To Remain On Top, The U.S. Needs To Start Protecting Its Design IP

China hasn’t usurped our manufacturing power, but the United States is slipping behind in trademarks.

To Remain On Top, The U.S. Needs To Start Protecting Its Design IP

[Editor’s note: This is the second post in a series by Ravi Sawhney on the future of manufacturing. The first installment can be read here.]


Despite the positive and hopeful news with respect to U.S. manufacturing addressed in my blog last week, people are right to be nervous and uncertain about the economic future. The negative news is virtually impossible to escape, encouraging news seems discounted, and focus on China grows more intense. However, there is a lot of perspective lost in the broad debate, and in my opinion the focus on China and the growth of other developing countries (i.e., BRIC) really misses our needed focus on the potential of “Made in America.”

True, China’s share of global manufacturing output has nearly tripled since 2000, from 6.6% in 2000 to 18.6% in 2009, and trends show that it will overtake us at some point in manufacturing output. In terms of value, the United Nations shows the United States has 19% of the global manufacturing value added (MVA) output, while the UN’s 2011 Q2 report shows China with 15.4% in 2010. China has earned the world’s respect, but Americans shouldn’t fret for their own future. China’s growth and manufacturing strength isn’t a cause for panic because it has a much less efficient workforce, it makes different things, and Chinese goods still represent a small fraction of America’s national expenditures. America also competes well on patents–the other side of the “Made in America” coin.

Some Perspective on China and America

The U.S. still makes a lot of stuff. According to the Associated Press, U.S. manufacturers made $1.7 trillion in goods in 2009 and out-produced China by more than 40%, but “the story of American factories essentially boils down to this: they’ve managed to make more goods with fewer workers.” Productivity gains have changed the picture during the past 60 years. This has been both a blessing and a curse.

American Value

Most don’t realize that today the U.S. remains competitive in manufacturing with roughly 10% of the Chinese workforce. A recent Wall Street Journal article cites, “The average American factory worker today is responsible for more than $180,000 of annual output, triple the $60,000 in 1972.” This strong output is mirrored by strong value creation; UN BLS data shows that the value added per worker is $118,419 in the U.S., while in China that amount is just a fraction, $13,266. The other countries with highest per-worker productivity are actually our most direct competition: Japan, the U.K., Korea, Canada, France, Germany, Spain, and Italy. With proper focus, I know we can have high wages and manufacturing trade surpluses simultaneously, just as seen in Germany and Japan. Healthy wages can be justified and sustained by continued leadership in MVA and through continued productivity growth, and this goal should integrate with a numerical job creation focus.

By and large, the U.S. also makes different stuff than the Chinese. Findings from the new survey of senior U.S. manufacturing executives show that “while 84% of survey respondents consider China the U.S.’s biggest competitor, the Export Similarity Index (ESI) ranks the degree of overlap between China’s exports and those of the U.S. as 41.4 out of 100, based on data from 2010.” Since a 0 means exporters don’t compete in any of the same markets and 100 would be identical export structures, it shows that the two countries largely compete in different areas.

Growing Headwinds

It should be noted that China is trying to shift to higher-value-added products to compensate for currency appreciation, and its manufacturing sector is seeing a double-digit rise due to domestic and export growth. However, international policy experts point to near-term infrastructure challenges and longer-term cultural attitudes toward innovation and disruption as obstacles China will need to overcome, as well as needed economic and social integration. Though China is moving in the right direction, it still has a long way to go to catch the U.S. in high-end manufacturing and especially intellectual-property protection. The report from GE’s Economist Intelligence Unit also indicated that “the three greatest assets the U.S. manufacturing industry has over emerging markets are the high quality of products (61%), innovative processes (39%) and the protection of intellectual property (37%).” Largely because of these headwinds and America’s strength in these areas, a recent report by the Boston Consulting Group, “Made in America, Again,” identified several manufacturing sectors most likely to return to the U.S.: transportation goods, electrical equipment/appliances, furniture, plastics and rubber products, machinery, fabricated metal products, and computers/electronics. According to the report, “These [products] account for about $2 trillion in U.S. consumption per year and nearly 70 percent of U.S. imports from China.”


Spending at Home

People also lose perspective that Americans overwhelmingly spend on American-made stuff, not foreign or Chinese goods. Chinese goods are less than 3% of our spending, as nearly 89% of U.S. consumer spending is on American-made goods and services according to the Federal Reserve.

Innovation in America

Americans also continue to make great contributions on the digital front in terms of IP. The U.S. leads in patent filings over China, Japan, and Germany, among others, in both country and abroad filings and international filings under the PCT system. On the patent front, the latest annual data shows that the United States’ approximate 44.9K patent filings in 2010 outpaces the other top nations by a wide margin–Japan (32.2K), Germany (17.2K), China (12.3K), Korea (9.7K), France (7.2K), the U.K. (4.9K)–but that the U.S. has seen a slight decline in international patent volume amid a surge in growth in Asia (China, Korea, and Japan) and from BRIC nations. I was also curious to see that the University of California filed the most of patents of any other academic institution in the world; digital communication was the fastest area of overall growth.

Where Do We Go From Here?

In my opinion, designers and policymakers should improve in the other areas of IP where we lag behind the Chinese and other nations–particularly, industrial-design patents and trademarks. Here is a brief breakdown of top line 2009 data.

Detailed country statistic profiles are available from World Intellectual Property Organization on the United States, China, Japan, and Germany for a quick comparison on numerous dimensions of IP activity. My greatest concern is that in 2009, China’s ID filing accounted for roughly 50% of the total, by office, and is growing more than 12% a year. We need much more domestic partnership and cooperation within the design industry and with government to help turn this trend around and mitigate China’s leadership position with trademarks. Product and graphic designers will be critical in establishing a surge in these areas of IP, and their efforts will have to be supported by policymakers. (Some ideas about that support will be discussed in the next installment of this series.)

I hope this information has helped to alleviate some concerns, provide perspective, and shed some new light on areas for American competitiveness. Because much of the U.S.’s future competitiveness will require good national policy ensuring fairness, next we’ll discuss the future of “Made in America” and ideas that, to quote former President Bill Clinton, can help America get “back into the future business.”

[Images: scruffdog1231, -ant!, LibraryArchives]


About the author

As the founder and CEO of RKS Design, Ravi Sawhney has spent more than thirty years at the forefront of product and technology innovation, and has grown his industrial design consultancy into a global leader in the fields of strategy, innovation and design. While leading RKS, Sawhney has helped generate more than 150 patents and over 90 design awards on behalf of his diverse list of international clients, and his work has been featured on the cover of Business Week’s best product design issue