This column examines the effects of Chinese import competition on another metric for the health of the US manufacturing sector - innovation. Firms whose industries were exposed to a greater surge of Chinese import competition from 1991 to 2007 experienced a significant decline in their patent output as well as their R&D expenditures. While politicians’ ‘obsession’ with manufacturing is primarily due to job losses, an accompanying reduction in innovation may well affect economic growth in the longer term.
By the early 2020s, rivalry for industrial innovation will accelerate between the U.S. and China. Ironically, the Trump White House has opted for a poor-economy industrial policy, whereas China has a rich-economy policy. The former seeks past glory; the latter cannot wait to get to the future.
China's industry minister on Saturday defended a manufacturing development plan and rejected complaints foreign makers of electric cars and other goods might be pressured to hand over technology or forced out of promising markets. Miao Wei, minister of industry and information technology, tried to reassure foreign companies that the "Made in China 2025" industry plan treats all companies equally.
A European business group says China is violating its free-trade pledges by pressing foreign makers of electric cars and other goods to hand over technology under an industry development plan that is likely to shrink access to its markets.
While companies based in the United States still dominate chip sales worldwide, only about 13 percent of the world’s chip manufacturing capacity was in this country in 2015, down from 30 percent in 1990, according to government data. Chip makers attribute the decline to a variety of forces, including high American tax rates and the hefty subsidies offered by foreign governments for new semiconductor plants, which can cost as much as $10 billion.
Restrictions on trade and immigration will not deter the march of technology. A study by McKinsey shows that more than 50% of the time spent at work today involves routine physical labor, data collection and data processing. Nearly all of this work can be automated. And the safer jobs of today -- jobs that involve human interaction -- may become automated in the future.
Congressman Ryan today introduced two new bills aimed at bolstering U.S. manufacturing and employment. The first of these bills, The RETAIN Act, modifies the United States Code for civilian and defense contracts by adding a preference for contractors that promise to retain jobs in the United States.
The prevailing narrative says automation was the main culprit behind U.S. manufacturing job losses in the early 2000s, and that automation is now powering an unprecedented manufacturing technology revolution that will continue to displace jobs. But the truth is trade pressure and faltering U.S. competitiveness were responsible for more than two-thirds of the 5.7 million manufacturing jobs lost between 2000 and 2010. And rather than entering a “fourth industrial revolution,” U.S. manufacturing productivity growth now is actually near an all-time low.
Offshoring production from the United States to factories overseas has arguably done a lot of damage to the U.S. economy. Over the last three decades, the trade deficit ballooned and millions of American manufacturing jobs were lost. And with those jobs, according to analysts, America also lost some of its innovative edge.
Intel Corporation on Tuesday announced plans to invest more than $7 billion to complete Fab 42, which is expected to be the most advanced semiconductor factory in the world. The high-volume factory is in Chandler, Ariz., and is targeted to use the 7 nanometer (nm) manufacturing process. It will produce microprocessors to power data centers and hundreds of millions of smart and connected devices worldwide. The announcement was made by U.S. President Donald Trump and Intel CEO Brian Krzanich at the White House.