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Crisis in Japan could slow U.S. economic recovery, trade group finds

The U.S. Business and Industry Council says American companies rely heavily on Japanese industrial equipment such as machine tools and turbines and are vulnerable to production disruptions.

March 30, 2011

DETROIT — The effect of the Japanese crisis on the U.S. economy is far greater than realized, a top trade group said.

American companies and industries rely heavily on Japanese-made automotive products and high-tech electronics, but the U.S. Business and Industry Council said in a report released Wednesday that there was an even greater dependence on less well-known Japanese products. These include industrial equipment like machine tools and energy-generating turbines.

In 2009, Japan accounted for about 15% of the turbines for generating energy sold in the U.S., up more than 2,000% from 1997, according to the council.

Although the federal data studied by the trade group, which represents 2,000 small and medium-sized U.S. manufacturers in many industries, was from 2009, it said trade figures for last year strongly indicated that the reliance rose considerably in 2010.

"Many more American manufacturing industries than typically recognized — and especially advanced, capital- and technology-intensive sectors — are vulnerable to production disruptions stemming from the earthquake, and to the aftershocks that may continue for several years," the council said in a report titled "A Supply-Chain Earthquake?"

"Such disruptions could greatly slow America's already sluggish economic recovery, as these industries generate an outsized share of the country's best-paying jobs and technological innovation," it added.

However, the council, which has criticized U.S. trade policy for encouraging the shift of too much advanced manufacturing outside the country, also said the instability offered opportunities as U.S.-made products are substituted for the Japanese-made ones, potentially boosting the recovery.

On a broader scale, U.S. economic growth could be expanded by hundreds of billions of dollars annually by limiting import growth rates, the council said. Higher domestic production also would boost the country's tax revenue without raising taxes.

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