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How to
the American
The debacle on Wall Street is widely viewed as the primary funding will provide some life to the manufacturing sector, but it is
culprit for the current U.S. recession. However, there are other unlikely that this will prove sustainable.
contributors: government regulators who didn’t prevent excesses The largest element of the U.S. trade deficit is related to manu-
from happening, politicians who supported damaging economic facturing. Q1 trade between the U.S. and China had an export
policies, and consumers who borrowed beyond their means. As ratio of 7.3/1 in favor of the Chinese. Furthermore, the United
policy analysts and government leaders debate how to get the States has lost market share within Chinese exports over the
U.S. economy out of this recession, jumpstarting the U.S. manu- past ten years, and is now a distant fifth (at 8.2%) behind Japan
facturing sector isn’t being sufficiently considered. As the financial (17.7%), the EU (15.6), Taiwan (12.4%), and South Korea. The US
services industry continues to shrink, and government spending used to dominate higher technology sectors, but is now strug-
rises to scary levels, the industry that should be viewed as most gling to compete with upstart Asian nations. For example, there
important to a recovery is being left out. has been a dramatic loss of optical and
America’s manufacturing decline didn’t precision equipment exports (21.7%
happen overnight, but today’s severe of China’s imports in 2000 to 7.2% in
drop is still alarming. In 2000, U.S. ex- 2008), to South Korea (3.4% in 2000,
ports were more than three times larger and 21.1% in 2008). Many in the U.S.
than Chinese exports, but in 2008, Chi- may see negative manufacturing statis-
nese exports were 25% larger. In 2000, tics as a cry for ‘fair trade,’ but the loss
the U.S. exported twice as much to Asian of market share in a developing nation
countries as China, while in 2008, Chi- like China is not a call for ‘trade liber-
nese exports to the region were twice alization’. Really, the call should be to
that of the U.S. Although it isn’t surprising Americans to restore the importance of
that Chinese exports would grow during manufacturing to their economy.
this time, the magnitude of this bilateral Many question whether America can
transformation is unprecedented. At the restore its manufacturing presence in
end of the 20th century, America’s economy began to diversify the world economy, but it is possible for developed nations to
away from manufacturing, and grow strongly in the services sec- grow in this sector. Successful industrialized developed nations, in
tor. By the 21st century, America was at the point where manufac- contrast to the U.S, place a public/private focus on manufacturing
turing constituted only around 10% of economic output. as a strategic national interest. Unfortunately, over the past two
decades, American manufacturing has placed strategic impor-
America’s manufacturing dilemma tance on financial services and housing over manufacturing. The
Housing-related manufacturing has fallen by almost 40% dur- current recession makes clear that American business leaders
ing the recession. Meanwhile, automobile production is down by and politicians must redouble their efforts, and make manufactur-
32%, and iron and steel products are down by over 50%. Ac- ing important to the U.S. economy again.
cording to a Manufacturers Alliance/MAPI study, no manufactur-
ing industry has a positive outlook for 2009 and only housing A former management consultant, Jack Buffington
starts and automobiles have a positive outlook for 2010. These
is Director of Supply Chain Logistics at Molson Coors
are primarily industries for domestic consumption. Industries that
Brewing Company. Based in the United States, he has
authored several books about outsourcing, supply chain
used to be prominent exporters, such as aerospace and high tech
issues and the need for American manufacturing.
industrial machinery, aren’t showing much promise. U.S. stimulus JULY/AUGUST 2009 45
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