Posted on 08/23/2009 5:57:41 PM PDT by nwrep
China is on its way to surpassing the U.S. as the world's largest manufacturer far sooner than expected. The question is, does that matter?
In terms of actual size, the answer is, no. But if size is a proxy for relative health of each nation's sector, the answer is yes.
In 2007, the latest year for which data are available, the U.S. accounted for 20% of global manufacturing; China was 12%.
The gap, though, is closing rapidly. According to IHS/Global Insight, an economic-forecasting firm in Lexington, Mass., China will produce more in terms of real value-added by 2015. Using value-added as a measure avoids the problem of double-counting by tallying the value created at each step of an extended production process.
As recently as two years ago, Global Insight's estimate was that China would surpass the U.S. as the world's top manufacturer by 2020. Last year, it pulled the date forward to 2016 or 2017.
U.S. manufacturing is shrinking, shedding jobs and, in the wake of this deep recession, producing and exporting far fewer goods, while China's factories keep expanding. If manufacturers on both sides of the Pacific were thriving, there would be little reason to butt heads. But given the massive trade gap between the two nations and uncertainty in the U.S. over when and to what degree manufacturing will recover, China's ascent has become a point of growing friction.
Chinese manufacturing activity continued to tick up in July from the previous month, data from the China Federation of Logistics and Purchasing showed Saturday. The Purchasing Managers Index edged up to 53.3 in July, from 53.2 in June and 53.1 in May.
(Excerpt) Read more at online.wsj.com ...
Thanx for that graphic, and sometimes we don’t even have a choice if we want to buy anything. I’m due for a new grill, and hope I can find one that isn’t Made in China.
Are there any businesspeople out there who will start a “NOT made from Red China” catalogue of some kind?
Here is another viewpoint:
Manufactured Objections
The Washington Post’s Harold Meyerson is wrong on trade.
By Daniel Ikenson
During the past few years, America has grown increasingly averse to trade. This trend is the product of myths perpetuated by campaigning politicians, captured policymakers, TV charlatans, and woefully ill-informed newspaper columnists. Harold Meyerson always comes to mind as emblematic of this last category, so his fallacy-laden diatribe about the decline of U.S. manufacturing in Wednesday’s Washington Post is par for the course.
Meyerson makes a few claims that cannot be allowed to stand. For example, he asserts: “We don’t [make things] any more — at least, not like we used to. Since 1987, manufacturing as a share of our gross domestic product has declined 30 percent.”
First of all, note that Meyerson’s second sentence does nothing to support his first. A decline in the manufacturing sector’s share of the total economy can result from growth in other sectors, rather than from a decline in total manufacturing output, and that’s what’s happening in the U.S.
According to data from the 2009 Economic Report of the President, as gathered and reported recently by George Mason University economics professor Don Boudreaux, since 1987, real U.S. manufacturing output has increased by 81 percent. And as reported by the Bureau of Economic Analysis, American real manufacturing value-added — the market value of manufactured goods, over and above the costs that went into their production — reached a record-high level in 2007 (the last year for which final data are available), breaking the record set in 2006, which broke the record set in 2005, which broke the record set in 2004. Notwithstanding the recent recession that has affected all sectors of the economy, U.S. manufacturing has been thriving in recent years.
If Meyerson isn’t intentionally misleading Washington Post readers, he is simply unqualified to be rendering conclusions about the state of manufacturing. A basic look at the history of the statistic he used shows its uselessness to the point he wants to make. Manufacturing as a share of gross domestic product peaked in 1953 at about 28 percent of the economy — well before the period of U.S. industrial prowess Meyerson yearns for — and has been trending downward ever since. Today manufacturing accounts for about 12 percent of our services-dominated economy, but manufacturing output and value-added are higher than ever in real terms.
Second, if the United States doesn’t “make things anymore,” nobody does. According to data from the United Nations Industrial Development Organization, U.S. factories are the world’s most productive, accounting for 25 percent of global manufacturing value-added. By comparison, Chinese factories account for 10.6 percent.
That may be hard to fathom, given that U.S. factories tend not to produce the sporting goods, toys, tools, and clothing found in Wal-Mart and other retail outlets nowadays. But U.S. factories make pharmaceuticals, chemicals, technical textiles, sophisticated components, airplane parts, and other products. American factories have moved up the value chain.
Contrary to this last point, Meyerson asserts, “The long-term decline of American manufacturing has depleted our high-tech, cutting-edge industries as much as it has our more venerable sectors.” To support his claim, he cites the value of our “high-tech” exports falling behind China’s beginning in 2004. By “high-tech,” Meyerson means computers, iPods, and other consumer electronic gadgets so ubiquitous nowadays. But in reality, the percentage of Chinese value-added in these so-called high-tech exports is quite small. Economists at the U.S. International Trade Commission estimate that only about 50 percent of the value of U.S. imports from China is actually Chinese value-added; the rest is value added in other countries and embedded in the components, design, engineering, and labor.
For iPods, the Chinese value-added is a few dollars on a product that costs $150 to produce and retails for $299. So, as China’s “high-tech” exports leave America’s “in the dust,” their sale in the United States and elsewhere supports high-paying American engineering, marketing, and logistics jobs, while providing Apple with the profits to conduct R&D to employ more engineers and keep the virtuous circle going.
The factory floor has broken through its surrounding walls and now traverses borders and oceans. What we have now is a world in which it is no longer “Us versus Them,” but rather “Us and Them,” a formulation that has been helping U.S. manufacturing to thrive. Without complementary Chinese and other foreign labor, far fewer American manufacturing ideas would come to fruition.
American manufacturing is by no means in decline. What should be is Meyerson’s myopic way of seeing things.
— Daniel Ikenson is associate director of the Center for Trade Policy Studies at the Cato Institute and author of “Thriving in a Global Economy: The Truth about U.S. Manufacturing and Trade.”
Why would someone commit economic suicide by pandering to an emotional request like that?
There is a reason why manufacturing has left the US - absurd environmental laws which restricted business expansion, a labyrinthine tax and benefits maze, high legal compliance costs, the threat of unions, and of course, the growth of China as a legitimate consumer market itself. It is not part of some evil conspiracy - Americans have reaped the rewards of the seeds they sowed.
It is not just the labor costs, but all the hidden costs that make it an infeasible to start manufacturing for 99% of things here. Labor costs are just what the lay people (non-businessmen) see at first. But it is the hidden costs that seal the deal.
Suicide is ingesting Chinese drugs, and their food is filthy. I can’t even find powdered garlic NOT made in China in the stores, so I sent away for some.
While I always buy Made in USA products as often as possible, there are many products that are not made in China from other countries which I buy. I believe there’s a market for Not Made in China stuff, and a good businessman could capitalize on that.
Speaking of garlic....
Here’s a granulated garlic Made in the USA, and the price is GREAT!
http://www.vitacart.com/kirkland-granulated-california-garlic.html
I always buy American garlic (From Gilroy, Calif.) when I can. However, for most manufactured goods, China is one of the best, most capitalist-friendly place on the earth.
P.S. I do know that we are overregulated, but there are other countries besides COMMUNIST China where businesses could go.
We are propping up a Communist Country as the future of capitalism..think about that..
Their stuff is crap...
That may be true, but the world still buys it. Everything from Apple iPhones to laptops to socks and underwear are made their. As much as one may hate it, one cannot escape being a consumer of Chinese-made goods.
Few other countries have the multiple advantages that Communist China brings to the table - low labor costs, absence of environmental meddling, capitalist-friendly policies, absence of labor unions, superb infrastructure in the key port cities, artifically low currency, major airports (Shanghai and Hongkong) serving large international commercial hubs, etc. In fact, I cannot think of many countries that meet these desirable criteria (from a businessman's perspective).
“That may be true, but the world still buys it.”
The world doesn’t have a choice, if they want to buy anything.
It is the inevitable culmination of long-maturing demographic, economic and philosophical trends.
Exactly.
There are many countries with low labor costs, but perhaps not AS low as Communist China. Patriots should not be so greedy, or maybe they are not patriots.
I buy inexpensive clothes, and other products, Made in NONRedChina countries, including the USA, but you have to look around.
I can’t buy electronics NOT made in Red China, because I never see them, so I do without some things that I don’t really need that much. There is a market for folks like me, who would pay a little more so as not to make an enemy country (China) STRONGER.
What, what, what??????? Are you selling for Wall Street?
The whole arttical is about the trend.
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