OIT Times: Study Examines Growing Trade Deficit in Products of Energy-Intensive Industries

March 27, 2002

As the overall U.S. trade deficit has worsened over the past several years, U.S. imports for many commodities produced and used by energy intensive U.S. industries have increased, as well. These are the preliminary results of an OIT-sponsored study by the National Coalition for Advanced Manufacturing (NACFAM).

The idea for the study originated during a meeting of NACFAM Advanced Manufacturing Leadership Council in late September 2001. In discussing the new national security environment and its potential impacts on U.S. manufacturing, the assembled manufacturers, academics, and policymakers wanted to know just how extensively U.S. manufacturing relies on international trade for input commodities. How much do U.S. manufacturers use foreign sources of materials? What countries supply the materials critical to U.S. manufacturing operations? To what degree have imports penetrated U.S. markets?

Because of the Leadership Council interest in these questions, OIT asked NACFAM to study import trends for supplies used and products manufactured by most of the energy-intensive industries participating in the Industries of the Future partnership. Accordingly, NACFAM researchers have focused their recent efforts on assessing the trends in international trade flows and resource origins for energy-intensive U.S. manufacturing industries.

The ongoing study consists of two parts. The first examines the import dependence (defined as the percentage of net imports in domestic consumption) of final products consumed in the U.S. The second part examines the commodity use patterns of the U.S. aluminum, chemicals, forest products, glass, metal casting, and steel industries.

As widely reported in the media, the U.S. trade deficit soared in the latter half of the 1990s, jumping by more than 30% between 1996 and 2000. Not surprisingly, imports rose across the entire spectrum of U.S. industry. The extent to which energy-intensive industries relied on imported final products jumped dramatically between 1997 and 1999. In glass and glass products manufacturing, for example, import dependence rose by more than 350%. Similarly, the forest products industry saw import penetration double in two subsectors: pulp, paper, and paperboard and veneer, plywood, and engineered wood products.

As one would expect, relative levels of domestic self-sufficiency vary from one industry to the next, but the overall picture is fairly consistent. In evaluating the degree to which energy-intensive industries rely on imported commodities to produce their final products, the study finds that the U.S. has been running persistent trade deficits in many leading commodity inputs. In the chemical industry, for example, the U.S. runs a trade deficit in 51 of the 101 traded commodities and, between 1996 and 2000, imports jumped 39% in the sectors that provide those commodities. For the steel industry, the U.S. runs a trade deficit in 46 of the 68 traded commodities, and imports in the sectors providing those commodities jumped 52% over the same period. Notably, most of the imported commodities tend to come from countries that are generally considered friendly to U.S. interests.

The study used the National Input-Output Tables produced by the Commerce Department Bureau of Economic Analysis to identify the leading commodities consumed by each industry. For each leading commodity, researchers then examined import trends over the last ten years, trade balances, and source country information. To complete the picture for each commodity, the study also looked at U.S. output and productivity growth.

As a next step, NACFAM researchers may work with representatives from the energy-intensive industries to identify the commodities considered most critical to manufacturing operations, and then conduct more detailed analyses on those key commodities. The researchers will present of their findings on May 8 just prior to OIT Customer Day.