The US, the world’s largest economy, will slip to fifth place from third in manufacturing competitiveness in the next five years as India and Brazil race ahead, according to a report.
China will remain in the top spot, while India rises to second from fourth and Brazil jumps from eighth to third, according to the Global Manufacturing Competitiveness Index compiled by Deloitte Touche Tohmatsu and the US Council on Competitiveness.
The index, which was first introduced in 2010, reflects perceptions of more than 550 senior corporate leaders surveyed about how 38 countries rank currently and will fare in five years.
Executives said that access to talented workers is the top indicator of competitiveness, followed by a country’s trade, financial and tax policies, according to the report, which was published yesterday.
“From a US perspective we didn’t change that much, but it’s just that others are moving rapidly,” Samuel Allen, chairman and chief executive of Deere & Co and chairman of the council, said in a telephone interview. “We can’t tread water, whether it be in education, tax reform or continued investment in infrastructure.”
The current and future rankings reinforce the perception that the US is “living off of investments we made a long time ago,” Allen said.
He said he worries about factors such as deteriorating US infrastructure that may increase costs to move goods and energy policies that could boost fuel prices.
According to the report, Germany will move from second to fourth in the competitiveness rankings, South Korea will fall from fifth to sixth, Taiwan will go from sixth to seventh, Canada will drop from seventh to eighth and Japan will fall out of the top 10 list altogether, tumbling from 10th to 12th. Vietnam, meanwhile, will jump from 18th to 10th and Singapore will maintain its No. 9 ranking.
Another “sobering” finding in the report is that in five years, Germany will be the only European country in the top 15 spots for manufacturing competitiveness, as the UK and Poland slide, Allen said.
The world is seeing a “power shift” of competitiveness toward developing countries, particularly those in Asia, said Deborah Wince-Smith, chief executive of the Washington-based council that includes business, academic and labor leaders.
China and other emerging countries are increasingly manufacturing advanced goods, said Craig Giffi, the US consumer and industrial products industry leader at Deloitte who co-authored the report.
While emerging manufacturing powers still face challenges in improving their infrastructure, supplier networks and legal systems, the countries are investing to drive growth and jobs, according to the report.
“We are at an inflection point,” Giffi said. “For developed nations, it’s going to get harder.”
Aside from the responses of top executives, the study was based on interviews with “key manufacturing players” and contributors from Deloitte, the council, the Indian Institute of Management in Lucknow and Clemson University in South Carolina, according to the report.
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