The United States likes to be number one. We like to have the most medals at the end of the Olympics and we like being “the greatest country on Earth.”
An article on eMarketer recently stated that China will surpass the U.S. to become the world’s largest retail market in 2016.
What does this mean for the U.S.? What does this mean for American manufacturing?
While China is about to become the world’s largest retail market, they have the world’s largest population. Americans still spend much more per capita than the Chinese. China’s population is 1.383 billion, whereas the U.S.’s population is 324 million. If the Chinese spend $4.886 trillion, that averages around $3,500 per person. If Americans spend $4.823 trillion, that averages around $14,900 per person. This means the average American citizen is spending more than four times the average of the Chinese citizen, and therefore Americans still have huge buying power. Spending power in China may be even more concentrated than it is in the U.S.
China’s rise to the largest retail market is directly related to the shift of wealth that occurred as manufacturing moved to China from the U.S. and Europe.
According to a recent PBS news report, it is becoming increasingly less attractive for American companies to manufacture in China. Harry Moser, the President and Founder of the Reshoring Initiative, says, “When [American companies] first went offshore to China, the Chinese wages were so low that the price differential was 30-40%, but now that the Chinese wages have come up, that gap might only be 15-20%.”
Since 2010, the offshoring of manufacturing jobs has slowed. From 2000 until 2010, the U.S. lost 6 million manufacturing jobs. Since 2010, 265,000 manufacturing jobs with around 900 companies have been created or reshored to the U.S., but this is a very small fraction of what was lost.
Mr. Moser feels that the increase in Chinese wages may make it harder to rationalize the other costs associated with offshoring, like shipping, delivery delays, and the overhead related to maintaining large inventories. Moser says that while these other costs may only account for 1-2%, if companies have 30 of these issues, it will make up for a 15-20% price difference from China.
However, this doesn’t mean that the U.S. will see these manufacturing jobs automatically return. We don’t have a coherent manufacturing policy coming from our government. Small businesses still face challenges with finding capital to invest in plants and finding suppliers and workers in many cases.
Robert Atkinson, the president of Information Technology and Innovation Foundation in Washington, D.C., said, “Every other country’s putting in place a manufacturing strategy, better tax incentives for investing in research, better tax incentives for investing in machinery, apprenticeship programs for their workers. You know, if we just sort of sit back and think we’re gonna win the race by the fact that we’re Americans, well, we’re not.”
Atkinson has a valid point—if other countries implement tax incentives and other benefits to keeping manufacturing on their home shores, and the U.S. doesn’t, we are not going to win back jobs unless we spend a lot more on U.S. made products. Yet, still only about 2% of clothing bought in America is made in America.
Each American citizen still has huge buying power. Where we focus this power is essential to regaining our footing in American manufacturing and restoring the American dream.
So how are you going to take action?
Here are a few easy options:
- Buy American products. Not sure where to find them? Look here.
- Request that retailers stock American made products. Speak up and tell them if you can’t find U.S. products and commend them when you do!
- Encourage American makers you know to join American Made Matters! There is power in numbers. American Made Matters wants to bring American manufacturers and makers together to make it easy for consumers to find whatever products they’re looking for made in America and help manufacturers find suppliers.
- Take action: Join American Made Matters’ Ambassador Program and host an American Made Matters Day in your community! American Made Matters Day encourages each consumer to buy at least 1 product made in the U.S. It’s held every year on November 19. This year, November 19 is a Saturday, so some of our ambassadors will conduct their events on Friday, November 18.
Together, we can change our future!
 Booker, Christopher and Connie Kargbo. “Why Some Manufacturers are Returning to the U.S.,” http://www.pbs.org/newshour/bb/manufacturers-returning-u-s, (August 27, 2016).