The “Revealed” Competitiveness of U.S. Exports

We investigate the factors behind the recent decline in the U.S. share of world
merchandise exports in an attempt to determine how big a role the changing productivity
of U.S. firms has played. We do so against the backdrop of a measure of cost
competitiveness which, insofar it is inferred from actual trade ows, we refer to as
'revealed marginal costs' (RMC). Although, in line with our purpose, we derive such
measure as an implication of a trade model with (intra-industry) firm heterogeneity,
computation does not require firm level data but only aggregate bilateral trade ows,
domestic trade included. Brought to the data for the manufacturing sector, such measure
reveals that, notwithstanding significant heterogeneity across industries, most U.S.
sectors are indeed losing momentum relative to their main competitors, as we find U.S.'s
RMC to grow by an average 14%, relative to the other G20 countries. The RMC
structure identifies in market size, trade freeness and imports its "revealing-observable"
components: while market size is found to be the main responsible of such decline on
average, cost competitiveness seems to have benefited from a good combination of
increasing trade freeness and decreasing imports, relative to the other G20 countries. The
best performing countries in terms of RMC (China and India among others) characterize,
however, for an increase in trade freeness higher than in the U.S. At the sectoral level,
the "Machinery" industry is the most critical, followed by the "Chemicals" and
"Equipment" industries.