U.S. goods trade and related party trade (billions of dollars), world and selected countries, 2011:
Country Exports from US Imports to US Balance
World $1480.4 $2207.8 - $727.4
World (RP) $ 365.0 $1056.2 - $691.2
Canada $ 280.9 $ 315.3 - 34.5
Canada (RP) $ 98.1 $ 162.0 - $ 64.1
Ireland $ 7.6 $ 39.4 - $ 31.7
Ireland (RP) $ 1.5 $ 34.6 - $ 33.1
Mexico $ 196.4 $ 262.9 - $ 64.5
Mexico (RP) $ 60.5 $ 155.7 - $ 95.2
Sources: Total trade, U.S. Census, Trade in Good with World, Not Seasonally Adjusted; Related party (RP) trade, U.S. Census, NAICS Related-Party, select all NAICS2, 2011, all countries, variables "imports related trade" and "exports related trade" and layout by country. Canada, Ireland, and Mexico as linked.
As we can see, related party trade (which can mean trade within either a U.S. or foreign multinational corporation) is 27.6% of goods trade, but it represents a whopping 95.0% of the trade deficit. Moreover, in countries where the U.S. has heavy foreign direct investment, such as Canada, Ireland, and Mexico, the trade deficit for intra-firm trade actually exceeds the country's overall trade deficit.
In fact, virtually all U.S. imports from Ireland take the form of intra-firm trade. This is no doubt due to Ireland's status as a tax haven and low corporate income tax rate of 12.5%.
These data suggest that much of the U.S. trade deficit is due to U.S. corporations offshoring production and exporting the products back home. As the related-party data does not distinguish between U.S. and foreign multinationals, there is no way to know exactly how big the share of U.S. multinationals is in intra-firm, but is surely much more than half. Moreover, not counted in the data are imports that come from subcontractors (Wal-Mart's many suppliers, Foxconn producing Apple products, etc.).
The bottom line is that we need to reverse the incentives in the tax code that encourage the offshoring of jobs. (Why does Apple have $64 billion in cash abroad?) However, to emphasize the point I made last time about what Americans want out of tax reform and the "reform" that has actually happened, it's worth pointing out that Robert Gilpin of Princeton University, author of the seminal U.S. Power and the Multinational Corporation (1975), made the same policy recommendation almost 40 years ago, and it hasn't happened yet. We've got our work cut out for us.
UPDATE: Following the
Year Goods trade deficit Related party trade deficit % Related party
2011 727.4 691.2 95.0%
2010 634.9 607.7 95.7%
2009 503.6 479.2 95.2%
2008 816.2 647.9 79.4%
2007 808.7 619.1 76.6%
2006 828.0 582.9 70.4%
2005 772.4 530.0 68.6%
2004 654.8 478.9 73.1%
2003 532.4 389.3 73.1%
2002 468.3 352.1 75.2%
UPDATE 2: Corrected first line of imports from 2707.8 to 2207.8 billion. Thanks to mrpuff and tle at Daily Kos for pointing out the error and correction.
Cross-posted at Angry Bear.