Few people realize that the U.S. is the world's #1 manufacturer by far and will stay that way for a long time per a recent Fin. Times article:
http://www.ft.com/cms/s/0/bccc155a-6c75-11dd-96dc-0000779fd18c.html?nclick_check=1
American industry can stay ahead of China
By John Engler
Published: August 17 2008 19:06 | Last updated: August 17 2008 19:06
According to a report last week in the Financial Times, China is now reverting to form as the worldâs workshop and will overtake the US as the worldâs largest manufacturer next year. I and members of the National Association of Manufacturers strongly disagree with this prediction.
China has a long way to go to catch up with the US. The NAMâs analysis shows that in terms of real manufacturing value-added (price-adjusted, to reflect the quantity of output) the US remains by far the worldâs largest manufacturer, producing nearly one-fourth of the worldâs industrial output. Based on the highly respected World Bank database, our analysis also shows that we will produce twice as much this year as the fourth placed economy, China (the European Union and Japan are in second and third position, respectively). Even in current measures of manufacturing denominated in dollars (which inflate Chinaâs position because of the rising yuan and other factors), China will produce only about 60 per cent as much as the US in 2008.
Far from overtaking the US next year, if China were to be able to continue its rapid 10 per cent-plus real annual rate of manufacturing growth, it would not equal US manufacturing production until nearly 2020. Moreover, given the constraints China is beginning to face, its ability to maintain that torrid growth is highly questionable.
Let me be clear. The only way China could surpass US manufacturing next year would be for the US to encounter an economic catastrophe of some kind. That would not be wholesome for us or anyone. It is possible â but not certain â that China may, in some future decade, become the worldâs largest manufacturer. If this occurred because the Chinese economy moved away from export-led growth and began to see the type of domestic-led growth that Hank Paulson, the US Treasury secretary, has been trying to get them to adopt, this could elevate Chinaâs living standard and create more demand for all goods and services in China â including imports from the US and the rest of the world. That would be a positive contribution to the global economy.
However, if China were to surpass US industrial production because it continued to rely on export-led growth that exacerbated global trade imbalances, that would be a strongly negative factor. It would not just be the US that was affected. For example, even now, the EUâs trade deficit with China is on the verge of overtaking our own huge deficit with China this year.
Looking to our own manufacturing future, there is no question that we need a vibrant manufacturing sector that will increase our standard of living, provide the defence industrial base that our security demands and continue to be the technological underpinning of US economic growth.
It is remarkable how the perception of American manufacturing differs from reality. Not only is the US the worldâs largest manufacturer, but US manufacturing output in 2007 set an all-time record. While there are more than 3m fewer manufacturing jobs than in 2000, our productivity has grown so rapidly that today 75 workers produce what it took 100 workers to produce then. This is not to say US manufacturing does not face serious problems. We have barely emerged from a five-year manufacturing recession and now face the prospect of renewed slow growth. We have a manufactured goods trade deficit at an annual rate of $440bn (â¬300bn, £236bn) this year, which, while down $120bn from its peak, is still too large.
But our manufacturing future is in our own hands. Congress and the next administration will have significant impact on the environment for US manufacturing and its ability to compete globally. For the US to stay ahead of China and maintain world leadership, we must reduce corporate tax rates, which are the highest in the world, develop more of our domestic resources to ensure an affordable supply of energy, provide more generous incentives for research and development, train a new generation of skilled workers and move aggressively to expand exports with more free trade agreements â just as China is now doing. We also need to tackle the foreign barriers to trade that Congress has declined to remove as it holds up trade agreements with markets such as Colombia, Panama and South Korea.
Americaâs manufacturing future is bright, but we need our own government to be our ally. With support in Washington, US manufacturing will continue to bring home the gold.
The writer is president of the US National Association of Manufacturers
http://www.ft.com/cms/s/0/bccc155a-6c75-11dd-96dc-0000779fd18c.html?nclick_check=1
American industry can stay ahead of China
By John Engler
Published: August 17 2008 19:06 | Last updated: August 17 2008 19:06
According to a report last week in the Financial Times, China is now reverting to form as the worldâs workshop and will overtake the US as the worldâs largest manufacturer next year. I and members of the National Association of Manufacturers strongly disagree with this prediction.
China has a long way to go to catch up with the US. The NAMâs analysis shows that in terms of real manufacturing value-added (price-adjusted, to reflect the quantity of output) the US remains by far the worldâs largest manufacturer, producing nearly one-fourth of the worldâs industrial output. Based on the highly respected World Bank database, our analysis also shows that we will produce twice as much this year as the fourth placed economy, China (the European Union and Japan are in second and third position, respectively). Even in current measures of manufacturing denominated in dollars (which inflate Chinaâs position because of the rising yuan and other factors), China will produce only about 60 per cent as much as the US in 2008.
Far from overtaking the US next year, if China were to be able to continue its rapid 10 per cent-plus real annual rate of manufacturing growth, it would not equal US manufacturing production until nearly 2020. Moreover, given the constraints China is beginning to face, its ability to maintain that torrid growth is highly questionable.
Let me be clear. The only way China could surpass US manufacturing next year would be for the US to encounter an economic catastrophe of some kind. That would not be wholesome for us or anyone. It is possible â but not certain â that China may, in some future decade, become the worldâs largest manufacturer. If this occurred because the Chinese economy moved away from export-led growth and began to see the type of domestic-led growth that Hank Paulson, the US Treasury secretary, has been trying to get them to adopt, this could elevate Chinaâs living standard and create more demand for all goods and services in China â including imports from the US and the rest of the world. That would be a positive contribution to the global economy.
However, if China were to surpass US industrial production because it continued to rely on export-led growth that exacerbated global trade imbalances, that would be a strongly negative factor. It would not just be the US that was affected. For example, even now, the EUâs trade deficit with China is on the verge of overtaking our own huge deficit with China this year.
Looking to our own manufacturing future, there is no question that we need a vibrant manufacturing sector that will increase our standard of living, provide the defence industrial base that our security demands and continue to be the technological underpinning of US economic growth.
It is remarkable how the perception of American manufacturing differs from reality. Not only is the US the worldâs largest manufacturer, but US manufacturing output in 2007 set an all-time record. While there are more than 3m fewer manufacturing jobs than in 2000, our productivity has grown so rapidly that today 75 workers produce what it took 100 workers to produce then. This is not to say US manufacturing does not face serious problems. We have barely emerged from a five-year manufacturing recession and now face the prospect of renewed slow growth. We have a manufactured goods trade deficit at an annual rate of $440bn (â¬300bn, £236bn) this year, which, while down $120bn from its peak, is still too large.
But our manufacturing future is in our own hands. Congress and the next administration will have significant impact on the environment for US manufacturing and its ability to compete globally. For the US to stay ahead of China and maintain world leadership, we must reduce corporate tax rates, which are the highest in the world, develop more of our domestic resources to ensure an affordable supply of energy, provide more generous incentives for research and development, train a new generation of skilled workers and move aggressively to expand exports with more free trade agreements â just as China is now doing. We also need to tackle the foreign barriers to trade that Congress has declined to remove as it holds up trade agreements with markets such as Colombia, Panama and South Korea.
Americaâs manufacturing future is bright, but we need our own government to be our ally. With support in Washington, US manufacturing will continue to bring home the gold.
The writer is president of the US National Association of Manufacturers