Just In Time -- Heroes and Villains

With China cast in the role of the arch-villain, the United States needs to start doing something heroic to save manufacturing.

Summer 2008 has been the season of the villain, and no, I'm not referring to Heath Ledger's box office-busting portrayal of the Joker. I'm talking about China, which has been cast in the role of the ultimate bad guy, thwarting the good guys in the United States at every turn much like the Joker keeps outwitting Batman. Virtually everything wrong with the U.S. manufacturing industry can be blamed on those dastardly Chinese.

Scott Paul, executive director of lobbyist group Alliance for American Manufacturing, certainly sees nothing but trouble when it comes to China. "Our flawed trade relationship with China is destroying good jobs throughout the U.S. manufacturing sector," he says. "In the past two months [June and July, 2008] the U.S. has lost 70,000 good-paying manufacturing jobs. A new report by the Economic Policy Institute (EPI) notes that the U.S. has lost 2.3 million jobs to China since 2001, many of them in the manufacturing sector. The Department of Labor reports that unemployment has increased by 1.6 million over the past 12 months. Is anyone missing the China connection?"

Well, yeah, I'm kind of missing the connection. First of all, that EPI report was funded by Paul's own Alliance, so any conclusions it reaches are bound to fit into whatever scenario casts China in the worst possible light (the Alliance also has a publicity campaign going called, none too subtly, "China Cheats"). And second, it's a pretty large leap of logic to assume that every manufacturing job lost in the U.S. is due to the Chinese. But let's continue with the premise a little while longer.

The EPI report, "The China Trade Toll," reads almost as melodramatically as any graphic novel. Every worker in the United States, all 100 million of them, has seen their wages reduced by $1,400 thanks to competition from China, the report proclaims. In any event, the report is very clear in its conclusion: China is costing us millions of jobs, and it's high time that U.S. manufacturers demand their government do something about it.

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See Chain Reactions: David Blanchard's blog about supply chain management.
Apparently, then, there can't possibly be any domestic reasons for why the U.S. manufacturing industry is losing jobs (you know, little things like declining customer service, poor product designs, broken supply chains, bloated inventories, or neglectful maintenance practices). And certainly there's not a chance in the world that the management of the U.S. trade unions has in any way failed the workers they profess to serve. Nope, it's gotta be the Chinese who are behind it all.

This kind of "us against them" mentality tends to overlook some real-world issues, such as the fact that China itself is offshoring production work to countries like Vietnam, Malaysia and Indonesia. What's more, as we report in this month's cover story, "Eye on China," some Chinese manufacturers are finding the going so tough they're selling their firms to foreign companies.

And here's another plot twist. Another recent study, based on a survey of North American manufacturing executives conducted by Deloitte Touche Tohmatsu, refutes the central premise of the EPI report, namely, that China is the country of choice for low-cost production. When manufacturers were asked in which countries they intend to expand their production operations, the No. 1 choice wasn't China, or any other Southeast Asian country. It's the good ol' USA.

According to the Deloitte study, "Made in North America," manufacturing executives say that North America will not lose any competitive ground to China or any other country over the next five years in such key areas as sourcing, sales and marketing, R&D, customer service and information technology. "While globalization will continue and some manufacturing jobs will follow, North America is showing significant resiliency, based on the plans of these executives," says Craig Giffi, vice chairman of Deloitte.

So whether or not you believe China really is out to destroy U.S. manufacturing, at least some U.S. companies are more inclined to write "To Be Continued" at the end of the current "U.S. vs. China" storyline, rather than "The End."

David Blanchard is IW's editor-in-chief. He is based in Cleveland. Also see Chain Reactions: David Blanchard's blog about supply chain management.

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