U.S. Manufacturing Is Important to the Global Economy

Manufacturing’s Share Within Countries Declines

Services’ share of GDP has been growing at the expense of manufactured goods for decades as part of a worldwide trend. One factor is that prices of industrial goods have held steady or even declined relative to services. Another is that innovation is spurring new waves of service applications, particularly for telecommunications, trade, and entertainment.

The gravitas of manufacturing in the U.S. economy has declined significantly since the fifties even compared with other industrial countries. For example, in Germany and Japan the share of manufacturing value-added in GDP is 6-10 percentage points higher than for the United States.

The government can and should take steps to create a more propitious climate for manufacturers and improve our supply of labor and capital. Vocational and apprenticeship training as well as lower taxes and more transparent taxation regimes can help. Export promotion and sound macroeconomic policies could translate into a more secure investment climate.