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Globalization and U.S. International Trade
Cletus C. CoughlinVice President and Deputy Director of Research
Federal 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.
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Nominal GDP
Nominal Exports
Nominal Imports
Figure 1Nominal Exports, Nominal Imports, and Nominal GDP
1947-2007
Y/Y Percent Change
Per
cen
t
Source: BEA, HAVER Analytics.
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GDP Deflator
Exports Price Index
Imports Price Index
Figure 2Exports Price Index, Imports Price Index, and GDP Deflator
1947 – 2007
(2000=100)
Inde
x
Source: BEA, HAVER Analytics.
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GDP Deflator
Exports Price Index
Imports Price Index
Figure 3Exports Price Index, Imports Price Index, and GDP Deflator
1947 - 2007
Y/Y Percent Change
Per
cen
t
Source: BEA, HAVER Analytics.
“[T]he old models simply no longer apply in our
globalized, interconnected and expanded economy…By
spurring productivity and fomenting tectonic economic
changes, globalization has acted as a tailwind for the
Fed’s – and other central banks – efforts to hold down
inflation.”
Richard Fisher – President, FRB Dallas
Source: “Coping with Globalization’s Impact on Monetary Policy,” speech at 2006 ASSA Meeting, Boston, MA, January.
BISDomestic Gap Foreign Gap Time Period
0.22 (1985 – 2005) (0.08)
-0.13 0.61 (1985 – 2005) (0.08) (0.09)
U.S. Results
Board
0.140 -0.048 (1985 – 2005)
(0.087) (0.098)
0.179 -0.157 (1977 – 2005)
(0.052) (0.087)
0.50
1.00
1.50
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PEX/PIM
PEX/PNon-Petro IM
Figure 4Price Index Ratios:
Total Exports to Total Imports and Total Exports to Non-Petroleum Imports
1967 - 2007
Rat
io
Source: BEA, HAVER Analytics.
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Real GDP
Real Exports
Real Imports
Figure 5Real Exports, Real Imports, and Real GDP
1947 - 2007
Y/Y Percent Change
Per
cen
t
Source: BEA, HAVER Analytics.
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EX+IM/ GDP
EX/GDP
IM/GDP
Figure 6Nominal Exports, Nominal Imports,
and Nominal (Exports + Imports) as a % of GDP 1947 – 2007
Per
cen
t
Source: BEA, HAVER Analytics.
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Figure 7U.S. Balance on Trade as a % of GDP
1960 – 2006
Per
cen
t
Source: BEA, HAVER Analytics.
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Figure 8U.S. Balance on Trade
1960 – 2006
$ M
illio
ns
Source: BEA, HAVER Analytics.
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Figure 9U.S. Balance on Trade in Goods
1960 – 2006
$ M
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ns
Source: BEA, HAVER Analytics.
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Figure 10U.S. Balance on Services
1960 – 2006
$ M
illio
ns
Source: BEA, HAVER Analytics.
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100
Figure 11Nominal Trade-Weighted Exchange Value of US$ vs. Major Currencies,
Jan 2003 – Jan 2008 Monthly Averages
Avg, 3/73=100
Source: Federal Reserve Board, HAVER Analytics.
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EX/GDP
IM/GDP
Figure 12Real Exports and Real Imports as a % of Real GDP
1947 – 2007
Per
cen
t
Source: BEA, HAVER Analytics.
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Services
Agricultural Goods
Non-Ag Goods
Figure 13Agricultural Exports Price Index, Non-Ag Exports Price Index,
and Services Exports Price Index 1968 – 2007
(2000=100)
Inde
x
Source: BEA, HAVER Analytics.
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Services
Agricultural Goods
Non-Ag Goods
Figure 14Agricultural Exports Price Index, Non-Ag Exports Price
Index, and Services Exports Price Index 1968 – 2007
Y/Y Percent Change
Per
cen
t
Source: BEA, HAVER Analytics.
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Services
Agricultural Goods
Non-Ag Goods
Figure 15Real Agricultural Exports, Real Non-Ag Exports, and Real Services Exports
1968 – 2007
Y/Y Percent Change
Per
cen
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Source: BEA, HAVER Analytics.
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Services
Petroleum Goods
Non-Petro Goods
Figure 16Petroleum Goods Imports Price Index, Non-Petro Goods Imports Price
Index, and Services Imports Price Index 1968 – 2007
(2000=100)
Inde
x
Source: BEA, HAVER Analytics.
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Services
Petroleum Goods
Non-Petro Goods
Figure 17Petroleum Goods Imports Price Index, Non-Petro Goods Imports Price
Index, and Services Imports Price Index 1968 – 2007
Y/Y Percent Change
Inde
x
Source: BEA, HAVER Analytics.
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Services
Non-Petro Goods
Figure 18Non-Petro Goods Imports Price Index and
Services Imports Price Index 1968 – 2007
Y/Y Percent Change
Inde
x
Source: BEA, HAVER Analytics.
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Services
Petroleum Goods
Non-Petro Goods
Figure 19Real Petroleum Imports, Real Non-Petro Imports, and Real Services Imports
1968 – 2007
Y/Y Percent Change
Per
cen
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Source: BEA, HAVER Analytics.
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Services
Agricultural Goods
Non-Ag Goods
Figure 20Export Shares (Nominal Terms):
Agricultural Exports, Non-Ag Exports, and Services Exports 1967 – 2007
Per
cen
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Source: BEA, HAVER Analytics.
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Services
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Figure 21Export Shares (Real Terms):
Agricultural Exports, Non-Ag Exports, and Services Exports 1967 – 2007
Per
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Source: BEA, HAVER Analytics.
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Services
Petroleum Goods
Non-Petro Goods
Figure 22Import Shares (Nominal Terms):
Petroleum Imports, Non-Petro Imports, and Services Imports 1967 – 2007
Per
cen
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Source: BEA, HAVER Analytics.
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Figure 23Import Shares (Real Terms):
Petroleum Imports, Non-Petro Imports, and Services Imports 1967 – 2007
Per
cen
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Source: BEA, HAVER Analytics.
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Manufacturing
Private Services
Figure 24Manufacturing and Private Services Employment
as a % of Total Employment 1948 – 2006
Per
cen
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Source: BEA.
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Manufacturing
Private Services
Figure 25Value Added by Industry:
Manufacturing and Private Services as a % of GDP 1947 – 2006
Per
cen
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Source: BEA.
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Manufacturing
Private Services
Figure 26Real Value Added by Industry:
Manufacturing and Private Services as a % of GDP 1987 – 2006
Per
cen
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Source: BEA.
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Manufacturing
Private Services
Figure 27Chain-Type Price Indexes for Value Added:
Manufacturing and Private Services 1947 – 2006
(2000=100)
Inde
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Source: BEA.
Figure 28U.S. Exports – Industrial vs. Developing Countries
5+ Year Averages
1981-1985 1991-19951986-1990
1996-2000 2001-2006*Former Soviet Union
Developing
Industrial
Developing
Industrial
Developing
Industrial
Developing
Industrial
Developing
Industrial
58%40%
63%36%
58%41%
56%
43%
54%
46%
FSU* 3%
China 4%India 2%
China 4%
China 5%
China 4%
China 9%
India 2%
India 1% India 2%
India 1%FSU 2%
FSU 2%
FSU 2%
FSU 1%
Source: IMF Direction of Trade Statistics Yearbooks.
Table 1Top 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
Singapore
Source: IMF Direction of Trade Statistics Yearbooks.
Figure 29U.S. Imports – Industrial vs. Developing Countries
5+ Year Averages
1981-1985 1991-19951986-1990
1996-2000 2001-2006*Former Soviet Union
Developing
Industrial
Developing
Industrial
Developing
Industrial
Developing
Industrial
Developing
Industrial
58%40%
62%39%
57%43%
53%
47%
47%
53%
FSU* <1%
China 2.4%India 1.7%
China 5.5%
China 16.4%
China 12.4%
China 24%
India 1.7%
India 1.9% India 2.0%
India 1.7%FSU <1%
FSU <1%
FSU <1%
FSU 1.7%
Source: IMF Direction of Trade Statistics Yearbooks.
Table 2Top 10 U.S. Import Partners
(5+ year averages ranked by $ of imports)
1981-1985
Canada
Japan
Mexico
Germany
Taiwan
United 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.
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Figure 30U.S.-China Bilateral Trade Deficit
1978 – 2007
$ Millions of Dollars Per Year: U.S. Net Exports
Source: U.S. Census Bureau, HAVER Analytics.
-900,000
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$ M
illio
n
U.S.-China Bilateral Trade Deficit
U.S. Trade Deficit
Source: U.S. Census Bureau, HAVER Analytics.
Figure 31U.S.-China Bilateral Trade Deficit &
U.S. Trade Deficit1978 – 2007
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Figure 32China’s Portion of the U.S. Trade Deficit
1978 – 2007
Source: U.S. Census Bureau.
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China
Figure 33Share of U.S. Goods Imports from China
1991- 2007
Per
cen
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Source: U.S. Census Bureau.
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China Pac Rim (ex China)
Figure 34Share of U.S. Goods Imports from the Pacific Rim:
China vs. Pacific Rim (ex China)1991- 2007
Per
cen
t
Source: U.S. Census Bureau.
• 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.
Concluding Comments
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