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Costs, Exports Threaten US Manufacturing

Two new reports from the Manufacturers Alliance/MAPI warn of threats to the nation's manufacturing sector from industrial modernization in Asia and rising costs for US manufacturers compared to their trading partners. The first report says manufacturing changes from open trade and investment by China and other Asian nations present serious challenges to the US. The other finds structural costs for US manufacturers compared to nine major trading partners increased from 22.4% to 31.7% since 2003.

By John McCloud | Updated on November 01, 2006

John McCloud is editor of Industry Property Journal, from which this article is excerpted.

Arlington, VA—Two new reports from the Manufacturers Alliance/MAPI warn of threats to the nation’s manufacturing sector from industrial modernization in Asia and rising costs for US manufacturers compared to their trading partners. The first report, China’s Surging Trade Surplus Being Driven by High-Tech Manufactured Exports: Policy Consequences of the Growing Imbalance, analyzes Chinese trade during the first half of 2006. Its author, Ernest H. Preeg, a senior fellow in trade and productivity at the Arlington-based organization, says manufacturing changes from open trade and investment by China and, to a lesser extent, other Asian nations, present serious challenges to the US.

At issue is the ability of US manufacturers to maintain their export competitiveness and long-standing leadership in technological innovation. Preeg warns of potential adverse consequences for the global economy if the issue remains unaddressed. He says the unprecedented global imbalances between growing East Asian account surpluses, especially in China, and the corresponding US deficit will lead to continued devaluation of the dollar vis-à-vis Asian currencies. However, he explains a substantial exchange rate adjustment will have advantages as well as disadvantages for both sides.

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