America Beats China in Manufacturing

Oct. 30, 2007 Special to ABCNEWS.com — -- As China continues its meteoric rise, life -- and commerce -- in America have become saturated with three words: "Made in China." The abundance of low-cost goods has made life less expensive, but as some critics argue, it has drained the country of factory jobs, as companies shutter plants and head east.

Indeed, the trade gap between China and the U.S. would be better described as a canyon. In 2006, China exported $287.8 billion worth of goods to the U.S. Meanwhile, the U.S. exported $57.2 billion to China, according to the U.S. Census Bureau.

But, the U.S-China trade deficit doesn't provide a complete profile on American productivity. While China excels at producing low-cost, labor-intensive goods, like sneakers, plastic toys, and clothes, America's factories actually churn out far more products, and they're worth a lot more money.

Click here to see what products are made in the U.S.A. at our partner site, Forbes.com.

According to Dan Ikenson, associate director of the Cato Institute's Center for Trade Policy Studies, America manufactures 21% of the value in the world's manufactured goods—China's share is growing, but it only makes up 8% of the pie.

America remains at the top of the value chain, producing high-quality, high-technology goods for domestic consumers and the rest of the world. As highlighted by this year's raft of "Made in China" recalls--toothpaste, pet food, and Mattel's embarrassing $21 billion toy recall, China's reputation is less than spotless.

According to Dan Griswold, director of the Cato center, there are three main factors that favor U.S. production. Goods are usually made in the U.S. if they're heavy to transport, require high technology or are capital intensive as opposed to labor intensive.

Take the U.S. auto industry, for example. The market for autos is dominated by U.S., Japanese and Korean products, but many of these foreign companies, like Honda, Nissan, and Toyota own U.S. factories. Foreign companies use U.S. factories to stay close to the consumer and save on freight costs. China could do the same--but its technology reputation still lags behind its Asian counterparts. If the American public is wary of Chinese-made toys, imagine how a China-stamped auto would fare in its debut year.