This is my final MAPI Foundation report, on U.S. and Chinese trade in manufactures during the first half of 2016, as I am retiring from MAPI at the end of August. The report also provides a breakout of U.S. bilateral trade with China and Mexico, which has become a contentious electoral issue. As will be seen, the two bilateral deficits are critically different in terms of trade composition and policy relationships.

Table 1 presents U.S. and Chinese global trade in manufactures during the first half of 2016:

This report surveys four types of proposals aimed at solving the EMU’s various crises. Only one of the four stands a realistic chance of being implemented in the next decade. What the EMU needs is an immediate implementation of a set of minimal conditions for the survival of the common currency. The paper delves into individual policy planks and assesses their chances of adoption in the next decade. The common currency faces long odds of survival beyond the next few years.

There has been considerable discussion of the U.S. federal debt, approaching $20 trillion, and the impact this will have on the budget deficit when Treasury rates rise. Almost no attention, however, has been paid to the fact that three-quarters of this projected debt, or $15 trillion, will be held by foreigners, and that a 3% rise in Treasury rates could cause disruption in international trade and finance.

In the first quarter, the U.S. trade deficit in manufactures rose by 4%, or $7 billion, compared with 2015. This is a big improvement from the 14% increase for calendar 2015, but still resulted in a trade-related loss of 50,000 American manufacturing jobs.

The rules-based multilateral trade and financial system created at Bretton Woods in 1944 has been crumbling over the past decade. The WTO trading system to reduce trade barriers on a reciprocal, most-favored-nation basis has been replaced by a spreading network of bilateral and regional preferential trade agreements. And far more threatening, the IMF financial system, centered on convertible, non-manipulated exchange rates, has been undermined by rampant exchange rate mercantilism, principally by China and other Asian nations.

Manufactured goods are ubiquitous at home, in transit, and at work, but the narrow definition of manufacturing industries in national statistics implies that the sector is of only minor importance to economic activity. The traditional finding is that manufacturers’ proportion of gross domestic product (GDP) is only about 11% and manufacturing’s share of economy-wide full-time equivalent employment is just 9%. Since this excludes manufacturing activities such as research and development, corporate management, logistics operations, and advertising and branding, those figures are merely the tip of the iceberg.

The U.S. trade deficit in manufactures soared by 16% in 2015, resulting in a loss of 600,000 American manufacturing jobs. Sixty percent of the global deficit was with China, with U.S. manufactured imports from China 5.8 times larger than U.S. exports to China.

As the U.S. trade deficit in manufactures rose in the third quarter while the Chinese surplus remained flat, it incurred an estimated trade-related loss of 150,000 American jobs, and heading toward more than 600,000 for the calendar year.

The European Commission recently proposed a capital markets union as a means of raising the share of direct finance in the economy. Kris Bledowski suggests possible components of such a union and assesses their value to MAPI members. His analysis shows that few components are likely possible by 2019, the putative deadline. Even if all the goals are met, their impact on MAPI member companies’ operations in Europe will probably be modest.

A rapid decline in U.S. export competitiveness for manufactures is having game-changing consequences for the international trade and financial systems. U.S. leadership capabil­ity has been reduced for pursuing a more open, nondiscriminatory trading system while trade relationships are shifting from the rules-based multilateral World Trade Organization to a spreading network of preferential bilateral and regional trade agreements.