US/ASIA: State dependence on trade with Asia grows

Analysis

In Washington it is widely understood that Asian countries' rapid economic growth, substantial foreign exchange reserves, increasing military capabilities and rising global political influence will help shape the future of the United States at a macro-level. Indeed, this has become conventional wisdom in business circles and in President George Bush's administration. However, among the general public it is less well understood that Asia -- particularly Asian trade and investment -- is also increasingly vital to employment and growth at a more local level in states, congressional districts and counties. This is true even in many interior states where there is little perceived dependence on Asian trade. As the political recognition of the importance of US-Asian trade increases, protectionist sentiment may gradually decline.

Politics and trade. Measuring the benefits of trade involves more than simply surveying the exchange of goods and services. The economic impact of trade encompasses a large range of economic and social exchanges ranging from exports, employment based on exports, revenue generated by Asian students studying in the United States, temporary visas granted for work in US firms, tourism and immigration patterns that exert an impact on US life and society.

However, the US public is only vaguely conscious of these less 'visible' impacts of trade and trade dependence. The politics of trade is typically driven by the most high-profile negative consequences, rather than a broader assessment of the overall benefits and tradeoffs:

1. Visible negative consequences. This, in part, explains why US-Asian trade is so unpopular in many southern and mid-western states, where it is widely blamed for decimating once-thriving industries:

   • For example, in North Carolina, the state's textile manufacturing businesses have collapsed in the face of Chinese imports.
   • Competition from Vietnamese prawn farmers has increasingly undercut shrimp fishermen in Louisiana.
   • In the 'Rust Belt', imports from Asia are widely blamed for undermining the US auto industry (although the lion's share of automobile and auto part manufacturing has been displaced to southern US states and Mexico, rather than Asia).

   Therefore, the negative effects of trade are highly politically salient in these states and localities.

2. Obvious beneficiaries. In contrast, in Pacific coast states such as Washington, trade with Asia is politically popular because it is widely appreciated that large employers -- such as Boeing and Microsoft -- generate jobs and revenue through their exports to Asian markets. Washington state's farmers, particularly apple growers, also send a substantial proportion of their produce to Asia. These highly visible trade benefits have long made the state a stronghold of anti-protectionist sentiment. (During their campaigns for the Democratic party's presidential nomination, Senators Barack Obama and Hillary Clinton pointedly avoided criticising US-Asian trade ties during the Washington state primary in February.) Similarly, the value of merchandise exports from California to Asia reached 58.6 billion dollars last year, which makes protectionist rhetoric politically hazardous in the most populous US state.

'Invisible' trade benefits. In other regions of the country, the positive aspects of this exchange are 'invisible' and therefore lack political salience. However, as the value and wide geographic spread of the economic benefits of US-Asian trade have become clearer, business organisations and lobby groups are beginning to make an effort to change public perceptions.

For example, the East-West Center, a congressionally funded education and research group, has begun a major study of the importance of Asian trade to US state economies called Asia Matters for America (AMA). Its findings thus far, which are based on publicly available US government data, have been startling:

• The usual suspects. The Pacific coast states of California, Oregon, and Washington certainly enjoy huge manufacturing exports to Asia, and very substantial export-generated employment. Almost 300,000 jobs in California, over 100,000 in Washington and nearly 60,000 in Oregon are directly tied to merchandise trade with Asia.
• Unexpected beneficiaries. However, merchandise exports to Asian countries also generate tens of thousands of jobs in states without such high-profile ties. While China is frequently blamed for shuttering manufacturing firms in Ohio, Pennsylvania and North Carolina, they also rank among the top ten states in manufacturing employment by exports to Asia. In Ohio alone, 47,796 manufacturing jobs are directly attributable to trade with Asia (see US/CHINA: Washington renews China policy debate - July 31, 2007).
• Big money, small states. Moreover, small states without any traditional ties to Asia have reaped major monetary benefits from US-Asian trade. Idaho, New Mexico, Maine and Vermont all rank among the top ten US states in terms of their share of exports to Asia in 2007. In Nevada, 76% of international students at the state's universities -- a major revenue generator -- came from Asia in 2005-2006, the highest such proportion in the country.
• Losers as winners. Some states widely seen as 'losers' as the result of US-Asian trade have made offsetting gains. For example, Louisiana's 5th congressional district had nearly 3 billion dollars in exports to Asia last year -- 36% of the total value of its exports, and the highest among all congressional districts in the south-eastern United States.

Changing attitudes. The East-West Center's AMA project is hardly the only national effort to change public political perceptions regarding US-Asian trade. The congressional delegations of California, Oregon and Washington are strong advocates for this view -- even though they are dominated by Democrats, the party often perceived as more protectionist. Obama, the Democrats' presidential nominee, has sometimes utilised protectionist rhetoric, and may postpone efforts to push through several bilateral free trade agreements (FTAs) if he captures the White House. Nevertheless, Obama would likely continue to back further trade liberalisation -- particularly as the importance of Asian trade to most state economies becomes more widely understood (see UNITED STATES: Obama's economic platform takes shape - May 21, 2008). (The Republican presidential nominee, Senator John McCain, has always been a strong supporter of free trade.)