Globalization and U.S. International Trade

1
Globalization and U.S. International Trade

• Cletus C. Coughlin
• Vice President and Deputy Director of
  ResearchFederal Reserve Bank of St. Louis
• Professors Conference February 21, 2008

Note The views expressed are mine and do not
necessarily reflect official positions of the
Federal Reserve System.
2
Figure 1 Nominal Exports, Nominal Imports, and
Nominal GDP 1947-2007 Y/Y Percent Change
Nominal Imports
Nominal Exports
Percent
Nominal GDP
Source BEA, HAVER Analytics.
3
Figure 2 Exports Price Index, Imports Price
Index, and GDP Deflator 1947 2007 (2000100)
Imports Price Index
GDP Deflator
Index
Exports Price Index
Source BEA, HAVER Analytics.
4
Figure 3 Exports Price Index, Imports Price
Index, and GDP Deflator 1947 - 2007 Y/Y Percent
Change
Imports Price Index
Percent
Exports Price Index
GDP Deflator
Source BEA, HAVER Analytics.
5
Richard Fisher President, FRB Dallas

• The old models simply no longer apply in our
• globalized, interconnected and expanded
  economyBy
• spurring productivity and fomenting tectonic
  economic
• changes, globalization has acted as a tailwind
  for the
• Feds and other central banks efforts to hold
  down
• inflation.

Source Coping with Globalizations Impact on
Monetary Policy, speech at 2006 ASSA Meeting,
Boston, MA, January.
6
U.S. Results

• BIS
• Domestic Gap Foreign Gap Time Period
• 0.22 (1985
  2005)
• (0.08)
• -0.13 0.61
  (1985 2005)
• (0.08) (0.09)

Board
0.140 -0.048 (1985 2005)
(0.087) (0.098)
0.179 -0.157
(1977 2005) (0.052)
(0.087)
7
Figure 4 Price Index Ratios Total Exports to
Total Imports and Total Exports to Non-Petroleum
Imports 1967 - 2007
PEX/PNon-Petro IM
Ratio
PEX/PIM
Source BEA, HAVER Analytics.
8
Figure 5 Real Exports, Real Imports, and Real GDP
1947 - 2007 Y/Y Percent Change
Real Imports
Real Exports
Percent
Real GDP
Source BEA, HAVER Analytics.
9
Figure 6 Nominal Exports, Nominal Imports, and
Nominal (Exports Imports) as a of GDP 1947
2007
EXIM/ GDP
IM/GDP
Percent
EX/GDP
Source BEA, HAVER Analytics.
10
Figure 7 U.S. Balance on Trade as a of GDP
1960 2006
Percent
Source BEA, HAVER Analytics.
11
Figure 8 U.S. Balance on Trade 1960 2006
Millions
Source BEA, HAVER Analytics.
12
Figure 9 U.S. Balance on Trade in Goods 1960
2006
Millions
Source BEA, HAVER Analytics.
13
Figure 10 U.S. Balance on Services 1960 2006
Millions
Source BEA, HAVER Analytics.
14
Figure 11 Nominal Trade-Weighted Exchange Value
of US vs. Major Currencies, Jan 2003 Jan 2008
Monthly Averages Avg, 3/73100
Source Federal Reserve Board, HAVER Analytics.
15
Figure 12 Real Exports and Real Imports as a of
Real GDP 1947 2007
IM/GDP
EX/GDP
Percent
Source BEA, HAVER Analytics.
16
Figure 13 Agricultural Exports Price Index,
Non-Ag Exports Price Index, and Services Exports
Price Index 1968 2007 (2000100)
Agricultural Goods
Services
Non-Ag Goods
Index
Source BEA, HAVER Analytics.
17
Figure 14 Agricultural Exports Price Index,
Non-Ag Exports Price Index, and Services Exports
Price Index 1968 2007 Y/Y Percent Change
Agricultural Goods
Percent
Services
Non-Ag Goods
Source BEA, HAVER Analytics.
18
Figure 15 Real Agricultural Exports, Real Non-Ag
Exports, and Real Services Exports 1968
2007 Y/Y Percent Change
Agricultural Goods
Non-Ag Goods
Percent
Services
Source BEA, HAVER Analytics.
19
Figure 16 Petroleum Goods Imports Price Index,
Non-Petro Goods Imports Price Index, and
Services Imports Price Index 1968
2007 (2000100)
Petroleum Goods
Index
Services
Non-Petro Goods
Source BEA, HAVER Analytics.
20
Figure 17 Petroleum Goods Imports Price Index,
Non-Petro Goods Imports Price Index, and
Services Imports Price Index 1968 2007 Y/Y
Percent Change
Petroleum Goods
Index
Non-Petro Goods
Services
Source BEA, HAVER Analytics.
21
Figure 18 Non-Petro Goods Imports Price Index and
Services Imports Price Index 1968 2007 Y/Y
Percent Change
Index
Non-Petro Goods
Services
Source BEA, HAVER Analytics.
22
Figure 19 Real Petroleum Imports, Real Non-Petro
Imports, and Real Services Imports 1968
2007 Y/Y Percent Change
Petroleum Goods
Non-Petro Goods
Percent
Services
Source BEA, HAVER Analytics.
23
Figure 20 Export Shares (Nominal Terms)
Agricultural Exports, Non-Ag Exports, and
Services Exports 1967 2007
Non-Ag Goods
Percent
Services
Agricultural Goods
Source BEA, HAVER Analytics.
24
Figure 21 Export Shares (Real Terms)
Agricultural Exports, Non-Ag Exports, and
Services Exports 1967 2007
Non-Ag Goods
Percent
Services
Agricultural Goods
Source BEA, HAVER Analytics.
25
Figure 22 Import Shares (Nominal Terms)
Petroleum Imports, Non-Petro Imports, and
Services Imports 1967 2007
Non-Petro Goods
Percent
Services
Petroleum Goods
Source BEA, HAVER Analytics.
26
Figure 23 Import Shares (Real Terms) Petroleum
Imports, Non-Petro Imports, and Services Imports
1967 2007
Non-Petro Goods
Percent
Services
Petroleum Goods
Source BEA, HAVER Analytics.
27
Figure 24 Manufacturing and Private Services
Employment as a of Total Employment 1948
2006
Private Services
Percent
Manufacturing
Source BEA.
28
Figure 25 Value Added by Industry Manufacturing
and Private Services as a of GDP 1947 2006
Private Services
Percent
Manufacturing
Source BEA.
29
Figure 26 Real Value Added by Industry
Manufacturing and Private Services as a of
GDP 1987 2006
Private Services
Percent
Manufacturing
Source BEA.
30
Figure 27 Chain-Type Price Indexes for Value
Added Manufacturing and Private Services 1947
2006 (2000100)
Private Services
Manufacturing
Index
Source BEA.
31
Figure 28 U.S. Exports Industrial vs.
Developing Countries 5 Year Averages
1981-1985
1986-1990
1991-1995
58
58
63
36
41
40
China 4
China 4
India 2
India 1
FSU 2
FSU 2
FSU 3
Former Soviet Union
2001-2006
1996-2000
54
56
46
43
China 9
China 5
India 2
India 1
FSU 1
FSU 2
Source IMF Direction of Trade Statistics
Yearbooks.
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Table 1 Top 10 U.S. Export Partners (5 year
averages ranked by of exports)
1981-1985 Canada Japan Mexico United
Kingdom Germany Netherlands Saudi
Arabia France Korea Belgium
2001-2006 Canada Mexico Japan United
Kingdom China Germany Korea Netherlands France Sin
gapore
Source IMF Direction of Trade Statistics
Yearbooks.
33
Figure 29 U.S. Imports Industrial vs.
Developing Countries 5 Year Averages
1981-1985
1986-1990
1991-1995
57
58
62
39
43
40
China 5.5
China 12.4
India 1.7
India 1.7
FSU lt1
FSU lt1
FSU lt1
Former Soviet Union
2001-2006
1996-2000
47
53
53
47
China 24
China 16.4
India 2.0
India 1.9
FSU 1.7
FSU lt1
Source IMF Direction of Trade Statistics
Yearbooks.
34
Table 2 Top 10 U.S. Import Partners (5 year
averages ranked by of imports)
1981-1985 Canada Japan Mexico Germany Taiwan Unite
d Kingdom Korea France Hong Kong Italy
2001-2006 Canada China Mexico Japan Germany United
Kingdom Korea Taiwan France Venezuela
Source IMF Direction of Trade Statistics
Yearbooks.
35
Figure 30 U.S.-China Bilateral Trade Deficit
1978 2007 Millions of Dollars Per Year
U.S. Net Exports
Source U.S. Census Bureau, HAVER Analytics.
36
Figure 31 U.S.-China Bilateral Trade Deficit
U.S. Trade Deficit 1978 2007
U.S.-China Bilateral Trade Deficit
Million
U.S. Trade Deficit
Source U.S. Census Bureau, HAVER Analytics.
37
Figure 32 Chinas Portion of the U.S. Trade
Deficit 1978 2007
Percent
Source U.S. Census Bureau.
38
Figure 33 Share of U.S. Goods Imports from
China 1991- 2007
Percent
Source U.S. Census Bureau.
39
Figure 34 Share of U.S. Goods Imports from the
Pacific Rim China vs. Pacific Rim (ex
China) 1991- 2007
Percent
Source U.S. Census Bureau.
40
Concluding Comments

• U.S. trade
• Trade/GDP
• Trade Prices rapid in 70s, relatively slow
  in 80s and 90s, faster than GDP deflator recently
• Exports of non-agricultural goods have increased
  as fast as exports of services
• Real manufacturing output/GDP constant
• Geographic pattern of trade shifting to
  developing counties
• China increasingly important problem?
• Implications for U.S. monetary policy
• International sector increasingly important for
  U.S. economic activity
• Models based on foreign output gaps of dubious
  value
• Negligible exchange-rate pass-through for U.S.