Industrial Insight

Can China compete?? | March 12, 2011

Can China compete with American manufacturing?

Posted by Michael Schuman Thursday, March 10, 2011 at 11:33 pm

Just take a quick look at the numbers. According to United Nations data, the U.S. is still the largest manufacturing country in the world. In 2009, American manufacturing output (in real terms) was nearly $2.2 trillion. That’s about 45% larger than China’s, at just under $1.5 trillion. (For statistical reasons, I chose to use figures that include mining and utilities as part of manufacturing.) Though China, of course, is growing very quickly, the U.S. has also maintained its global share of manufacturing, at 20% in 2009 compared to just over 22% in 1980. What’s more, American manufacturing is becoming more productive. In 2009, productivity in U.S. manufacturing increased by 7.7%, more than any other country followed by the Bureau of Labor Statistics.

Since China has so many, low-wage laborers, there is no way high-wage America can possibly compete in products that require teams of workers to manufacture, like toys, apparel, consumer electronics, and a lot of other stuff you’ll find on Wal-Mart shelves. Making such products in the U.S. would simply be too expensive; companies that did so would not be able to compete with cheaper imports made in lower-cost economies. But the U.S. still is very competitive in the types of products that demand a high level of technology, engineering and capital to produce. In such industries, wages don’t matter quite as much, and the U.S. can capitalize on its clear advantage over emerging markets like China in expertise, technology and innovation.Inexpensive manufacturing labor will not be a factor for long with the acceleration of technology in manufacturing processes. Our manufacturing is moving to a technology driven operation rather than a labor one. The skills required by manufacturing are changing.

That, however, has serious implications for the American workforce. Many Americans equate manufacturing with jobs, but as industry progresses, that link will become more and more tenuous. As manufacturing becomes more high-tech and automated, it will become a smaller source of new employment. In other words, even if American manufacturing can maintain its competitiveness versus China, it could very well be the case that fewer and fewer people will be working in factories anyway. That would especially be the case with poorly skilled workers, as manufacturing will increasingly depend on a higher level of training and engineering and IT knowledge.
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I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.







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