Can The US ‘Decouple’ From Asia?
Over the past year, everyone in the business community has been asking ‘Can Asia decouple from the US?’, but hardly anyone has been asking the reverse question, which, in a globalised world, is a reasonable one.
I’ve been sifting through US export data by states to get a feel for how they are exposed to Asia, which is set to slow in 2008-09. This, combined with the stronger dollar, could be bad news for the US economy, which is being supported by exports.
My figures are derived from the US Census Bureau, and I present the main findings in the chart below, which shows the percentage of exports to Asia by state, for all states where more than 30% of shipments head across the Pacific.
US State Exports To Asia (% of State Exports)
As might be expected, the western-most American states are heavily geared towards Asia. Of the Asia-focused states, only Vermont, Maine and Massachusetts are not in the western United States.
However, the data has some limitations and raises several questions, for which answers are not readily available:
• What percentage of US exports to Asia is re-exported elsewhere, including back to the US?
• What percent of each state’s GDP and employment is generated by exports (or net exports)?
• Which US states are running trade surpluses or deficits with which Asian states?
On the first point, I concede that it is impossible to say. I am tempted to suggest that in US states where Japan is the nominal destination, Japan is also the final destination, since it is a mature economy with its own high-tech industrial base. Similarly, I am tempted to suggest that where China is the nominal destination, a significant amount of US goods are subsequently re-exported elsewhere, since China has become the ‘factory of the world’.
The data does show that China is the top Asian destination for 23 states’ exports, and Japan for 20 states’ exports. In some cases, we can hypothesize trade patterns from the composition of exports by category. I provide a more detailed analysis of this on Business Monitor Online.
On the points about exports as a percentage of individual US states’ GDPs, data does not appear to be available, even from the US Bureau of Economic Analysis. The same is true of state trade balances with foreign countries.
Overall, there are several big (in terms of population and GDP) states whose exports have very little weighting towards Asia. These include Texas, Illinois, Pennsylvania, and Florida. Texas can be explained by the fact that a third of its exports go to Mexico, while in the case of Florida, more than 50% of shipments go to Latin America.
It is interesting to speculate how globalization may re-orient the US economy. With western states increasingly focused on Asia, and some southern states turning more to Latin America, the variance in economic performance in those regions could potentially have significant effects on the US economy in the coming decades.