Comment by pstuart
4 days ago
The trade balance as a number shouldn't matter, but offshoring critical manufacturing capability and production ecosystems does.
China has at least 2 key advantages in manufacturing -- cheaper labor and laxer regulations. If the US were to embrace and extend robotics and automation more vigorously that first point could become moot. Also the second point as far as labor regulations go, and if environmental regulations were properly priced then that too would be moot.
1. The US industrial output has been growing for decades[1]. US manufacturing is doing very well, it's US manufacturing jobs that aren't due to automation.
2. Manufacturing as % of the population has long been declining globally including China. Labor cost is a very minor expense in modern manufacturing unless we talking something like clothing. I don't think Americans miss the millions of jobs they had 60 years ago sewing shoes.
3. Car industry isn't critical manufacturing capability by any means. I can understand ships, or steel or even chips, but cars?
[1] https://www.macrotrends.net/global-metrics/countries/usa/uni...
That just shows dollar amounts, with no sense of what's being sold.
Being that so many companies have moved production to China to make their products cheaper, I'd be curious as to what then comprises those savings.
China hasn't been cheap for ages. Mexican labor is way cheaper both in manufacturing (20% less) and engineering (40 % less).
I'll quote you the CEO of Apple, Tim Cook himself on that topic:
The number one reason why we like to be in China is the people. China has moved into very advanced manufacturing, so you find in China the intersection of craftsman kind of skill, and sophisticated robotics and the computer science world. That intersection, which is very rare to find anywhere, that kind of skill, is very important to our business because of the precision and quality level that we like. China has extraordinary skills. In the US, you could have a meeting of tooling engineers, and I'm not sure we could fill the room. In China, you could fill multiple football fields. Hence, the vocational expertise in China is very deep.
FWIW a cousin of mine, Italian, founded a 3D printers startup a decade ago and according to him there was no place in the world with the level of expertise and skills to create a complex machine manufacturing startup like Guanzhou or Shenzen. It's not just the skills they have when it comes to manufacturing, it's the entire ecosystem: logistics, bureaucracy, suppliers, energy, materials, engineering. China has all of those.
He was even featured on the first Italian national channel:
https://www.youtube.com/watch?v=q7j5WOsadkI
I can guarantee you that cheap labor was really a non-factor in such a choice, because there was no cheap labor in the first place.
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