"Two-thirds of our economy is non-traded, so if it goes out of business, the demand is automatically supplied by an American supplier," Atkinson says. "If a barbershop goes out of business, I'm not going to Canada to get a haircut. But when our traded sector goes out of business, or loses market share or cuts back or moves a factory, that demand is not necessarily replaced by American supply."
Atkinson says economists have been slow to grapple with the data problem for fear that the truer picture of the sector's straits will encourage protectionists. But, he adds, "there are multiple paths one could go down as a response to this and that's only one of them." His group favors an aggressive strategy to restore U.S. competitiveness in part by overhauling the tax code and investing in public-private partnerships to develop higher-tech production lines -- an approach it will spell out in greater detail later this spring.