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I came across an interesting article a few days ago that presented the findings and opinions of an economist who works for Fabricators and Manufacturers Association International. In short, by 2016 China will loose its manufacturing cost advantage over the U.S. China built its manufacturing base in a relatively short period of time relying on extremely low wages, massive amounts of government assistance, and a low valued currency which lead to competitive advantage within the export market place.

The article also further cited that wages for unskilled Chinese laborers were increasing at a rate of approximately 17% per year while the growth rate for US counterparts was 3%. For skilled workers and managers, the growth rate in China has averaged 135% per year, while for their US counter parts wage growth has averaged only 3.7%.

In addition to the large disparities in wage growth, the US has been achieving year over year productivity gains of approximately 8%.

These factors along with inflation that will increase the value of the Chinese currency in world market in addition to rising oil and transportation costs will decrease China’s competitive advantage within the export market place.

Once the shift has taken place, by 2016, both China and the US will begin to focus on their own domestic markets for the sale of their goods. While there has been much talk about the failing transportation infrastructure of the US, by comparison, the Chinese infrastructure is much worse. As a result, the US should be better positioned for the shift in focus.

In my opinion, I think that the study and article presents a sound basis and argument for a shift in competitive advantage between China and the US. The impact on transportation costs, logistics and supply chain methodologies, and the challenges placed on production capabilities and infrastructure will certainly need to be considered.

What are your thoughts?

WASHINGTON - The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) today issued a regulatory proposal that would revise hours-of-service (HOS) requirements for commercial truck drivers.

“A fatigued driver has no place behind the wheel of a large commercial truck,” said Transportation Secretary Ray LaHood. “We are committed to an hours-of-service rule that will help create an environment where commercial truck drivers are rested, alert and focused on safety while on the job.”

The publication of this proposed rule coincides with the timeframe established in a court settlement agreement that requires FMCSA to publish a final HOS rule by July 26, 2011.

This new HOS proposal would retain the “34-hour restart” provision allowing drivers to restart the clock on their weekly 60 or 70 hours by taking at least 34 consecutive hours off-duty. However, the restart period would have to include two consecutive off-duty periods from midnight to 6:00 a.m. Drivers would be allowed to use this restart only once during a seven-day period.

Additionally the proposal would require commercial truck drivers to complete all driving within a 14-hour workday, and to complete all on-duty work-related activities within 13 hours to allow for at least a one hour break. It also leaves open for comment whether drivers should be limited to 10 or 11 hours of daily driving time, although FMCSA currently favors a 10-hour limit.

“In January, we began this rulemaking process by hosting five public listening sessions with stakeholders across the country,” said FMCSA Administrator Anne S. Ferro. “This proposed rule provides another opportunity for the public to weigh in on a safety issue that impacts everyone on our roadways.”

Driving hours are regulated by federal HOS rules, which are designed to prevent commercial vehicle-related crashes and fatalities by prescribing on-duty and rest periods for drivers.

Commercial truck drivers who violate this proposed rule would face civil penalties of up to $2,750 for each offense. Trucking companies that allow their drivers to violate the proposal’s driving limits would face penalties of up to $11,000 for each offense.

Other key provisions include the option of extending a driver’s daily shift to 16 hours twice a week to accommodate for issues such as loading and unloading at terminals or ports, and allowing drivers to count some time spent parked in their trucks toward off-duty hours.

A copy of the rulemaking proposal is available on FMCSA’s Web site at http://www.fmcsa.dot.gov/HOS. The rulemaking will be published in the Federal Register on December 29 and the public will then have 60 days to comment. Information on how to submit comments and evidentiary material is available at http://www.fmcsa.dot.gov/HOS.