Least In the East?

From 2000 to 2010, America lost market share in key East Asian economies faster than any of our major competitors. One key reason for this is the growing network of trade agreements that have helped our competitors grow their exports to these lucrative markets.

In a previous analysis, Third Way found that America’s share of the rapidly growing Asia-Pacific import pie had shrunk drastically, plummeting more than 40% between 2000 and 2010. If this trend continues, we projected that America would lose out on over $900 billion in potential new exports to the region in 2020 alone—exports that could support over 4.5 million American jobs.

In this new analysis, we find that, over the last decade, America was dead last in growing or retaining its share of East Asia’s import market when compared with 14 major exporters to the region. And, while America’s share has been slipping, East Asia’s economies have concluded some 50 free trade agreements—the vast majority of them excluding the United States.

According to the World Trade Organization, East Asian economies have concluded 48 free trade agreements. Only two of these involve the United States. The United States implemented an FTA with Singapore in 2004, and the Obama Administration’s important FTA with South Korea entered into force in 2012. (The United States also implemented an FTA with Australia in 2005.)

Least in the East: As detailed in the table on page 2, America’s share of imports into the “East Asia-15” economies fell by over 42% between 2000 and 2010. Our key competitors in the region all did better, with many growing their import shares significantly.

The unmistakable role of regional trade deals in promoting exports: America’s major competitors for sales into the East Asian market—especially China, Korea, Thailand, and Australia—have significantly outperformed the United States in growing or retaining market share in the region. It’s noteworthy that virtually all of the Asia-Pacific economies on this list are also much more closely linked to the region through an extensive and growing network of trade deals with other regional partners.

Share of Imports into “East Asia-15” Economies*

* The East Asia-15 is comprised of China, Hong Kong, Japan, Korea, and Taiwan and the 10 ASEAN countries of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. (The EA-15 does not include Australia, India, or New Zealand or other economies in the broader Asia-Pacific region.) Third Way calculations based on UN, Asian Development Bank, and Taiwan Census data.

Leaving the United States out of regional trade pacts puts our exports and workers at a growing disadvantage. When Asia-Pacific countries eliminate trade barriers among themselves, remaining duties and other barriers to U.S. trade loom even larger. There are countless examples. For instance, the Agriculture Department projects that preferential duty eliminations under ASEAN’s trade deals with China, Australia, and New Zealand will reduce American fruit and processed food exports to ASEAN economies by some $350 million.

Other reasons for the decline: There are, of course, other important reasons why countries on this list may have gained or lost East Asian market share over time, including swings in exchange rates and other changes in economic conditions. Saudi Arabia, for example, has an expensive commodity–oil–that many economies in East Asia increasingly need. Germany’s growing share in East Asia likely reflects its strong and effective export promotion programs and its globally competitive specialty products. And China? China is East Asia’s 800 pound gorilla. It’s also worth noting that import data–which assigns a single country of origin to products produced in multiple countries–often doesn’t fully capture the complexity of modern trade flows and global supply chains.

But, having said all this, the sharp slide in America’s share of the region’s imports is disturbing. With goods imports into Asia expected to surge to almost $10 trillion annually by 2020, reversing this trend is more vital than ever. Hundreds of billions in new U.S. exports and millions of good U.S. jobs hang in the balance.

Getting a bigger share of exports to the region: As we detail in our recent report, “America Makes . . . Will Asia Take?” there are growing opportunities for America’s workers, farmers, manufacturers, and service firms to export to a rapidly-expanding Asia-Pacific region–a market that will add 1.2 billion new middle class consumers by 2020. From heavy equipment to health care and food to financial services, U.S. companies and workers increasingly make what Asia wants to buy. But Asia’s extensive trade barriers–including high duties, unfair rules, and lax enforcement–often get in the way.

To seize more opportunities in the Asia-Pacific, America must continue to aggressively use international trade rules to clear away Asia’s remaining barriers to our trade. This means filing new trade cases when countries in the region violate trade rules. And it requires that we build a more extensive network of trade agreements in the Asia-Pacific–beginning with the TransPacific Partnership trade agreement that the United States is currently negotiating with key Asia-Pacific countries.

More Third Way work on these issues:

Third Way Infographic: 
Linked In: Trade Networking In the Asia Pacific

Third Way Infographic: 
America’s Shrinking Slice

Third Way Report: 
Boatloads of Growth: Recapturing America’s Share of Asia-Pacific Trade

Third Way Report: 
America Makes . . . Will Asia Take?

Third Way Report: 
China’s Trade Barrier Playbook: Why America Needs a New Game Plan