Topic Category: Manufacturing

A Persian Gulf may lie beneath North Dakota and Montana, says a Harvard study. And the Marcellus shale alone may hold 141 trillion cubic feet of natural gas reserves, an amount equal to total world consumption in 10 years, the U.S. Energy Information Administration (EIA) reports. Advances in drilling and extraction, combined with these newly discovered massive energy resources, could supercharge American manufacturing and hurt China.

New trends are impacting whether manufacturers offshore, backshore or nearshore—terms used to describe corporate decisions to produce in low-cost countries, bring production back to the United States or establish facilities near fast-growing global markets. Plus, other factors are playing a role. For manufacturers, as well as economic development and other organizations seeking to attract this investment, it’s important to understand today’s new economic realities and their implications.

As American businesses navigate through this era of uncertainty, slow economic growth and hyper competitiveness, many are evolving and establishing new business models and processes. Others are undertaking new initiatives to boost productivity and reduce costs.

U.S. manufacturing employment has declined from a high of 19.5 million workers in 1979 to 11.7 million in May 2011. For many policymakers and much of the media, this is believed to be the result of offshoring: moving U.S. production to low-cost countries in search of cheap labor. In turn, many say the American manufacturing sector has been “hollowed out.” Although supporting arguments are persuasive, they’re not accurate.

Designing or selecting the basic corrugated shipping case is typically considered to be a job for marketers and engineers. While the marketing department concerns itself with the appearance and utility of the consumer package and the engineering group typically focuses on cost effective packaging, neither group usually considers logistics or supply chain issues adequately. As a result, most firms end up with less than optimal packaging and higher total costs.

Surprising to many, the United States manufacturing sector is not being hollowed out. With the exception of the recent recession when all U.S. industries experienced poor economic growth, U.S. manufacturing has been breaking its own record, year after year, with respect to output, value-added, profits, returns on investment, exports, and imports, says Dan Ikenson, associate director of the Cato Institute’s Center for Trade Policy Studies. “U.S. factories are the world’s most prolific, accounting for 21.4 percent of global manufacturing value added in 2008; China accounted for 13.4 percent,” he added.

As policymakers respond to the global recession, they should remember that the unprecedented global economic growth experienced in recent decades owes much to the removal of political and economic barriers to trade and investment. During that time, a division of labor on a truly global scale has emerged, presenting opportunities for specialization, collaboration, and exchange that affirm—and might even astonish—the great Adam Smith.

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.

A particular reporter always comes to mind as emblematic of this last category, so his inaccurate diatribe about the decline of U.S. manufacturing published some time ago in a popular newspaper is par for the course.

Following other Asian nations, China is moving up the technology ladder—but at an unprecedented pace. This speed is phenomenal in and of itself. However, China possesses significant advantages relative to nations that have followed this very same path.

A Compelling Mix of Strengths

China possesses a combination of characteristics that enable rapid and sustainable growth of its technology base that few other nations enjoy. These include a: