	Introduction

The health of the U.S. manufacturing sector has long been of great concern to Congress. The large decline in manufacturing employment since the start of the 21 st century has stimulated particular congressional interest. Over the years, Members have introduced hundreds of bills intended to support domestic manufacturing activity in various ways. The proponents of such measures frequently contend that the United States is in some way falling behind other countries in manufacturing and argue that this relative decline can be mitigated by government policy. While some of those changes may be a result of factors specific to the United States, others may be attributable to technological advances, shifting consumer preferences, or macroeconomic forces such as exchange-rate movements. This report is designed to inform the debate over manufacturing policy by examining changes in the manufacturing sector in comparative perspective. It does not describe or discuss specific policy options. The charts and tables on the pages that follow depict the position of the United States relative to other major manufacturing countries according to various metrics. According to U.N. estimates, China displaced the United States as the largest manufacturing nation in 2010. These estimates are calculated in U.S. dollars, and the reported manufacturing value added of some countries, including China, Mexico, and Russia, declined in 2016 due to the declines of those countries' currencies against the dollar. The U.S. share of global manufacturing value added has declined over time, from 29% in the early 1980s to 18.1% in 2015 and 2016 (see Figure 2 ). It is important to note that global shares are measured in U.S. dollars, so each country's share in a given year is greatly affected by the strength of its currency against the dollar. This figure has changed little in recent years. The manufacturing share of total economic output in China declined from 32% in 2010 to 27% in 2016, while the share of manufacturing in the U.S. economy remained relatively stable. Over the quarter-century between 1990 and 2016, manufacturing employment fell by a much lower percentage in the United States than in the United Kingdom, France, Sweden, and Japan and by about the same percentage as in Germany, the Netherlands, and Canada (see Figure 10 ). Adjusted for differences in purchasing power, Chinese manufacturers' R&D spending has grown more rapidly than that of manufacturers in the United States, and as of 2015 was 18% larger. Conversely, the service sector is relatively more important in undertaking R&D in the United States than in many other countries. The research intensity of U.S. manufacturing increased significantly in the years leading up to the most recent recession, but data measuring R&D relative to manufacturing value added indicate that U.S. manufacturers' research intensity has not increased since 2008. U.S. manufacturers spend more on R&D, relative to value added, than those in other large manufacturing countries, with the exceptions of Japan and South Korea (see Figure 15 ). As Table 3 confirms, a very large proportion of U.S. manufacturers' R&D takes place in high-technology sectors, particularly pharmaceuticals, electronics, and aircraft manufacturing, whereas in most other countries save South Korea, a far greater proportion of manufacturers' R&D outlays occur in medium-technology sectors such as motor vehicle and machinery manufacturing.
The health of the U.S. manufacturing sector has long been of great concern to Congress. The decline in manufacturing employment since the start of the 21st century has stimulated particular congressional interest, leading Members to introduce hundreds of bills over many sessions of Congress intended to support domestic manufacturing activity in various ways. The proponents of such measures frequently contend that the United States is by various measures falling behind other countries in manufacturing, and they argue that this relative decline can be mitigated or reversed by government policy.
This report is designed to inform the debate over the health of U.S. manufacturing through a series of charts and tables that depict the position of the United States relative to other countries according to various metrics. Understanding which trends in manufacturing reflect factors that may be unique to the United States and which are related to broader changes in technology or consumer preferences may be helpful in formulating policies intended to aid firms or workers engaged in manufacturing activity. This report does not describe or discuss specific policy options.
The main findings are the following:
The United States' share of global manufacturing activity declined from 28% in 2002, following the end of a U.S. recession, to 16.5% in 2011. By 2016, the U.S. share rose to over 18%, the largest share since 2009. These estimates are based on the value of each country's manufacturing in U.S. dollars; part of the decline in the U.S. share was due to a 23% decline in the value of the dollar between 2002 and 2011, and part of the subsequent rise is attributable to a stronger dollar. China displaced the United States as the largest manufacturing country in 2010. Again, part of China's rise by this measure has been due to the appreciation of its currency, the renminbi, against the U.S. dollar. The reported size of China's manufacturing sector decreased in 2015 and 2016 due to currency adjustments. Manufacturing output, measured in each country's local currency adjusted for inflation, has been growing more slowly in the United States than in China, South Korea, Germany, and Mexico, but more rapidly than in many European countries and Canada. Employment in manufacturing has fallen in most major manufacturing countries over the past quarter-century. In the United States, manufacturing employment since 1990 has declined in line with the changes in Western Europe and Japan, although the timing of the decline has differed from country to country. U.S. manufacturers' spending for research and development (R&D) rose 10.5% from 2010 to 2015, adjusted for inflation. Manufacturers' R&D spending rose more rapidly in several other countries. Manufacturers in many countries have increased spending on R&D, relative to value added in the manufacturing sector, but U.S. manufacturers' R&D intensity has changed little since 2008. A large proportion of U.S. manufacturers' R&D takes place in high-technology sectors such as pharmaceutical, electronics, and aircraft manufacturing, whereas in most other countries the largest share of R&D occurs in medium-technology sectors such as automotive and machinery manufacturing.