s; and varying since 2000 in a narrow band between 2.2% and 2.6%. As two points of comparison: (a) about 11% of world GDP goes to health (or 6% of world GDP if one counts only public spending), and 4.2% to education; and (b) in labor terms, the CIA’s World Factbook estimates that about 20 million men and women are in uniform around the world which would be 0.5% of the world’s 3.5 billion workers. To look more specifically at the U.S., American military spending was about 3.5% of GDP in 2022 (by the World Bank’s table), which is above the worldwide average but far below the 11% the U.S. Defense Department reports for the Korean War years in the early 1950s and the 5% levels of the later Cold War.

Arms trade small relative to civilian trade: SIPRI’s parallel “arms transfer” count reports about $32 billion worth of arms deliveries in 2022. Their count covers deliveries of “major conventional weapons” — tanks, planes, missiles, submarines, artillery, etc. — and includes sales of both new and used kits, licensed production, and deliveries of significant components as well as complete systems. Like the world’s combined military budget as a share of GDP, the arms transfer total is a lot of money but small when measured against civilian trade. The WTO’s most recent annual trade statistics report puts “goods trade” in general at $24 trillion in 2022, which would make SIPRI’s $32 billion in arms transfers about 0.1% of the total. Or, to look at particular products, the WTO’s places clothing exports at $313 billion — ten times SIPRI’s arms transfer figure — and automotive trade at a much larger $1.37 trillion, while the U.N. Food and Agricultural Organization’s estimate of fish and seafood exports was $151 billion.

Nor does military trade look very large for individual countries. By country, SIPRI’s top exporters in 2022 were the U.S. at $14.5 billion, France at $3.0 billion, Russia at $2.8 billion, and China at $2.0 billion. This would be about 1% of the U.S.’ $2.1 trillion in goods exports, 0.5% of French and Russian exports (though a higher 3% of Russian manufacturing trade), and 0.1% of Chinese exports. On the import side, military shares of trade can be quite high for the largest purchasers — Qatar, the largest buyer on the SIPRI list, spent $3.3 billion on weapons or 15% of its overall $28 billion in imports, and military goods accounted for 2% and 7% of imports for fourth place Saudi Arabia and fifth place Kuwait — but outside the Persian Gulf is rarely a very large part of national import bills.

Tentative Conclusion: The public data and estimates, then, suggest that as of 2022 the world’s military economy was a relatively small part of the larger global economy; military spending a modest though not tiny part of national budgets; and military trade a very small part of international trade. Three cautions, though:

Caution (1): Secrecy: In many countries, some sections of national defense budgets and arms sales aren’t thought suitable for publishing, and are thus missing from the totals. So figures for military spending and trade, strictly defined, are reasonable “lowest-case estimates” rather than very firm data.

Caution (2): Definitions: The military economy is not separate from the civilian economy, but merges with it along the edges. Definitions of what is “military” and what is “civilian” are thus a bit arbitrary. In military trade, for example, is the right approach SIPRI’s decision to count weapons only? Would it be better to add “dual-capable” trucks, chips, fuel, rifles, and satellites too? Repair, training, software updates, replacement parts, and maintenance? Or should everything a military service buys be considered “arms trade”?

As an important example, the U.S. Defense Department’s 2023 policy paper observes that for both of these reasons, China’s “actual military-related spending could be 1.1 to 2 times higher than stated in its official [$209 billion] budget.” This would suggest a figure approaching $400 billion and somewhere between 2% and 3.2% of Chinese GDP, in contrast to the World Bank table’s 1.6%. (And some private estimates go higher.) Or to choose a case close to home, the State Department’s Political-Military Affairs branch, which oversees official U.S. arms sales policy, uses a broader definition than SIPRI’s to report “new sales” of U.S. weapons at about $55 billion a year, which would imply considerably higher global as well as American arms sales.

Caution (3): Changing times: The defense budgets and arms transfers of 2022 are those decided upon in 2021, just before Russia’s attack on Ukraine. Whatever the definitions one chooses, and however much they publish, governments are making this year’s budgets and sales in a world grown more dangerous, and their numbers will presumably be larger.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’s Trade Fact of the Week: 13 of the 54 World Series players this year are “international”

Posted on November 1, 2023September 18, 2024 by Alyssa Brown

FACT: 13 of the 54 World Series players this year are “international.”

THE NUMBERS:

MLB rosters by birthplace –

All players	969
U.S.*	719
Dominican Republic	104
Venezuela	62
Cuba	21
Mexico	15
Canada	10
Japan	8
Colombia	7
11 other countries	23

* Includes 15 Puerto Rican players, whom MLB for some reason counts as “international.”

WHAT THEY MEAN:

Cuban-born Adolis Garcia’s 11th-inning walk-off won Game 1 for the Rangers on Friday night; Venezuelan catcher Gabriel Moreno’s 2nd-inning home run started the Diamondbacks’ 9-1 rout on Sunday’s Game 2. The two teams together feature 12 international players: six Dominicans, three Venezuelans, and three Cubans as the Series began; still seven as they prepare for Game 5 but now seven, three, and two respectively given Garcia’s Game 3 injury and replacement last night by Dominican shortstop Ezequiel Duran. Altogether, they make up 24% of the Series rosters. This figure:

(a) Pretty closely matches the 26.5% international share of MLB’s full Opening Day rosters, and likewise faithfully reflects the roles of the Dominican Republic, Venezuela, and Cuba as the top three contributors;

(b) Is also quite close to the 25% international-player share of the roughly 4200 pro athletes playing this year in the six big North American pro leagues (MLB, NBA, WNBA, NFL, MLS, and NHL); and

(c) Is a bit above the 18% overall international share of the American workforce, but typical of top-tier elite working life. Some context for this last point:

The Bureau of Labor Statistics’ Labor Characteristics of the Foreign-Born Workforce release comes out each May. Its most recent edition reports 158.3 million people working in the U.S. last year, of whom 28.7 million or 18% were born abroad. The foreign-born workforce is growing relatively faster than the native-born on net — the BLS release finds total U.S. employment up 5.7 million from 2021 to 2022, with foreign-born labor up 2.3 million workers and U.S.-born by 3.4 million. This “net growth” figure, though, conceals the fact that most of the 3.6 million workers who retire each year are locally born, so the actual “gross” count of new jobs for native-born Americans was probably more like 6 million.

Looking past these top-line figures to specific industries, the foreign-born labor shares represent a sort of classic “smile curve,” with immigrant contributions highest in the best-paying and lowest-paying sections of the economy, and lower in the middle. At the very top, MLB’s 250 international players join 60% of this year’s 20 Oscar acting nominees and 50% of the six U.S.-based 2023 Nobel Prize laureates in science and economics. At the lower-paying end, USDA’s Economic Research Service reports that about 60% of crop-pickers on American farms as of 2022 are immigrants, and BLS finds foreign-born employment shares between 20% and 30% in construction, groundskeeping, domestic and personal care services, and food preparation. An illustrative table with immigrant labor shares, using 2023 when possible and otherwise picking the most recent year available:

Crop-picking farmworkers	60%
Computer science doctorates	60%
2023 Oscar nominees	60%
All farmworkers	44%
Doctoral-level science & tech workers	40%
Construction workers	34%
Major-league athletes	25%
Food service	23%
Personal care & services	20%
All science & tech workers	19%
All U.S. workers	18%
Management jobs	14%
Education & training	12%
Health care practitioners	10%
Lawyers & paralegals	6%
Security services	6%

Sources: Bureau of Labor Statistics for all workers, National Science Foundation for engineering and science workers; MLB, NBA, WNBA, MLS plus outside writers on hockey and football for athletes.

Turning back to the Series, though, the nationalities of Garcia, Moreno, their MLB teammates and rivals, and by extension, the nationalities of U.S. workers generally, are interesting both as background for fans watching the game and as illustrations of the evolution of the economy and working life. But what they’re actually doing is the main thing. The manager’s perspective: Don’t overthink it. Play ball.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

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PPI Statement on U.S. Withdrawal of Core WTO Electronic Commerce Proposals

Posted on October 26, 2023 by Alyssa Brown

Today, Ed Gresser, Vice President & Director for Trade and Global Markets at the Progressive Policy Institute (PPI) released the following statement in response to the Biden administration’s decision yesterday to withdraw support for critical U.S. digital trade policy proposals at the World Trade Organization (WTO):

“It is deeply troubling to hear that the U.S. is removing its support for WTO digital trade policymaking on issues ranging from cross-border data flows to localization requirements, source code protection, and non-discriminatory treatment of digital products. These policies are sound in principle and proven in practice through such agreements as the U.S.-Korea Free Trade Agreement or USMCA. Finance Committee Chairman Ron Wyden is right to term the U.S. decision as “leaving a vacuum” that others — including authoritarian governments interested in surveillance, data-mining, and censorship — will quickly seek to fill. We share his concern over this decision, and that other technology policy leaders such as Reps. Suzan DelBene and Darin LaHood have expressed.

“We see no evidence that the U.S.’ historic advocacy of free flows of digital data subject to non-discriminatory public-interest regulation, or opposition to the financially and environmentally costly forced localization of servers and other technology, has conflicted in any way with public-interest legislation in the U.S. or elsewhere, or with regulation to protect privacy and security. Rather, we are concerned that a new U.S. passivity on these matters will embolden other governments unhappy with America’s centrality to digital technological development and trade commerce, and lead to the spread of regulatory and antitrust policies aimed differentially at American firms, and in others through de facto legitimation of national firewalling, state surveillance, and censorship.

“The administration, before proceeding further, should step back and return to first principles. In very practical terms, an open internet is indispensable to the well-being of consumers everywhere; to U.S. leadership in IT research, innovation, and technology; and to the jobs and growth underpinned by the U.S.’ world-leading $720 billion in exports of ICT and digitally enabled services. And more conceptually, an open internet is essential to a world economy in which liberty and free flows of information support growth and development, while impartial public-interest regulation targets abusive behavior and protects Internet users. We urge the administration to reflect carefully on the risks a U.S. withdrawal from core e-commerce and digital trade policy development poses to these interests and values, and to reconsider.”

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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Media Contact: Amelia Fox, afox@ppionline.org

PPI’s Trade Fact of the Week: Americans are buying fewer Chinese-made smartphones, laptops, TVs, and toys this year

Posted on October 25, 2023September 18, 2024 by The Progressive Policy Institute

FACT: Americans are buying fewer Chinese-made smartphones, laptops, TVs, and toys this year.

THE NUMBERS: Chinese share of U.S. laptop computers –

Jan. to Aug. 2023 82%
2022: 91.5%
2021: 93%
2017: 93%

WHAT THEY MEAN:

The Census’ monthly trade figures, now complete through August 2023, show imports down by about $136 billion or 6% as compared the first eight months of 2022. (Last year: $2.21 trillion; this year: $2.08 trillion.) Nearly two-thirds of this decline is in specifically Chinese-made goods, so the worldwide 6% drop combines a remarkable 24% fall in imports from China with a modest 2% decline from the rest of the world. The figures are:

Imports: -$136.3 billion = -6%
From China: -$89.6 billion = -24%
From all other countries: -$46.7 billion = -2%

Some thoughts on possible explanations below, but first a set of mini-case studies covering four consumer goods: laptops, smartphones, TV sets, and toys. Together these account for $19.5 billion of the $89.6 billion drop in imports from China, and about a seventh of the worldwide drop.

1. Laptops: Laptop computers accounted for $48 billion of America’s $526 billion in imports from China in 2022. This Chinese-made $48 billion in turn made up about 92% of a worldwide $52 billion. Counting individual devices, Americans bought 111.5 million laptops last year from three main sources: 102.7 million from China, 5.4 million from Vietnam, and 2.5 million from Taiwan. Comparing Census’ Jan.-August figures for 2022 with those for 2023, the total laptop-import count is down from 76.4 million to 65.8 million, with Chinese-assembled laptops specifically off from 71.1 million to 56.4 million. By contrast, Vietnam’s laptop shipments, have more than doubled from 3.3 million in Jan.-Aug. 2022 to 7.2 million so far in 2023. Taiwan’s have stayed the same at 1.4 million. So here, the drop in imports is not worldwide, but wholly Chinese..

2. Smartphones: The phone pattern is similar — overall U.S. buying down; buying from China especially down; one rival (though not the same one) rising fast. Specifically, 2022’s 173 million smartphone arrivals included 134.9 million from China, 30.4 million from Vietnam, 4.0 million from India, and another 4.0 million divided among Hong Kong, Korea, and Japan. So far this year (again comparing Jan.-August. data), phone imports are down from 115.8 million to 94.3 million, with Chinese-assembled phones accounting for 12.2 million of the total 21.5-million drop. In contrast to laptops, next-door Vietnam is even further off its 2022 pace — from 24 million phones to 11.5 million, or more than half. India is the fast-growing rival here, up from 2.5 million phones to 6.8 million.

3. TV sets: TV-set data again repeat the pattern — total imports down, China down especially fast, and a competitor rising. TV imports from China are down by 40.7% in dollars — from $7 billion to $4.4 billion — and 35% in set-count, from 43 million to 27.9 million. Meanwhile, imports of TVs from Vietnam have jumped from 3.8 million in 2022 to 5.7 million in 2023. Imports from Mexico are up too (though not dramatically) from 19.1 million to 19.6 million.

4. Toys: Finally, a less chip-and-solid-state-electronics-heavy example Overall, U.S. toy imports have dropped by about a third, from $13.8 billion in Jan.-Aug. 2022 to $9.1 billion in Jan.-Aug. 2023. Almost all the decline is in Chinese-made toys, down from $11.0 billion in Jan.-August 2022 to $6.9 billion in 2023. Here, though, while China’s “share” of U.S. toy imports has drifted down (from 83% in 2021 to 80% in 2022 and 76% so far in 2023) no single competitor seems to be rising in China’s place. Vietnamese toy shipments are down by 34%, Indonesia’s by 22%, and the non-China world overall by 20%. Mexican toy exports are a modest exception, up 8% in percentage terms, but in dollars, this is only about $40 million.

What to make of this? Four possible explanations:

1. Tapped-out American shoppers: One contributing factor is purely American. After two years of post-Covid shopping, Americans have restocked their wardrobes, replaced their phones, and TVs, and don’t need more just now.

This is plausible at least in part: With China the principal source of these things, any drop will naturally show up mainly in trade with China. But this doesn’t seem like the whole story — the simultaneous jumps in laptop and TV imports from Vietnam, and in phone imports from India, suggest buyers finding alternative if smaller Asian sourcing sites. So analysts while not discounting explanation 1 should also be thinking about explanations 2, 3, and 4.

2. Structural change reflecting geopolitics and trade conflict: After holding up through 2018-2022, despite tariffs, retaliations, spikes in diplomatic tension, and export controls, U.S.-China trade finally began to buckle this year.

3. Structural change reflecting Chinese domestic policies: After three years of chronic zero-COVID factory closures and intensified political pressure on foreign firms, China’s competitiveness has badly eroded and buyers are looking elsewhere.

4. Alternative structural change reflecting intra-Asian integration: Or, finally, China’s competitiveness maybe hasn’t eroded per se, but electronics supply chains are becoming more elaborate and specialized. In this hypothesis, final consumer-goods assembly (having shifted to China in the 2000s) now moves to neighboring countries as China takes up a new role as a components and engineering skills supplier, using the newly implemented Regional Comprehensive Economic Partnership agreement to cut costs.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

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PPI’s Trade Fact of the Week: Trade in 2022: $32 trillion in exports, in a $100 trillion world economy

Posted on October 18, 2023September 18, 2024 by Alyssa Brown

FACT: Trade in 2022: $32 trillion in exports, in a $100 trillion world economy.

**THE NUMBERS: U.S. shares of world exports* –**

2022: 7.8% of manufacturing, 12.7% services, 9.6% agriculture, 8.5% fuels & mining
2017: 9.4% of manufacturing, 14.4% services, 9.8% agriculture, 6.7% fuels & mining

* Data from the WTO’s annual World Trade Statistical Review reports, 2023 and 2018.

WHAT THEY MEAN:

The International Monetary Fund’s most recent World Economic Outlook, launched last Thursday, reports that in 2022, the world’s GDP topped eleven digits for the first time to reach $100.1 trillion. The WTO’s latest World Trade Statistical Review report, meanwhile, shows exports of goods in 2022 at $24.9 trillion and exports of services at $7.0 trillion. Combining the two, this means $31.9 billion, and a matching 31.9% of world output, crossed borders. This is high in historical terms — possibly the highest export-share-of-GDP ever — reflecting the energy price spike caused by Russia’s war on Ukraine along with post-COVID surge in shopping for consumer goods, reviving travel and transport services, high farm prices, and probably some acceleration of trade integration in Asia. A table of these totals in the recent past and the last two decades:

2022:       31.9%
2021:       29.4%
2020: 26.5%
2019:       28.6%
2017:       28.4%
2012:       29.6%
2002: 22.4%

Tentative conclusion: The high 2022 export-to-GDP ratio probably reflects some temporary factors; in particular, without the energy price spike it would have been somewhere around 29%. But it also suggests that at least so far, the trade conflicts of the past five years haven’t very fundamentally changed trade flows.

Three closer-level looks — at products and “sectors,” countries, and the United States — offer some backup to this general conclusion, but also suggest areas where flows have at least shifted course:

Products: The largest single chunk of world exports is in manufacturing, which in 2022 accounted for $15.3 trillion, or about 48% of all world exports, slightly below the 52% of pre-pandemic 2019. The $15.3 value nearly equals the roughly $17 trillion in world manufacturing output; top exports were $3 trillion in chemicals, $2.5 trillion in IT goods, and $1.5 trillion in autos and auto parts. In second place comes $5.1 trillion in energy and mining, where the supply shock caused by the war nearly doubled trade value from 2017’s $2.63 trillion. Then came $3.3 trillion in digitally deliverable services ranging from entertainment and media to finance, software, gaming, air and hotel reservations, and so on; $2.3 trillion in food and farm goods; $1.5 trillion in miscellaneous goods-trade categories such as scrap metal, small-scale parcel deliveries, and returned purchases; and $1.4 trillion in transport and travel services.

So: Assuming the high energy prices were temporary, little about the world “traded-product” mix changed very much in the last five years.

Countries: The countries at the top of the WTO’s export rankings also remained pretty stable. The largest single block of merchandise trade was either (a) the European Union’s $5.4 trillion in manufacturing exports (which is shaky as it counts $3.25 trillion in trade among the 27 EU members as well as $2.14 trillion from the EU to other countries), or (b) if you take the EU as a lot of individual countries rather than one big economy, China’s $3.3 trillion in manufactures. Counting down from this, the WTO’s rankings of “top exporters” and ‘top importers’ haven’t changed very much in any of the big product divisions. The top six manufacturing exporters in 2022 – China, EU-as-a-single-economy, the U.S., Japan, Korea, Mexico – are identical to the top six of 2017, though Taiwan and Singapore swap 7th and 8th place, and Vietnam replaces Canada in tenth. In agriculture, likewise, the top six exporters are identical, though Thailand jumps over Mexico and Australia to place 7th. Rankings in “fuels and mining” (which in WTO argot includes metal ores) have changed most¸ with the U.S. climbing past Saudi Arabia and Russia to become the top exporter.

Hmm: Despite the “301” tariffs the Trump administration placed on most Chinese goods in 2018 and early 2019, China’s #1 share of world manufacturing exports rose from 17.8% to 21.7%. The U.S. held its #2 manufacturing rank, but the American share of manufacturing exports shrank from 9.4% to 7.8%.

The U.S.: How did the U.S. fare as all this proceeded? From 2017 to 2022, the U.S. held its second-place share as a goods exporter, lengthened its lead as the world’s top goods importer, and remained the top services trader. So to date — despite “301” and “232” tariffs, withdrawal from the Trans-Pacific Partnership Agreement, renegotiation of the North American Free Trade Agreement, sanctions on Russia, and a battery of new export controls — no very revolutionary changes in the actual U.S. world role. A slightly more granular level, though, reveals some shifts:

1. U.S. export economy is a bit smaller and more concentrated in energy: The U.S. export economy shrank a bit (in relative terms), from 12.2% of GDP in 2017 to 11.6% in 2022. Meanwhile, the Census’ count of U.S. exporting businesses fell from 290,600 in 2017 to (a preliminary) 279,000 in 2022. Energy exports however jumped from a historically very high 9.1% of total exports in 2017 – $141 billion of $1547 billion – to an all-time record 18.2% in 2022, or $380 billion of $2086 billion. Mirroring these domestic figures, the WTO finds the U.S. with a lower share of world manufacturing exports and a higher share of energy. Overall, then, not a very inspiring result. One explanation is benign: heavy stimulus spending causing a consumer boom and diverting exports to domestic customers. Another is less encouraging: an unanticipated effect of tariffs, as the “301” and “232” tariffs imposed in 2018 and 2019 fell heavily on industrial inputs, and thus likely raised U.S. factory costs and eroded competitiveness, especially as Asian countries continued to cut tariffs on one another’s goods.

2. Americans import more, especially in manufacturing: Imports, by contrast, rose from 14.9% of U.S. GDP to 15.4%. This is the highest import share since 2014. Most of the jump reflects a post-pandemic surge in import of manufactured goods, which rose in dollar terms by $740 billion from the levels of 2014. Mirroring this rise, the WTO tables show Americans buying 14.1% of world manufactured exports in 2017, and 15.7% in 2022. With exports only up $70 billion, the Trump administration’s pledge to reduce U.S. manufacturing trade deficits ended with a comically perverse doubling of the sectoral deficit from -$648 billion in 2016 to -$1.3 trillion in 2022.

3. Less from China, more from Vietnam and Mexico: Within the totals, though, U.S. sourcing has shifted noticeably. China’s share of U.S. imports, at 21.6% in 2017, fell to 16.3% in 2022; Vietnam and Mexico, and secondarily India and other ASEAN countries, picked up most of the roughly $150 billion in diverted imports. In 2023 (based on the Census figures complete through last August) this drop accelerated, with China falling behind both Mexico and Canada as U.S. import sources. This noted, China’s higher share of worldwide manufacturing exports suggests that (a) Chinese firms were able to replace lost U.S. customers with sales elsewhere, and/or (b) some of China’s diminishing share of American imports reflects shifts of final assembly to other middle-income countries, in which case China would be exporting components and parts to factories abroad and the U.S. still the final buyer. See below, though, for a third possibility — the early stages of vaguely geopolitical “trade blocs” — suggested by WTO economists this month.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

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PPI’s Trade Fact of the Week: Florida green turtle nesting counts up 80-fold since the 1970s

Posted on October 11, 2023September 18, 2024 by Alyssa Brown

FACT: Florida green turtle nesting counts up 80-fold since the 1970s.

THE NUMBERS: Green turtle nest counts at 27 Florida “core index beaches” –

2022-2023 ~40,000 nests?
2020-2021 ~23,000 nests
2010-2011 ~10,000 nests
2000-2001 ~4,000 nests
1990-1991 ~1,000 nests
1980s ~500 nests

* Florida Wildlife Commission, using two-year averages as green turtle nesting totals appear to vary in a two-year cycle. These are not total statewide (or U.S.) nesting estimates, but counts of nesting at 27 long-studied beaches, making up a representative sample of known Florida nesting beaches. Total nest counts in 2022 were 37,000

WHAT THEY MEAN:

Here’s 17th-century British navigator/pirate/early naturalist William Dampier, on the Caribbean’s vast green turtle flotillas and the swarms of fish traveling in their wake:

“I heard of a monstrous green turtle once taken at Port Royal in the Bay of Campeachy [ed. note: then the capital of Jamaica] that was four foot deep from the back to the belly, and the belly six foot broad. … [M]ultitudes of Turtles go from their common places of feeding and abode, to those laying eggs: and at the time the Turtle resort to these places to lay their Eggs, they are accompanied by abundance of Fish, especially Sharks; the places that the Turtle then leave being at that time destitute of Fish, which follow the Turtle.”

By the mid-20th century the “multitudes of turtles” were nearly gone. When Florida wildlife staff began counting green turtle nests in the 1970s, they found only about 500 each year and sometimes fewer. NOAA’s unhappy summary reports a “catastrophic global decline of the species” with six causes: (a) “by-catch,” as turtles drown in nets towed by shrimp boats; (2) direct hunting, taking green turtles “in extraordinarily high numbers for their fat, meat, and eggs”; (3) loss of nesting grounds, through beach erosion, seawall construction, and bright hotel lighting that deter night-time nesting; (4) collisions with boats close to shore; (5) ocean pollution, in particular plastics and balloons; and most recently (6) climate change and warming ocean temperatures. The green turtles’ decline is typical: the International Union for the Conservation of Nature lists all seven sea turtle species — greens, loggerheads, leatherbacks, Kemp’s Ridleys, olive Ridleys, flatbacks, hawksbills — as either “threatened,” “endangered,” or “critically endangered.”

Some of these threats — floating plastics, warming water — are daunting, global-scale issues. Others seem cheap and simple to fix. Most countries, including the U.S., have banned turtle hunting for food and jewelry, and excluded turtle products from international trade in 1977 through the Convention on International Trade in Endangered Species. Congress in 1987 adopted a law requiring shrimp boats serving the U.S. — whether local or foreign — to equip their nets with “Turtle Exclusion Devices,” which are metal grilles with holes allowing unintentionally trapped turtles to swim out of the nets, costing $325-$550 each. (See below for the WTO’s record of a celebrated U.S.-Mexico trade dispute over the application of this regulation to foreign boats, which the panels eventually decided in favor of the U.S.) And the Florida government under Gov. Lawton Chiles in 1991, meanwhile, imposed beach protection rules and night-time blackouts during nesting months.

A generation later, these cheap and simple fixes look like they’ve worked. Florida’s green turtle nesting counts, measured in two-year cycles, show very strong recovery. The Florida Wildlife Commission’s most recent report, out early this year, shows an 80-fold increase in nesting counts since the early 1980s: a few hundred a year then, about 40,000 per year in 2021 and 2022. The official count for the 2023 nesting season won’t come out until early 2024, but individual beach counts suggest a boom year with as many as 70,000 nests. Nor again are green turtles unique; populations of the smaller and rarer Kemp’s Ridley turtle in Mexico has also rebounded, and the U.S Fish and Wildlife Service has successfully started a new Texas nesting ground.

Not yet anything on the scale of Dampier’s “multitudes”, of course. And looking ahead, the challenges of floating plastics and warming water aren’t simply and probably won’t be cheap. But nonetheless, after many bad decades. the turtles have had a few good ones.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

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PPI’s Trade Fact of the Week: The U.S. does 28% of the world’s scientific research and development spending

Posted on October 4, 2023September 18, 2024 by Alyssa Brown

FACT: The U.S. does 28% of the world’s scientific research and development spending.

**THE NUMBERS: R&D spending, 2020* –**

World (known)	$2.4 trillion
United States	$668 billion
China**	$526 billion (?)
European Union	$440 billion
Japan	$173 billion
South Korea	$105 billion

* National Science Foundation estimates, 2022
** Estimate from 2022; 2023 likely will revise this downward.

WHAT THEY MEAN:

The National Science Foundation’s most recent tally of research spending around the world, published early in 2022, calculated in “purchasing-power parities,”* estimated about $2.4 trillion worth of science in 2019. The IMF’s guess at the 2019 world economy meanwhile (also using the PPP-basis option so as to match NSF’s R&D figure) was $138 trillion. So that year, $1.70 of each $100 of world income went back to labs to design quantum computers and write up artificial intelligence programs, give the last touches to the Webb telescope and open the first analyses of the COVID-19 virus, design new biotech crops, finance robot-sub dives to deep-sea black smokers, and work up ancient-DNA investigations of Neanderthal origins.

Dividing the $2.4 trillion global figure into country-by-country totals requires some social science best-guesses and adjustments to later revisions. For example, NSF put China’s R&D spending at $526 billion in 2019. The OECD, though, has China at $465 billion in 2018 and hasn’t yet guessed at 2019. Meanwhile, if Chinese science is getting revised a bit down, the Brits have been scaled up. The NSF’s first guess for the U.K. in 2019 was a deflating $57 billion, putting the land of Darwin & Newton, Berners-Lee & Hawking, etc. at par with India and well below the $74 billion for France. They’ve now recalculated and gotten something closer to $90 billion. But understanding there’s some blurriness around the edges, here are three big-picture perspectives as of 2019:

Largest R&D Centers: Five countries put more than $100 billion a year into science. The U.S. was top at $668 billion (and per NSF, ratcheted up to $717 billion in 2021 and a likely $792 billion in 2022). American science accordingly made up 28%, or somewhat more than a quarter, of all world research spending – nearly twice the U.S.’ 15.8% share of world PPP-basis GDP, and seven times its 4% share of world population. China was second at $526 billion and 22% of world R&D, followed by Japan at $173 billion, Germany at $148 billion, and South Korea at $102 billion. Together these five countries accounted for two-thirds of all world R&D spending. Adding France and the UK brings the total near three-quarters of the world total.

West & Rest: Traditional ‘western’, ‘developed’ countries account for over three-fifths of world science. Combining the NSF’s estimate for the U.S. with those for Japan, Korea, the 27 EU members, the UK, Switzerland, Norway, Israel, Taiwan, Canada, Australia, and New Zealand, yields a total of $1.5 trillion, exactly five-eighths of the $2.4 trillion worldwide total. China, whether at $526 billion or somewhere in the $500 billion range, is the secondary pole at 22%. The remaining 150 countries — all of Latin America, the Middle East, Southeast Asia, and Africa — together put about $400 billion into science each year. A Korea-like $135 billion comes from the nine non-Chinese big-population BRICS members and invitees (Brazil, Russia, India, South Africa, Egypt, Iran, United Arab Emirates, Saudi Arabia, and Ethiopia). The remaining 120 provide $240 billion and 10% of the world total.

Most “Research-Intensive”: Dropping total-dollar figures and instead looking at research spending relative to national economies, the R&D shares of GDP in the world’s most research-intensive economies, and in nine of the world’s ten largest countries by population,** look like this:

Israel	4.9%
South Korea	4.6%
Taiwan	3.5%
Sweden	3.4%
Germany	3.2%
Japan	3.2%
U.S.	3.1%
China	2.3%
Brazil	1.2%
Russia	1.0%
South Africa	0.8%
India	0.7%
Mexico	0.3%
Indonesia	0.2%
Pakistan	0.2%
Nigeria	0.1%

And a Bit More: Brazil is the top Latin American research power, with $36 billion and 1.2% of GDP. India has a very large dollar-value R&D program at $59 billion, eighth in the world after the U.K. and France. Indian science, though, remains modest as a 0.65% share of GDP. This is somewhat below the 1.6% average for middle-income countries. Russia had about the same total-dollar investment as Taiwan at $44.5 billion in 2019 (though it’s presumably lower now); relative to GDP, its 1.04% was about the same as Turkey’s R&D intensity. Thailand is ASEAN’s top researcher in dollar terms at $12 billion or 1.0% of GDP; relative to GDP, though, Singapore leads at 1.8%.

* The two common calculations of GDP are “exchange-rate basis,” and “purchasing-power parities.” The PPP-basis gives larger figures for developing countries, as it attempts to equalize prices paid for services. Both have advantages and disadvantages; we’re using PPP here as that’s how NSF estimated science spending.
** Unfortunately missing #8 by population, not because we forgot Bangladesh, but as NSF hasn’t done an R&D estimate for them.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

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Saudi Arabia	7.4%
Qatar	7.0%
Oman	5.2%
Israel	4.5%
Russia	4.1%
U.S.	3.5%
Cuba	2.9%
Singapore	2.8%
South Korea	2.7%
Pakistan	2.6%
Lithuania	2.5%
WORLD	2.3%
Vietnam	2.3%
United Kingdom	2.2%
France	1.9%
China*	1.6%
Norway	1.6%
Spain	1.5%
New Zealand	1.2%
Thailand	1.2%
Brazil	1.1%
Switzerland	0.8%
Indonesia	0.7%
South Africa	0.7%
Argentina	0.4%
Ireland	0.2%
Haiti	0.1%

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FACT: PPI’s Trade Fact of the Week: A quarter of Ohio’s manufacturing workers work for international businesses.

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