Saturday, February 20, 2010

Chart of the Day: Import Truths

To understand just how valuable imports are to US businesses - especially manufacturers - one need only look at the following chart, courtesy of Economist Mark Perry.

Perry uses this chart to help explain why cheap Chinese imports actually strengthen US businesses and, by extension, increase American jobs: "As the chart above shows, almost 60% of imported goods are: a) industrial supplies (chemicals, commodities, raw materials, etc.) and b) capital goods (machinery, equipment, parts, tools, etc.) which are mostly purchased by AMERICAN COMPANIES as inputs for production in the United States.  Being able to purchase Chinese and other foreign inputs at the lowest possible price makes American companies MORE competitive, sell MORE of their products, and hire MORE American workers."  Indeed.

The chart also clearly demonstrates why improved access to imported goods (and services) must be a critical component of any national policies geared at increasing US exports.  As I recently wrote, "[A] strong, positive correlation exists between import growth and export growth—a statistic that makes perfect sense when one realizes that over half of all U.S. imports are capital goods and equipment used by American manufacturers to produce globally-competitive products. Such data are helpful signals of imports’ vital role in the U.S. economy, and they undermine a [mercantilist] U.S. export policy that ignores access to foreign goods." 

Unfortunately, our current export policies do just that.


RickRussellTX said...

I initially looked at the graph and thought, "surely it doesn't include oil", but it turns out our petroleum imports for 2008 totaled "only" about 430 billion dollars, barely half the total spending on chemicals and industrial commodities. And that was at $90 per barrel. Suddenly that "dependence on foreign oil" doesn't look so bad any more.

Scott Lincicome said...

Just imagine how much stuff would cost if we didn't have that awful Canadian and Mexican oil at "only" $90 a barrel!