Keith B. Belton and Meghan Heier of the American Chemistry Council and Indiana University have taken a close look at not only how China is moving ahead of the U.S. in advanced manufacturing but the breadth of that gain.
They’ve developed what they call the ‘Clout’ Index where a low number means an industry with a lot of clout and the results are summarized in the table extracted from the work below.
It’s the first column that’s most striking. Not only does China lead in advanced manufacturing but the scale by which it leads is amazing.
Previous studies have noted China’s gains in particular industries and their push forward in MIC2025 goods (Made in China 2025). This study though is the first I’ve seen to highlight not just the depth but also the breadth of China’s gains.
[RCA= Relative Comparative Advantage, an indicator derived by taking the share of a nation’s exports for a good divided by the share of world trade of that good.]
How has this happened? We know what China’s done to move ahead but what has the U.S. done that’s caused them to not even keep pace?
The answer seems to be what the researchers refer to as allowing ‘the loss of the industrial commons’. This issue has been widely discussed elsewhere and refers to the cumulative effect of years of offshoring production. When manufacturing goes, collaboration goes, innovation stalls, process refinement ceases etcetera.
Is there a cure? From P.13 the authors supply some plausible responses but I was reminded here of how futile politician’s talk in Europe is about the need for greater integration. Sure, great idea, but you’re suggesting swimming against a current that’s been flowing for decades, and getting stronger the other way (Cornwall, seriously?).
I think a die is cast and the U.S. and China’s relative positions are likely to only diverge further. Hawks will see vulnerability but happy-clapping-optimists like me see a world of greater abundance, creativity and progress. Who cares if the cat is black or white?
Trying to throw sand into the cogs and slow the machine down won’t work; but that won’t stop the hard-of-thinking continuing to try.
You can review the paper in full here.
Happy Sunday.