U.S. Machinery Exports: Discovering the Benefits of TPPFebruary 3, 2016
Padraic Sweeney is the Acting Machinery Team Leader for ITA’s Industry and Analysis Division
The United States is the world’s largest market for machinery, as well as the third-largest machinery supplier. In 2014, products such as machine tools, hydraulic excavators, combine harvesters, engines, motors, pumps, water-filtration and purification equipment and much more accounted for six percent of manufacturing production in the United States. The following year, exports grew significantly, particularly to Trans-Pacific Partnership (TPP) partner countries. In fact, more than 45 percent of machinery exports in 2014 went to countries in the TPP region, alone!
With a high percentage of U.S. machinery being exported, the International Trade Administration’s Industry and Analysis team has prepared a TPP sector report that captures what machinery exporters can expect as a result of the recently negotiated trade agreement.
The TPP, once it takes effect, will reduce the cost of exporting, increase the competitiveness of U.S. goods, and promote fairness and transparency in trade among the participating countries. In addition, many tariffs will be reduced or completely eliminated. Japan will eliminate import taxes on all U.S. machinery exports immediately. Both Malaysia and New Zealand will eliminate taxes on nearly 94 percent of machinery exports imports immediately, upon implementation of the agreement.
Until the TPP takes effect, machinery equipment exporters face tariffs of up to 59 percent in some TPP countries, which make American products more expensive. This puts the United States’ mostly small- and medium-sized (SME) machinery manufacturers at a significant competitive disadvantage. This matters: in 2014, U.S. machinery manufacturing sector employed 1.4 million American workers in virtually every state. Machinery manufacturing also supports the jobs of thousands of Americans in a variety of other manufacturing and service industries.
For example, U.S. agricultural equipment manufacturers reported domestic and foreign sales totaling $38.6 billion in 2014. Of that amount, U.S. exports to the world were worth $11.1 billion. (This figure is calculated from 2014 U.S. total exports of products classified by the relevant 10-digit codes from the Harmonized Tariff Schedule of the United States (HTS).) Despite intense global competition, the United States enjoys a strong trade surplus in agricultural equipment. Under TPP, 100 percent of U.S. exports to New Zealand will be duty free immediately upon implementation, removing the last tariff barriers to this important regional market.
American exporters of high-quality construction equipment will also benefit from TPP once the agreement is implemented. Exporters currently face tariffs as high as 59 percent in Vietnam and 30 percent in Malaysia. At the same time, Chinese-made construction equipment faces much lower tariffs in those markets. TPP will level the playing field for U.S. producers by immediately eliminating Vietnamese tariffs on 97 percent of U.S exports of these products. Similarly, within four years, Malaysia will eliminate tariffs on 95 percent of imports of U.S. construction equipment exports.
U.S. manufactures’ commitment to produce high-quality equipment is key to our continued leadership in a highly competitive marketplace. In 2014, the industry exported $123.5 billion in products to the world. TPP will help expose more countries to our quality machinery products.
To learn more about how TPP benefits U.S. workers and businesses visit trade.gov/TPP. For more information on this historic agreement and opportunities for U.S. machinery exporters, contact one of our local offices.