The new reality

Around the world, manufacturing is making a comeback. Many of the jobs the US has created during the past three years ­ over 500,000 of them, in fact ­ are in the manufacturing sector.

Countries like China are transitioning from manufacturing low-end products to inventing high-end ones, creating more jobs and wealth for their citizens.

And here in the UK ­ and indeed across much of Europe ­ we can sense renewed promise and possibility. 

The chemical and pharmaceutical industries, which account for 20% of the UK’s manufactured exports ­ a £6-billion trade surplus ­ is at the vanguard of this renaissance, where the challenge is not so much identifying the opportunities, but seizing them.                                         

The goal should not merely be restoring traditional factory jobs in the UK and other developed economies. Rather, it should be fostering a new breed of manufacturing sector ­ an advanced manufacturing sector.

Advanced manufacturing refers to state-of-the-art modern industries that support high-paying jobs, create ground-breaking products, use modern processes and forge solutions to the world’s biggest challenges.

At a recent forum in China, the country’s new premier used that term at least six times in 45 minutes ­ a signal that the Chinese understand and the importance of making products, such as faster, more powerful semiconductors, solar cells and advanced water filtration systems.

Or look at some of the innovations at Dow Chemical Co. ­ like Dow’s trans-fat-free Omega 9 cooking oils, which ­ since their launch in 2005 ­ have reduced the American consumption of trans and saturated fats by 1 billion pounds … or a smart paint that eliminates toxic formaldehyde from the air, indoors.

By building advanced, next-generation products, companies and countries will also build capacity for further innovation. Where production goes, innovation inevitably follows, creating a virtuous and self-sustaining cycle.

Take the electronics industry. One company opens shop. Soon, suppliers, and R&D centres, and universities move in nearby. Over time, more businesses co-locate in the same place.

Where production goes, innovation inevitably follows, creating a virtuous and self-sustaining cycle

And, ultimately, an entire ecosystem of production and innovation flourishes, as seen, for example, in Silicon Valley.

The world is building innovation ecosystems and incubators like this everywhere, but especially in places where advanced manufacturing industries ­ and the talent needed to work in them are located.

Still, this virtuous cycle does not set itself in motion. It depends on our ability to pull together ­ across oceans, across borders, across sectors, across industries ­ and work at the intersections.

Around the world, countries are investing in modern infrastructure and in better education and training. They now offer the right mix of incentives for businesses to build partnerships between their public and private sectors.

In Singapore, Germany, Thailand and elsewhere, manufacturing has flourished ­ and a cycle of investment, job creation, and prosperity has followed.

This is what the UK, the EU, and ­ indeed ­ the entire world ­ needs to do more of.

While, no two countries are exactly alike, increasingly, all need to consider the same sorts of economic policies if they want to boost their advanced manufacturing sectors in a new type of growth environment.

These policies range from common-sense tax and regulation to investments in infrastructure and fair and free trade agreements.

And of course, policies that help bridge the gap between the skills that employers need and the competencies that workers have ­ advanced manufacturers will go where the talent is.

That is why we should be encouraged by the growing interest in maths, science and engineering subjects in the UK. For example, the number applying to study chemical engineering degrees was at a record high this year.

There is one more issue I would like to address: access to affordable energy and cost-advantaged feedstocks. This is the most pressing concern for manufacturers here today.

For years, the UK and the Continent have struggled on this front. Industrial customers in the EU, for instance, pay 3-4 times more for power than their competitors in the US.

But in the US, we have seen just how transformative vast stores of shale gas can be for our industry ­ and all industry. Shale gale has created a set of new competitive advantages for America ­ among them, affordable energy for consumers and manufacturing companies.

That is why US manufacturers ­ including Dow ­ have announced more than 110 new investments, totalling roughly $100 billion.

The UK’s shale-gas reserves are not quite as expansive as those in North America. But they are significant enough to drive a comparative advantage for the UK ­ and for the EU.

The data shows that if the UK truly takes advantage of its shale resources by 2020, the chemical sector could be growing at 4%, year-on-year.

This is a big deal: if we choose to turn gas into high-value chemistry, materials and high-tech products rather than burn or to export it, we create eight times more value across a nation’s economy.