Manufacturing back in vogue

After four months experiencing the highs and lows of travelling through Latin America, it’s great to be back in Australia and to discover the manufacturing sector still travelling in positive territory.

One thing that is clear when visiting other parts of the world is the high regard governments place on manufacturing products themselves.

From Argentina to Mexico, they understand how important it is to their country’s economic future.
In the US, Obama has announced major plans to revitalise its manufacturing industry and reduce imports. The US House of Representatives has recently passed three major bills (Make it in America) designed to promote the country’s manufacturing sector.

The National Manufacturing Strategy Act will create a four-year national manufacturing strategy to promote the US sector across the globe. The other bills contain hundreds of tariff suspensions and reductions.

The Act will create a President’s Manufacturing Strategy Board, with members many from industry, who will be responsible for assessing all aspects of US manufacturing competitiveness including comparisons of manufacturing policies and strategies relative to other nations’ policies and strategies.

It will be tasked with identifying emerging and evolving markets, technologies and products for which the nation’s manufacturers could compete and assessing levels of domestic production, productivity and the trade balance.

While America continues to struggle out of its economic nightmare, hundreds of Chinese manufacturers are thinking long term and setting up factories right across the US. And somewhat surprisingly, it all makes economic sense.

For example, the just opened American Yuncheng Gravure Cylinder plant in South Carolina was able to purchase 6.5 acres of land for just $US350,000, that’s a quarter of the price of land back in Shanghai or Dongguan (a gritty city near Hong Kong where the company already runs three plants). Electricity is cheaper too, the company pays up to 14c per kW-hour in China at peak usage, and just 4c in South Carolina. Plus there are no brownouts.

It is true that US workers are more expensive, and the overall cost of making a widget in China remains lower. But the gap is shrinking. Chinese companies have already invested $280m and created more than 1,200 jobs in South Carolina alone.

Besides affordable land and reliable power, states and cities are offering tax credits and other incentives to woo Chinese manufacturers. And when China finally allows the Yuan to appreciate, these Chinese projects will really take off and impact the US economy.

The world’s recent economic problems have highlighted the importance of a vibrant manufacturing sector to a country’s economy.

Politicians ignore the manufacturing sector at their peril.