Deloitte published 2016 Global Manufacturing Competitiveness Index highlighting that China is the most competitive manufacturing nation for now. But is expected to slip to second position as global executives provide their perspective on how the next five years will play out.
The United States is expected to take over the number one position from China by the end of the decade while Germany holds firm at number three.
If we take a closer look at the main drivers for a country to solidify its position as one of the top highly competitive manufacturer and compare them with policies of Donald Trump, we might have a clear understanding how implementation of such policies could impact life of regular people.
As the manufacturing industry becomes increasingly more advanced and sophisticated, countries have continually invested in developing advanced manufacturing technologies to secure a top ranking positions.
Driven by a focus on innovation and advanced technology, the shift to higher-value, advanced manufacturing is shaping a new battleground for global competitiveness going forward.
Top performing countries, including the United States, have invested heavily in establishing national innovation ecosystems which connect people, resources, policies, and organisations to efficiently translate new ideas into commercialised products and services.
In the United States, executives consistently stressed predictive analytics, smart, connected products that support the “Internet of Things” (IoT), and advanced materials as their highest priority technologies and vital to their companies’ future competitiveness.
Global manufacturing executives continue to reward nations with highly skilled, well-educated workers. Over the past three GMCI studies, CEOs consistently ranked ‘Talent’ as the most important driver of global manufacturing competitiveness.
A highly skilled workforce can strongly influence a nation’s overall competitiveness.
As executives indicated through their rankings, despite China and India’s sheer volume of graduates, they still have significant room for improvement when it comes to talent.
The United States is facing a serious manufacturing workforce challenge due to an ageing population, retiring “Baby Boomers,” changing dynamics of the skillset needed for advanced manufacturing, and perceived attractiveness of the industry.
The recent Deloitte United States and The Manufacturing Institute study on the resulting skills gap predicts two million positions in the US manufacturing industry will likely go unfilled due to a lack of skilled workers over the next decade.
Global economic uncertainty makes cost competitiveness a critical consideration for most senior manufacturing executives. Ranked the second most important driver, the cost competitiveness of nations continues to shift, thus transforming the global landscape with respect to manufacturing competitive advantage.
Emerging economies are still the most competitive on cost, primarily due to significantly lower labour rates.
With China’s explosive growth in its middle class, and its evolving manufacturing focus, its overall cost advantage may soon deteriorate, leaving room for other nations to emerge as viable alternatives from a cost competitiveness perspective.
However with this growth in middle class populations, such as in China and India, significant domestic consumer demand increases have created attractive new markets and new consumers to penetrate.
A well-supported, productive workforce is both a driver of economic prosperity for a nation and a strong driver of manufacturing competitiveness in the view of the manufacturing executives surveyed. Where emerging economies have an advantage over advanced economies on issues of labour and materials costs, advanced economies lead their developing counterparts on labour productivity.
Based on an analysis of data from International Labour Organisation (ILO), the United States leads in overall workforce productivity, generating US$111,083 per employee on an annual basis (2015).
The fourth most important driver of manufacturing competitiveness, signaling the overall influence of a well-established, qualified, integrated, and available supplier base and ecosystem.
As physical and digital worlds converged, a historically one directional approach between companies and their suppliers have laid way to a more collaborative approach.
Globalization creates increased opportunities for manufacturers to collaborate as suppliers become part of a connected manufacturing system, thereby enhancing the overall supply capability of the nations involved.
Indeed, as the global economy and manufacturing technologies became more integrated and complex, global manufacturing networks and innovation ecosystems have followed suit.
The most competitive manufacturing nations have a diverse and high-quality supplier base with strong industrial clusters focused on R&D.
This driver focuses on a nation’s public policies and government regulations aimed at increasing trade competitiveness, encouraging domestic investments, policies and regulations aimed at creating strong and reliable financial and banking systems as well as competitive and stable monetary, fiscal, and tax policies.
Competitiveness of trade exports is a key determinant of overall country competitiveness and prosperity. Nations that are able to competitively export higher value, advanced manufacturing and technology intensive products have higher overall prosperity (e.g., Germany, the United States, and Japan).
Global trading patterns among leading manufacturing nations are complex as shown in Figure 21. Germany appears to maintain a relatively high share of medium and high technology exports within the European region, whereas similar United States and Japanese exports are more geographically diverse. As for China, a large percentage of its medium and high technology exports stay within Asia.
I would only like to add, that when we compare countries like the United States and Germany or Japan, we shall keep in mind that it is not perfect comparison as the United States is by far bigger area-wise as well as the size of its economy.
One of the main factors which let the US to secure its position as #1 world economy is continuously pursued policy to attract the top talents. This policy was in place almost throughout the entire history of the United States. Because before we would have the best technology, infrastructure, network of efficient suppliers or the most progressive legislation, we shall be able to generate the best ideas. And ideas belong to people.
Donald Trump’s policies of isolationism and protectionism are in direct opposition with the history of the country he is now leading.
Interestingly enough, his policies have already started to send first disturbing signals.
CNBC, with reference to one of the senior officials, reported that Donald Trump intents to sign the order Tuesday which would establish “the strict enforcement of all laws governing entry into the United States of labour from abroad for the stated purpose of creating higher wages and higher employment rates for workers in the United States.”
Meanwhile. Rising interest rates have dampened homebuyer purchasing power and enthusiasm affecting home sales in California. Look to 2018 for the next significant boost in home sales volume.
Reuters reported that a tightening labour market, which is generating steady wage growth is underpinning the housing market.
The sector, however, remains constrained by a dearth of properties available for sale. Builders have failed to bridge the gap, citing a range of problems including shortages of labour and land as well as rising material prices.
And this is only the first signs that show constrains faced by the construction labour market. There is an indication that the White House plans to implement H-1B reforms to make it more difficult to obtain by foreign specialists.
If this plan is materialised, the inflow of talents to the United States would be significantly reduced. With continuously shrinking number of highly qualified specialists, the US, might have a chance to gradually lose its competitiveness.
The other strong signal comes from the Wall Street. I would assume that it cased by the wide range of uncertainties created by Trump’s lack of strategic clarity, spontaneous decisions that lead to international tensions and his overall inability to run the country.
As Goldman goes, so goes the market, history shows
Using hedge fund analytics tool Kensho here’s what happens to the major market benchmarks, on average, when Goldman falls more than 5 percent in one month’s time.
Goldman has dropped 5 percent or more during 91 30-day periods since it became a public company in 1999. The S&P 500 only managed to be positive during 16 percent of those months, posting an average loss of more than 3 percent.
It seems the fortunes of the overall market and the Wall Street leader are inextricably linked.
A look at daily correlation also backs up this notion. Here are the Dow Jones industrial average members most highly correlated to the Dow itself since Goldman entered the benchmark in 2013.
When I was writing this Article, situation has changed a bit
Investors better hope Goldman shares can turn it around this month or the whole market may be in trouble, according to history.
The above examples are very general (without detailed analysis).
We shall take into account that Donald Trump do not like to be transparent. But what we already know is vivid illustration what he is capable to do and what direction he actually drives the US.
We also need to remember that he has not even reached his 100-days period as the president. Therefore, I may conclude that there is more to come.