Setser on Germany

Brad Setser:

I suspect the politics around trade would be a bit different in the U.S. if the goods-exporting sector had grown in parallel with imports. 

That is one key difference between the U.S. and Germany. Manufacturing jobs fell during reunification—and Germany went through a difficult adjustment in the early 2000s. But over the last ten years the number of jobs in Germany’s export sector grew, keeping the number of people employed in manufacturing roughly constant over the last ten years even with rising productivity. Part of the “trade” adjustment was a shift from import-competing to exporting sectors, not just a shift out of the goods producing tradables sector. Of course, not everyone can run a German sized surplus in manufactures—but it seems likely the low U.S. share of manufacturing employment (relative to Germany and Japan) is in part a function of the size and persistence of the U.S. trade deficit in manufactures. (It is also in part a function of the fact that the U.S. no longer needs to trade manufactures for imported energy on any significant scale; the U.S. has more jobs in oil and gas production, for example, than Germany or Japan).