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US manufacturing competitiveness rising, set to take number one spot from China by 2020

Rankings reveal a shift among the world’s traditional manufacturing powerhouses due to the Asia Pacific region’s rising influence and declining strength in European and BRIC countries.

WASHINGTON, DC, Mar. 31, 2016 — The United States is expected to be the most competitive manufacturing nation, moving China into the number two position by 2020, according to the 2016 Global Manufacturing Competitiveness Index report from Deloitte Touche Tohmatsu Limited (Deloitte Global) and the Council on Competitiveness (Council). The rankings also reveal a shift among the world’s traditional manufacturing powerhouses due to the Asia Pacific region’s rising influence and declining strength in European and BRIC countries (Brazil, Russia, India, and China).

The prediction is based on an in-depth analysis of survey responses from more than 500 chief executive officers and senior leaders at manufacturing companies around the world.

Major highlights of the 2016 Global Manufacturing Competitiveness Index (GMCI) include:

The US projected to take number one spot by end of decade

  • The US improved its ranking from 4th in 2010 to 2nd in this year’s study and is expected to reach number one by 2020
  • As the US invests heavily in talent and technology, the nation ranks highest as an advanced manufacturing economy. The country is highly competitive in terms of the share of high skill and technology contribution to exports and labor productivity as measured by gross domestic product (GDP)
  • The US continues to position itself among the global leaders in research and development (R&D) activities by investing in top universities, R&D talent and venture capital

Mighty Five (MITI-V) start to show face as manufacturing power group

  • Made up of the five-Asia Pacific nations of Malaysia, India, Thailand, Indonesia, and Vietnam, the MITI-V or “Mighty Five” could represent a “New China” and enter the top 15 rankings of global manufacturing competitiveness over the next five years
  • Low-cost labor, agile manufacturing capabilities, favorable demographic profiles, and market and economic growth are leading factors likely to position these countries to rise in rankings by 2020

BRIC crumbles as member nations’ individual ratings shuffle

  • Among the BRIC countries, only China is viewed as a top manufacturing nation in 2016. The other three–Brazil, Russia, and India–have seen continuous declines in the study’s rankings over the past six years, despite aspirations that they may emerge as manufacturing goliaths
  • Brazil’s political uncertainty, Russia’s geopolitical activities and impact from the slide in global crude oil prices, matched with India’s challenged economic and policy actions around infrastructure and investments, have likely triggered the decline from the BRIC’s manufacturing competitiveness peak
  • Among the BRIC nations, manufacturing executives expressed optimism for only China and India by 2020, with expectations that India will regain some of its ranking position lost over the past several years

North America and Asia-Pacific become regional clusters of strength

  • The two regions are expected to dominate the competitive landscape in the next four years: All three North American countries (US, Canada, and Mexico) in today’s top 10 remain there in the 2020 outlook; five Asia-Pacific nations (China, Japan, South Korea, Taiwan, and India) factor into the study’s top 10 in 2020
  • The US stands out as the anchor for the North American region with the highest level of manufacturing investments, a strong energy profile, and high-quality talent, infrastructure and innovation. Canada’s low trade barriers, tariff-free zone and investments in sectors key to its growing high-tech manufacturing future, along with Mexico’s 40 free trade agreements, low labor costs and close proximity to the US round out the region
  • The dominant Asia Pacific countries of China, Japan, and South Korea are driven by talent and innovation and along with emerging newer powerhouses, such as Singapore and Taiwan, strengthen the region with a focus on high-tech exports. This region also houses the “Mighty Five” and five of the top 10 countries in current or future GMCI rankings

European countries feel pressured to remain competitive on global scale

  • European nations are lagging behind as they work through sluggish economic recovery efforts and look to their anchors, Germany and the United Kingdom, to pull them ahead
  • Most European nations, aside from the two anchors, are expected to slip in overall global manufacturing competitiveness rankings in next five years

“Made in the USA is making a big comeback,” said Deborah L. Wince-Smith, president and CEO of the Council on Competitiveness. “Contrary to the view that manufacturing is dirty, dumb, dangerous and disappearing, our study points to a manufacturing future characterized by innovation-driven growth. Manufacturing is sustainable, smart, safe, and surging–and America will lead the world in this transformation.”

“The US is currently among the top nations unlocking advanced manufacturing technologies including smart, connected products and factories, predictive analytics and advanced materials that are core to future competitiveness,” said Craig Giffi, vice chairman, Deloitte LLP and Deloitte US Automotive Sector leader. “The US excels at creating connections and synergy between people, technology, capital, and organizations to form a cohesive ecosystem of innovation, generating tremendous value from investments in research and development.”

According to Michelle Drew Rodriguez, manufacturing leader for Deloitte US’s Center for Industry Insights, “While the US lead is a positive signal, the existing engineering and manufacturing workforce that pushed the country forward is beginning to get older. Therefore, it is important that public and private sectors collaborate on the nation’s educational and technological future to remain a top manufacturing competitor.”

The full Index also covers the top drivers of manufacturing competitiveness, the impact of public policy, and how global manufacturers can succeed.

Visit www.deloitte.com/us/global-competitiveness for more information about the 2016 Global Manufacturing Competitiveness Index or follow us @DeloitteMFG or @CompeteNow.

About the study
The 2016 Global Manufacturing Competitiveness Index (GMCI) report is the third study prepared by the Deloitte Touche Tohmatsu Limited (Deloitte Global) Global Consumer and Industrial Products Industry group and the US Council on Competitiveness, with prior studies published in 2010 and 2013. This multi-year research platform is designed to help global industry executives and policy makers evaluate drivers that are key to company and country level competitiveness as well as identify which nations are expected to offer the most competitive manufacturing environments through the end of this decade. The 2016 study includes more than 500 survey responses from senior manufacturing executives around the world.

About the US Council on Competitiveness
The Council on Competitiveness is a leadership organization in the US comprised of CEOs, university presidents and labor leaders committed to ensuring that the United States remains the world leader. The Council has one goal: to strengthen America’s competitive advantage by acting as a catalyst for innovative public policy solutions. For more information, please visit www.compete.org.

Media contacts:

 

Courtney Flaherty
Public Relations
Deloitte
+ 1 203 905 2708

Jay Hamilton
SVP Communications & Public Affairs
Council on Competitiveness
+2 240 515 1816

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