Industrial Distribution

Jack Keough

Myths about China and U.S. manufacturing
June 4, 2007

Based on all the articles you’ve read about manufacturing fleeing overseas, what percentage of products would you guess are still manufactured in the United States and Canada compared to the total world gross domestic product? Would you guess 10 percent, 15 percent? You’d be wrong.

Products made in these two countries still comprise 27.7 percent of the world’s GDP, according to Alan Beaulieu of the Institute for Trend Research.  And he says this hasn’t varied by more than two percent in the last 100 years.

Beaulieu made those remarks during his keynote presentation at the recent convention of  NAHAD-the Assn. for Hose and Accessories Distribution, held in Victoria Island, British Columbia last month.

Beaulieu, an economist with an excellent track record for forecasting, says, “40 percent of Americans think that China will be the number-one producing nation in the next 10 years. It isn’t going to happen.”

He says the Chinese economy has major problems, such as banking, government interference and pollution. He adds that 400,000 Chinese will die because of poor air quality, much of the drinking water is polluted, and 900 million people live in poverty.

He also notes that the middle class is growing, but so is the military. There is a serious gender imbalance in that there are 125 million more men than women in China, and violence and instability is growing.

Looking at other nations, he says India’s long-term potential is huge, and that it would be a good partner to the United States. Mexico and Brazil also have good long-term economic potential. In particular, he says Brazil will become an important source for business and sourcing of product.

Here are some other tidbits from Beaulieu’s speech:

• Russia’s population will drop from 149 million to 109 million. Life expectancy is only 57 years old, and the country has a very poor health care system.
• Japan’s population continues to shrink. It also is seeing problems because of an aging workforce, and there are negative demographic trends.
• In the United States, unemployment continues to be low and we haven’t had a serious recession since the early 1990s. U.S. oil prices will continue to creep upward through 2008, and the debt level continues to rise. But the United States will continue to be faced with difficulties because of Social Security, Medicare, soaring prices for prescription drugs and the retirement of baby boomers.

Beaulieu points out that the economy this year and next will be “okay,” but in 2009 and 2010 there will be a recession that will be “fairly significant in scope and will spread to Canada, Europe and Asia, and possibly to China.” The years 2011 and 2012 will be recovery years, he says.

Interest rates will remain high in the United States because of inflation, he adds.

Judging from comments made by attendees following the speech, Beaulieu hit a nerve with manufacturers and distributors.

“We still have a lot of manufacturing in the U.S.” one distributor told me. “Maybe it isn’t like it was before, but there is still plenty of business.”

Posted by Jack Keough on June 4, 2007 | Comments (3)