NIST Technical Note 1810

The U.S. Manufacturing Value Chain: 

An International Perspective

Douglas S. Thomas

Technical Note 1810

The U.S. Manufacturing Value 

Chain: An International 

Perspective

Douglas S. Thomas

Applied Economics Office

Engineering Laboratory

February 2014

U.S. Department of Commerce 

Penny Pritzker, Secretary

National Institute of Standards and Technology 

Patrick D. Gallagher, Under Secretary of Commerce for Standards and Technology and Director 
Certain commercial entities, equipment, or materials may be identified in this

document in order to describe an experimental procedure or concept adequately.

Such identification is not intended to imply recommendation or endorsement by the

National Institute of Standards and Technology, nor is it intended to imply that the

entities, materials, or equipment are necessarily the best available for the purpose. 

National Institute of Standards and Technology Technical Note 1810

Natl. Inst. Stand. Technol. Tech. Note 1810, 35 pages (February 2014)

CODEN: NTNOEF
iii

Abstract

This report uses input-output data from the World Input-Output Database to track the 

intermediate goods and services used in national manufacturing industries. Specifically, it 

examines the extent that supply chains increasingly involve imports and the extent that 

this trend has changed for the U.S. and other countries. The U.S. data is compared to 39 

other countries between 1995 and 2009, a 15 year period. The 40 countries represented 

approximately 88 % of global manufacturing value added in 2009, according to United 

Nations data. In terms of 2009 imported supply chain value added used by a nation’s 

manufacturing industry as a percent of all value added associated with that nation’s 

manufacturing industry, the U.S. imported 10.8 % of its supply chain, the 3rd lowest 

percentage, meaning that in relation to other countries the U.S. imports a smaller

proportion of its supply chain for manufacturing. Between 1995 and 2009, the percentage 

of imported supply chain value added increased for 32 of the 40 countries examined and 

for the U.S. it increased by 1.96 percentage points. The average increase for the 32 

countries was 4.67 percentage points and the average change for all countries was an 

increase of 2.78 percentage points; thus, the U.S. percentage increase in supply chain 

imports is slightly below the average. China’s value increased by 4.92 percentage points 

while Japan’s value increased by 4.59 percentage points. U.S. supply chain imports 

peaked in 2008 at 14.2 % and ranked as the 6th lowest at that time. These figures confirm 

that foreign suppliers have replaced some domestic suppliers in the U.S.

Keywords: supply chain; value chain; manufacturing; input output; intermediate goods 

and services
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Preface

This study was conducted by the Applied Economics Office in the Engineering

Laboratory at the National Institute of Standards and Technology. The study provides 

aggregate manufacturing industry data and industry subsector data to develop a 

quantitative depiction of the U.S. manufacturing industry.

Disclaimer

Certain trade names and company products are mentioned in the text in order to adequately specify the 

technical procedures and equipment used. In no case does such identification imply recommendation or 

endorsement by the National Institute of Standards and Technology, nor does it imply that the products are 

necessarily the best available for the purpose.

Cover Photographs Credits

Microsoft Clip Art Gallery Images used in compliance with Microsoft Corporation’s non-commercial use 

policy.
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Acknowledgements

The author wishes to thank all those who contributed so many excellent ideas and 

suggestions for this report. Special appreciation is extended to Dr. Howard Harary, 

Acting Director, Engineering Laboratory along with Simon Frechette and Dr. Christopher 

Brown of the Engineering Laboratory’s Systems Integration Division for their technical 

guidance, suggestions, and support. Special appreciation is also extended to Barbara 

Lippiatt and Dr. Robert Chapman of the Engineering Laboratory’s Applied Economics 

Office for their thorough reviews and many insights and to Shannon Takach for her 

assistance in preparing the manuscript for review and publication. The author also wishes 

to thank Dr. Nicos Martys, of the Materials and Structural Systems Division, and Dr. 

Robert Atkinson of the Information Technology and Innovation Foundation for their

reviews and comments.
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Table of Contents

ABSTRACT............................................................................................................................................... III

PREFACE ..................................................................................................................................................V

ACKNOWLEDGEMENTS ..........................................................................................................................VII

TABLE OF CONTENTS....................................................................................................................... IX

LIST OF FIGURES................................................................................................................................ X

LIST OF TABLES.................................................................................................................................. X

COUNTRY ACRONYMS ............................................................................................................................ XI

1 INTRODUCTION .............................................................................................................................. 1

1.1 BACKGROUND ...................................................................................................................................... 1

1.2 PURPOSE ............................................................................................................................................. 2

1.3 SCOPE AND APPROACH........................................................................................................................... 2

2 MANUFACTURING VALUE CHAIN.................................................................................................... 5

3 CONCLUSION ................................................................................................................................ 19
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List of Figures

Figure 2.1: U.S. Manufacturing and Supply Chain Value Added ...................................... 7

Figure 2.2: Intermediate Imported Value Added for Manufacturing as a Percent of Final 

Product Value Added Plus all Intermediate Value Added.................................................. 9

Figure 2.3: Intermediate Imported Value Added for Manufacturing as a Percent of 

Intermediate Value Added ................................................................................................ 10

Figure 2.4: Intermediate Imported Value Added for Manufacturing as a Percent of Final 

Product Value Added Plus all Intermediate Value Added, 1995-2009 ............................ 11

Figure 2.5: Percent of the Manufacturing Supply Chain that is Imported........................ 12

Figure 2.6: Ratio of the Supply Chain of Non-Manufacturing Value Added to 

Manufacturing Value Added............................................................................................. 13

Figure 2.7: Percent of Manufacturing Supply Chain that is Imported, by Industry 

Categories (2009).............................................................................................................. 15

Figure 2.8: Percent of Manufacturing Supply Chain that is Imported, by Industry 

Categories (2009).............................................................................................................. 16

Figure 2.9: Percent of the Manufacturing Supply Chain that is Imported, 1995-2009 

(Rentals, Computer Services, R&D)................................................................................. 17

List of Tables

Table 2.1: World Input-Output Database Characteristics................................................... 5
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Country Acronyms

AUS Australia

AUT Austria

BEL Belgium

BGR Bulgaria

BRA Brazil

CAN Canada

CHN China

CYP Cyprus

CZE Czech Republic

DEU Germany

DNK Denmark

ESP Spain

EST Estionia

FIN Finland

FRA France

GBR United Kingdom

GRC Greece

HUN Hungary

IDN Indonesia

IND India

IRL Ireland

ITA Italy

JPN Japan

KOR Korea

LTU Lithuania

LUX Luxembourg

LVA Latvia

MEX Mexico

MLT Malta

NLD Netherlands

POL Poland

PRT Portugal

ROU Romania

RUS Russia

SVK Slovak Republic

SVN Slovenia

SWE Sweden

TUR Turkey

TWN Taiwan

USA United States
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1

1 Introduction

1.1 Background

As national manufacturing supply chains migrate into an integrated global system, there 

is concern that U.S. manufacturing is being hollowed out. Hollowing out occurs when

intermediate goods and services for manufacturing are imported rather than produced 

domestically, resulting in a loss of other economic assets/activities.

1, 2, 3 These items may 

be imported from an overseas company or a U.S. company that has moved production 

and/or services overseas. There are a number of factors that impact factory location 

decisions, including cost factors, labor productivity, government stability, infrastructure, 

and supply chain factors among others.4

Statistical, mathematical, and empirical evidence for the hollowing out of the U.S. supply 

chain is somewhat unclear, as data challenges make it difficult to conduct thorough 

analyses of such issues.5 Many studies point to the increased value of imported supply 

chain goods and services; however, this does not create a complete image, as it does not 

provide a comparison to other nations. If other countries are importing their supply chain 

at a similar rate as the U.S., then, it might be that national economies are becoming more 

globally integrated rather than a trend where the U.S. is losing its manufacturing activity 

to its international competitors. 

Despite competition from abroad, the U.S. is still a major manufacturer. In 2010, the U.S. 

produced approximately 18 % of the world’s manufactured goods, and was the second 

largest manufacturing nation, down from being the largest in 2009, according to United 

Nations Statistics Division (UNSD) data. Although, while many products are assembled 

offshore, semiconductors and other components along with software are developed in the

U.S.

6 The manufacturing industry is indispensable to the U.S. economy, as it affects 

28 % of U.S. output;

7 however, numerous media articles and some industry experts have 

discussed the decline of U.S. manufacturing with many proposing that the U.S. has lost 

its competitive edge.8 There is also a concern that the hollowing out of domestic 

 1 Tassey Gregory. “Rationales and Mechanisms for Revitalizing U.S. Manufacturing R&D Strategies.” 

Journal of Technology Transfer. 35 (2010): 283-333. 2 Pisano, Gary P. and Willy C. Shih. Restoring American Competitiveness. Harvard Business Review. JulyAugust (2009). 3 Levinson, Marc. “Hollowing Out in U.S. Manufacturing: Analysis and Issues for Congress.” 

Congressional Research Service. 7-5700. R41712. ( 2013). 4 Bhatnagar, Rohit and Amrik S. Sohal. “Supply Chain Competitiveness: Measureing the Impact of 

Location Factors, Uncertainty and Manufacturing Practices.” Technovation. 25 (2005): 443-456. 5 Levinson, Marc. “Hollowing Out in U.S. Manufacturing: Analysis and Issues for Congress.” 

Congressional Research Service. 7-5700. R41712. ( 2013). 6 Duhigg, Charles and Keith Bradsher. “How the U.S. Lost out on iPhone Work.” New York Times. 

January 21, 2012. <http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middleclass.html?_r=4&pagewanted=all&> 7 OECD. (2013) StatExtracts. http://stats.oecd.org/Index.aspx. Accessed May 2013 8 Sirkin, Harold L. Made in the USA Still Means Something. Bloomberg Businessweek. 2009. 

http://www.businessweek.com/managing/content/apr2009/ca20090410_054122.htm. 
2

manufacturing may negatively affect industry growth potential. It has been suggested that 

knowledge supporting emerging technologies involves person-to-person contact for 

efficient transfer; therefore, co-location synergies are important.9 As supply chains are 

increasingly imported, this interaction can be diminished, resulting in a loss of research 

and development and the associated technological knowledge. Manufacturing accounts 

for a majority of research and development in the U.S. and the loss of this activity is 

likely to affect growth in both manufacturing and high-tech services. 

1.2 Purpose

The purpose of this report is to examine the extent that the U.S. supply chain is being 

relocated offshore. Specifically, it develops a quantitative depiction of the U.S. 

manufacturing supply chain in the context of international supply chains. The report 

analyzes the U.S. manufacturing supply chain and compares it to supply chains of its 

international counterparts such as trading partners and those countries that are often 

considered as competitors. 

1.3 Scope and Approach

Although national economies are commonly compared to companies competing for 

market share, this type of analogy provides limited insight and is, unfortunately, rather 

misleading.10, 11, 12, 13, 14 A national economy is the primary supplier of goods and 

services to its labor force while a single company, generally, is not the primary supplier 

of goods and services to its employees. Additionally, a national economy provides the 

income for the majority of the nation’s consumers while a business, generally, does not 

provide the income for the majority of its customers. Moreover, a national economy 

represents a system of exchange in which a company operates as one entity of that 

system. Companies can go out of business while nations do not. Domestic demand for 

goods and services constitutes a great proportion of the demand for a nation’s 

domestically-produced products whereas the demand for goods and services from a 

 9 Tassey Gregory. “Rationales and Mechanisms for Revitalizing U.S. Manufacturing R&D Strategies.” 

Journal of Technology Transfer. 35 (2010): 283-333. 10 Krugman, Paul R. “Making Sense of the Competitiveness Debate.” Oxford Review of Economic Policy. 

Vol 12, no. 3 (1996): 17-25. Paul Krugman won the 2008 Nobel Memorial Prize in Economic Sciences for 

his work on international trade and economic geography.

11 Krugman, Paul R. “Competitiveness, A Dangerous Obsession.” Foreign Affairs. Vol 73. Num 2. 

March/April (1994): 28-44. 12 The World Economic Forum defines competitiveness of a nation as “the set of institutions, policies, and 

factors that determine the level of productivity of a country.” This definition relates to productivity and is 

not consistent with the idea of countries competing for market share. World Economic Forum. The Global 

Competitiveness Report. 2010-2011. 

<http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf> 13 Porter, Michael E. The Competitive Advantage of Nations. 1st ed. (New York: The Free Press, 1990). 14 Porter asserts that competitiveness is measured by productivity and that measuring a country’s 

competitiveness as its share of world markets is “deeply flawed.” Porter, Michael E. “Building the 

Microeconomic Foundations of Prosperity: Findings from the Business Competitiveness Index.” In Porter, 

Michael E., Klaus Schwab, Xavier Sala-i-Martin, and Augusta Lopez-Claros. The Global Competitiveness 

Report 2003-2004. (New York: Oxford University Press, 2004).
3

company is primarily external. This realization has implications for developing an 

approach to examine the U.S. supply chain, as some approaches provide productive 

insight while others do not. For example, one might examine the temporal changes in the 

percent of U.S. supplier value added as a percent of global supplier value added (i.e., U.S. 

market share of the supply chain); however, the conclusions that can be drawn from this 

type of analysis are limited. In order for underdeveloped countries to become developed 

countries, their production and income will need to approach that of the developed world. 

This, inevitably, results in a decline in the proportion or market share that each developed 

country represents. 

In addition to countries being compared to companies, frequently, anecdotal observations 

are used to characterize the manufacturing industry;15 however, the insight from these 

types of observations is somewhat limited, as the manufacturing industry includes 

hundreds of thousands of establishments with millions of employees making trillions of 

dollars’ worth of goods. Anecdotal observations provide a limited narrow scope of the 

industry that does not necessarily reflect or apply to the industry as a whole; thus, this 

report will largely avoid using these types of comparisons and anecdotes as evidence for 

economic trends. This approach reduces the possibility of mischaracterizing the industry 

and provides an evidence-based depiction of the manufacturing industry and its 

subsectors. 

This report uses input-output data from the World Input-Output Database to track the 

intermediate goods and services used in national manufacturing industries. Specifically, it 

examines the extent that supply chains are imported and the extent that this trend has 

changed for the U.S. and other countries. The U.S. data is compared to 39 other countries

between 1995 and 2009, a 15 year period. Throughout the report there are discussions 

about imported goods and services. It is important to note that these are imports of 

intermediate goods and services used by the manufacturing industry and not the import of 

final goods and services for other industries or for end use.

 15 Greenwald, Bruce C.N. and Judd Kahn. Globalization: The Irrational Fear that Someone in China will 

Take Your Job. (Hoboken, NJ: John Wiley & Sons 2009). 
4
5

2 Manufacturing Value Chain

This analysis utilizes the World Input-Output Database (WIOD), which provides data for 

40 countries between 1995 and 2009. These countries represented approximately 88 % of 

manufacturing value added in 2009, according to United Nations data.16 The data covers 

35 industries categorized using the International Standards Industrial Classification 

(rev. 2) system (see Table 2.1).

17 Input-output data describes the sales and purchases of 

Table 2.1: World Input-Output Database Characteristics

Countries Covered Industries Covered

1 AUS Australia 1 Agriculture, Hunting, Forestry and Fishing

2 AUT Austria 2 Mining and Quarrying

3 BEL Belgium 3 Food, Beverages and Tobacco

4 BGR Bulgaria 4 Textiles and Textile Products

5 BRA Brazil 5 Leather, Leather and Footwear

6 CAN Canada 6 Wood and Products of Wood and Cork

7 CHN China 7 Pulp, Paper, Paper , Printing and Publishing

8 CYP Cyprus 8 Coke, Refined Petroleum and Nuclear Fuel

9 CZE Czech Republic 9 Chemicals and Chemical Products

10 DNK Denmark 10 Rubber and Plastics

11 ESP Spain 11 Other Non-Metallic Mineral

12 EST Estionia 12 Basic Metals and Fabricated Metal

13 FIN Finland 13 Machinery (not elsewhere classified)

14 FRA France 14 Electrical and Optical Equipment

15 GBR United Kingdom 15 Transport Equipment

16 DEU Germany 16 Manufacturing not elsewhere classified; Recycling

17 GRC Greece 17 Electricity, Gas and Water Supply

18 HUN Hungary 18 Construction

19 IDN Indonesia 19 Sale, Maintenance and Repair of Motor Vehicles and Motorcycles; Retail Sale of Fuel

20 IND India 20 Wholesale Trade and Commission Trade, Except of Motor Vehicles and Motorcycles

21 IRL Ireland 21 Retail Trade, Except of Motor Vehicles and Motorcycles; Repair of Household Goods

22 ITA Italy 22 Hotels and Restaurants

23 JPN Japan 23 Inland Transport

24 KOR Korea 24 Water Transport

25 LTU Lithuania 25 Air Transport

26 LUX Luxembourg 26 Other Supporting and Auxiliary Transport Activities; Activities of Travel Agencies

27 LVA Latvia 27 Post and Telecommunications

28 MEX Mexico 28 Financial Intermediation

29 MLT Malta 29 Real Estate Activities

30 NLD Netherlands 30 Renting of M&Eq and Other Business Activities

31 POL Poland 31 Public Admin and Defence; Compulsory Social Security

32 PRT Portugal 32 Education

33 ROU Romania 33 Health and Social Work

34 RUS Russia 34 Other Community, Social and Personal Services

35 SVK Slovak Republic 35 Private Households with Employed Persons

36 SVN Slovenia

37 SWE Sweden

38 TUR Turkey

39 TWN Taiwan

40 USA United States

 16 United Nations Statistics Division. “National Accounts Main Aggregates Database.” 

<http://unstats.un.org/unsd/snaama/Introduction.asp> 17 Timmer, Marcel. The World Input-Output Database (WIOD): Contents, Sources, and Methods. April 

2012, version 0.9. <http://www.wiod.org/publications/source_docs/WIOD_sources.pdf>
6

final and intermediate goods and services within an economy. The WIOD tracks 

intermediate goods and services by industry by country, making it possible to ascertain 

the proportion of each country’s manufacturing supply chain that is imported and to 

examine other relevant factors. It is important to note that the following analyses do not 

examine final goods and services imported into a nation, as it focuses on the suppliers to 

manufacturing.

For this examination, entities involved in the manufacturing supply chain are broken into 

six categories:

1. Domestic manufacturers

2. Foreign manufacturers

3. Domestic suppliers of manufactured goods

4. Domestic suppliers of non-manufactured goods and services

5. Foreign suppliers of manufactured goods

6. Foreign suppliers of non-manufactured goods and services

Examining the extent to which U.S. manufacturing is being hollowed out requires 

examining the extent that foreign suppliers (i.e., entities 5 and 6) to domestic 

manufacturing (i.e., entity 1) are replacing domestic suppliers (i.e., entities 3 and 4). 

Typically, value added is the best measure available for comparing the relative economic 

importance of manufacturing activities. The World Input-Output Database defines it as 

the compensation for labor and capital services.18 More generally, value added is the sum 

of compensation, gross operating surplus, and taxes. Input-output data is collected in 

terms of output; thus, value added is estimated from this data. In recent years there has 

been concern about the precision of some measures of value added over time. 

Particularly, there is concern about the use of chained dollars, as discussed by Atkinson.19

This report uses the producer price index when activity is traced over time, which avoids 

the issue regarding chained value added. When tracking manufacturing value added over 

time using the producer price index, it shows a decline of 9.8% between 2000 and 2009, 

which is consistent with Atkinson’s findings. Thus, the measurement problems of 

chained GDP are not an issue in the measurement of U.S. manufacturing value added in 

this study.

The value added for the U.S. manufacturing industry and its supply chain is presented in 

Figure 2.1. The values at the top, shown in red, represent value added that is imported to 

the U.S. for use by the manufacturing industry. The top value, shown in a lighter red, 

represents intermediate imported non-manufactured goods and services, such as raw 

materials from mining. The second one, shown in a darker red, represents intermediate 

imported manufactured goods used by the U.S. manufacturing industry. Domestic U.S. 

manufacturing activity is shown in three shades of blue. The light blue represents 

 18 Timmer, Marcel. The World Input-Output Database (WIOD): Contents, Sources, and Methods. April 

2012, version 0.9. <http://www.wiod.org/publications/source_docs/WIOD_sources.pdf>

19 Atkinson, Robert D., Luke A. Stewart, Scott M. Andes, and Stephen J. Ezell. “Worse than the Great 

Depression: What Experts are Missing about American Manufacturing Decline.” 

<http://www2.itif.org/2012-american-manufacturing-decline.pdf>
7

Figure 2.1: U.S. Manufacturing and Supply Chain Value Added

intermediate non-manufactured goods and services, such as agricultural products or 

finance products, produced in the U.S. and used by the U.S. manufacturing industry. The 

darker blue represents intermediate manufactured products used by the U.S. 

manufacturing industry; for example, a bolt used to assemble a car. The bottom value, 

shown in a dark blue, represents final products manufactured in the U.S. As can be seen 

in the figure, the imported values are a relatively small percentage of the total activity. 

Figure 2.2 presents the intermediate imported value added as a percent of U.S. 

manufactured final product valued added plus intermediate value added. That is, the 

figure presents intermediate imported value added used by a nation’s manufacturing 

industry as a percent of all value added associated with that nation’s manufacturing 

industry. For example, for the U.S. it would be the values shown in red from Figure 2.1

divided by all the values shown in red and blue in the figure and calculated for each year. 

For all products produced in a particular country, it represents the percent that does not 

originate from that country. In 2009, the U.S. imported 10.8 % of its supply chain, the 3rd

lowest percentage, meaning that in relation to other countries, the U.S. imports a smaller 

proportion of its supply chain for manufacturing. Between 1995 and 2009, the percentage 

of imported supply chain value added increased for 32 of the 40 countries examined and 

for the U.S. it increased by 1.96 percentage points. The average increase for the 32 

countries was 4.67 percentage points and the average change for all countries was an 

increase of 2.78 percentage points; thus, the U.S. percentage increase in supply chain 

imports is slightly below the average. China increased by 4.92 percentage points while 

0

500

1000

1500

2000

2500

3000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Foreign Intermediate Non-manufacturing 111 117 124 116 129 155 140 137 150 180 206 227 235 253 181

Foreign Intermediate Manufacturing 98 97 102 103 111 118 101 100 101 124 129 133 131 118 89

U.S. Intermediate Non-manufacturing 609 635 677 686 712 726 717 696 705 691 707 692 723 657 628

U.S. Intermediate Manufacturing 883 888 939 1009 1057 1034 971 1003 980 1003 988 981 945 820 860

U.S. Final Product 664 671 711 762 758 742 705 716 722 763 780 794 807 758 742 $Billion 2009
8

Japan increased by 4.59 percentage points. The U.S. peaked in 2008 at 14.2 % and ranked 

as the 6th lowest at that time.

Figure 2.3 presents intermediate imported value added as a percent of national 

manufacturing supply chain value added (i.e., intermediate value added). It represents the 

percent of the nation’s supply chain for manufacturing that is imported. For example, for 

the U.S. it would be the two values in red from Figure 2.1 divided by the sum of the two 

values shown in red and the values for the two lighter shades of blue. With a 2009 value 

of 15.4 % and ranking as the 4th lowest, the U.S. imports a smaller proportion of its 

supply chain compared to other countries; however, it is important to note that the size of 

an economy and its manufacturing industry correlate negatively with the proportion of its 

supply chain that is imported, as illustrated in Figure 2.4. Therefore, a country with a 

larger manufacturing industry and/or larger economy would be expected to import a 

smaller proportion of its supply chain. Figure 2.2 and Figure 2.3 confirm that the U.S. is 

among the lowest as would be expected of a large economy. Additionally, the U.S. 

proportion has not grown as fast as many other countries. Between 1995 and 2009, the 

U.S. percentage increased as did that for 33 other countries out of the 40 total. For the 34 

countries with increases, the average increase was 6.55 percentage points while the U.S.

increased by 3.07 percentage points. Germany, China, and India grew by 8.75, 7.24, and 

8.32 percentage points. The average change for all countries was an increase of 4.94 

percentage points; thus, the U.S. was slightly below average. Figure 2.5 presents data for 

1995 and 2009 imported intermediate manufacturing value added as a percent of national 

manufacturing supply chain value added (i.e., the two end points in Figure 2.3). Those 

countries that are above the dashed 45 degree line saw their percentage increase in value 

while those below it saw it decrease. Among those that decreased are Indonesia, Russia, 

Canada, Cyprus, Estonia, and Malta.

As discussed previously, hollowing out occurs when 1) intermediate goods and services 

for manufacturing are increasingly imported rather than produced domestically and 2) 

these imported goods result in the loss of other economic assets/activities. Figure 2.2 and 

Figure 2.3 confirm that foreign suppliers have replaced domestic suppliers in the U.S.; 

however, it does not confirm that these changes have resulted in a loss of other economic 

assets/activities. Therefore, increasingly imported intermediate goods and services

suggest that some hollowing out may be occurring, but it is not conclusive evidence. 

Alternatively, increases in imported intermediate goods may be the result of the

specialization in the production of goods, where resources are transferred from one sector 

to another. This trend could result in importing goods that are not within the area of 

specialization. 

It is important to note the difference between Figure 2.2 and Figure 2.3. The former

shows a nation’s supply chain in terms of the intermediate and final goods and services 

associated with manufactured products while the later shows it in terms of the 

intermediate goods and services. Distinguishing between an entity in a nation that 

supplies manufactured goods to that nation’s manufacturing industry from an entity that 

produces final goods is somewhat arbitrary. Typically, data is distinguished by 

establishment, which is a single physical location where manufacturing is conducted and 
9

Figure 2.2: Intermediate Imported Value Added for Manufacturing as a Percent of Final Product Value Added Plus all Intermediate Value Added RUS JPN USA IDN BRA AUS CHN GBR IND TUR ITA ROM ESP DEU FIN CAN CYP MEX LVA AUT DNK TWN KOR POL FRA GRC PRT EST SWE LUX SVN MLT NLD BGR LTU CZE BEL SVK HUN IRL

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

1995

1997

1999

2001

2003

2005

2007

2009
10

RUS

BRA

JPN

USA

IDN

AUS

IND

TUR

CHN

ITA

GBR

MEX

ROM

ESP

DEU

FRA

CAN

GRC

CYP

POL

DNK

LVA

AUT

PRT

FIN

KOR

SWE

EST

TWN

SVN

BGR

NLD

MLT

LTU

CZE

SVK

HUN

BEL

LUX

IRL

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1995

1997

1999

2001

2003

2005

2007

2009

Figure 2.3: Intermediate Imported Value Added for Manufacturing as a Percent of Intermediate Value Added
11

Figure 2.4: Intermediate Imported Value Added for Manufacturing as a Percent of Final Product Value Added Plus all Intermediate Value Added, 

1995-2009

Note: This figure presents data from Figure 2.2 combined with manufacturing value added for the corresponding country.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

0.5 5 50 500

Intermediate Imported Value Added for Manufacturing as a Percent 

of Final Product Value Added Plus all Intermediate Value Added

National Manufacturing Value Added ($Billions)

Other Countries

United States

Japan

China

Germany

United Kingdom

2009

Log Trendline
12

should not be confused with an enterprise or company; thus, it is somewhat arbitrary 

whether a company produces all of a product in one location or in two locations with one 

location being a supplier to the other.

Figure 2.2 shows that intermediate imported value added as a percent of final product 

value added plus intermediate value added in the U.S. increased from 8.8 % in 1995 to a 

peak of 14.2 % in 2008, a 61 % increase in the percentage; however, it still remains well 

below that of many other nations. Figure 2.3 shows that the U.S. supply chain is 

increasingly relying on imports; however, it still remains a smaller proportion than many 

other countries. 

U.S. final product value added grew by 21.6 % between 1995 and the peak of final 

product value added in 2007, as seen in Figure 2.1. Meanwhile, domestically produced 

supply chain value added increased 11.8 %. During the same period, foreign-produced 

supply chain value added grew 74.7 %. It is important to note that foreign activity may be 

replacing both domestic supply chains and manufacturing activity itself, as there is a 

trend where manufacturing activities are being unbundled into other industries. For 

instance, at one time a company might have had its own staff to handle tax preparations, 

whereas today, it might outsource these activities to a company that specializes in tax 

preparation. This causes activities previously categorized as part of the manufacturing 

industry to be categorized under a different industry. As can be seen in

Figure 2.6, the ratio of the supply chain of non-manufacturing value added to 

Figure 2.5: Percent of the Manufacturing Supply Chain that is Imported

0%

10%

20%

30%

40%

50%

60%

0% 10% 20% 30% 40% 50% 60%

2009

1995

China

Germany

United States

Canada

Japan

Ireland

Taiwan
13

Figure 2.6: Ratio of the Supply Chain of Non-Manufacturing Value Added to Manufacturing Value 

Added

manufacturing value added increased for a number of countries and the average increased 

from 0.49 to 0.58.

One concern with the hollowing out of U.S. manufacturing is that high-tech activities 

involving research and development may be moved offshore. Figure 2.7 and Figure 2.8

present the manufacturing supply chain imports in 2009 as a percent of national 

manufacturing value added and intermediate value added.20 As seen in Figure 2.7 and 

Figure 2.8, the highest values for U.S. imports is 44 % for agriculture and mining with 

the next highest being 21 % for transportation. In all cases, the U.S. was below the 

average. For instance, of the rental, computer services, and R&D used by the U.S. 

manufacturing industry, 13 % of it is imported from other countries and is the second 

lowest. This value is consistent with the fact that the U.S. is among the top science and 

technology innovators.21 The percent imported for rental, computer services, and R&D

used by the U.S. manufacturing industry increased from 11 % in 1995 to 13 % in 2009, as 

seen in Figure 2.9. While this value increased for the U.S., it decreased for 21 of the 40 

countries examined. For the average of all countries, it decreased by 2.0 % while the U.S. 

increased by 2.1 %. The correlation coefficient between the change in the percent of the 

supply chain that is imported (i.e., data from Figure 2.5) and the percent of the supply 

chain that is imported for rentals, computer services, and R&D (i.e. from Figure 2.9) is 

 20 Other things being equal, lower values are considered to be favorable to higher values. 21 Thomas, Douglas. The Current State and Recent Trends of the U.S. Manufacturing Industry. NIST

Special Publication 1142. National Institute of Standards and Technology. 2012. 

<http://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.1142.pdf>

0.00

0.20

0.40

0.60

0.80

1.00

1.20

0.00 0.20 0.40 0.60 0.80 1.00 1.20

2009

1995

United States

Japan China

Ireland

Mexico

Germany

France

Average
14

0.39. Thus, as manufacturing supply chains are increasingly imported, there is a tendency 

for the proportion of rentals, computer services, and R&D imported to increase. 

However, the correlation is weak, suggesting that it is either not a major factor or that 

there are other factors that play a role.
15

12%

13%

14%

15%

16%

16%

21%

22%

23%

24%

24%

25%

25%

27%

27%

28%

28%

28%

29%

30%

30%

31%

33%

33%

33%

36%

37%

37%

40%

40%

40%

42%

42%

43%

45%

48%

49%

49%

50%

51%

RUS

BRA

JPN

USA

IDN

AUS

IND

TUR

CHN

ITA

GBR

MEX

ROM

ESP

DEU

FRA

CAN

GRC

CYP

POL

DNK

LVA

AUT

PRT

FIN

KOR

SWE

EST

TWN

SVN

BGR

NLD

MLT

LTU

CZE

SVK

HUN

BEL

LUX

IRL

Manufacturing

Figure 2.7: Percent of Manufacturing Supply Chain that is Imported, by Industry Categories (2009)

14%

15%

19%

20%

22%

27%

28%

34%

39%

41%

41%

44%

51%

52%

53%

57%

59%

60%

60%

60%

60%

61%

62%

63%

65%

65%

66%

70%

70%

71%

72%

74%

74%

78%

78%

79%

80%

87%

90%

94%

IDN

RUS

BRA

MEX

AUS

CHN

IND

TUR

CAN

POL

ROM

USA

DNK

GBR

CYP

EST

LVA

FIN

ESP

HUN

CZE

JPN

FRA

BGR

PRT

AUT

SWE

KOR

ITA

MLT

SVK

IRL

SVN

TWN

DEU

GRC

NLD

LTU

LUX

BEL

Agriculture and 

Mining

10%

14%

14%

16%

19%

19%

20%

21%

23%

24%

26%

28%

28%

30%

31%

31%

32%

33%

34%

35%

36%

36%

37%

38%

39%

40%

44%

46%

46%

48%

48%

49%

53%

53%

56%

56%

56%

65%

70%

72%

RUS

BRA

JPN

USA

IND

CHN

AUS

IDN

ESP

GRC

ITA

ROM

TUR

GBR

POL

BGR

LVA

CYP

FRA

CAN

EST

DEU

LTU

PRT

FIN

MEX

DNK

KOR

SVK

CZE

AUT

SWE

SVN

NLD

MLT

TWN

HUN

LUX

BEL

IRL

Utilities

8%

8%

9%

13%

14%

14%

17%

18%

19%

20%

22%

22%

23%

25%

28%

29%

30%

30%

31%

33%

33%

33%

34%

35%

35%

36%

36%

36%

36%

38%

41%

50%

51%

54%

55%

59%

61%

63%

71%

75%

IND

AUS

JPN

ESP

USA

ITA

BGR

BRA

IDN

CYP

LVA

AUT

POL

PRT

FRA

SVK

ROM

GBR

SWE

EST

SVN

DNK

FIN

DEU

NLD

GRC

RUS

CZE

LTU

CAN

BEL

TWN

MEX

LUX

MLT

HUN

TUR

KOR

IRL

CHN

Construction

Category ISIC Codes

Agriculture and Mining 1, 2, 5, 10-14

Utilities 64, 40, 41

Construction 45

High-Tech Manufacturing 30, 31, 32, 33

Manufacturing 15-37

Retail and Wholesale Trade 50-52, 55

Transportation 60-63

Real Estate, Finance, and Social Services 65-67, 70, 80, 85, 90-93

Rentals, Computer Services, R&D 71-74

Other 75, 95
16

Figure 2.8: Percent of Manufacturing Supply Chain that is Imported, by Industry Categories (2009)

4%

7%

15%

18%

20%

20%

21%

22%

26%

31%

31%

32%

35%

37%

40%

41%

41%

43%

44%

45%

50%

54%

55%

55%

56%

57%

58%

60%

64%

71%

73%

74%

74%

82%

83%

85%

89%

90%

96%

100%

RUS

USA

ESP

BRA

JPN

FIN

AUS

PRT

DEU

FRA

POL

SWE

TWN

CAN

MLT

IND

GBR

NLD

BGR

DNK

HUN

BEL

SVN

CYP

EST

GRC

AUT

CZE

KOR

SVK

ITA

IDN

IRL

LVA

TUR

CHN

MEX

LTU

LUX

ROM

Other

13%

13%

16%

20%

21%

22%

25%

25%

26%

29%

35%

38%

38%

38%

42%

42%

43%

43%

44%

45%

46%

47%

48%

49%

49%

49%

51%

52%

55%

56%

58%

59%

63%

65%

66%

67%

68%

77%

88%

100%

JPN

USA

AUS

FRA

DEU

BRA

CYP

RUS

ITA

GBR

TUR

LVA

MEX

ESP

GRC

CAN

KOR

DNK

IND

PRT

EST

SWE

ROM

POL

AUT

SVN

BEL

CHN

NLD

FIN

SVK

LTU

TWN

HUN

CZE

BGR

MLT

LUX

IRL

IDN

Rentals, Computer 

Services, R&D

13%

14%

16%

17%

18%

21%

24%

24%

24%

25%

26%

26%

27%

28%

28%

31%

33%

33%

33%

33%

33%

34%

35%

39%

40%

41%

43%

43%

43%

44%

44%

48%

51%

53%

55%

57%

62%

64%

71%

80%

JPN

BRA

USA

AUS

IND

ITA

FRA

CHN

ESP

RUS

TUR

DEU

GRC

LVA

TWN

IDN

CYP

MEX

BGR

DNK

GBR

CAN

PRT

ROM

EST

FIN

AUT

POL

SWE

KOR

LTU

SVN

NLD

HUN

BEL

MLT

CZE

SVK

LUX

IRL

Finance and 

Social Services

15%

15%

17%

17%

18%

21%

26%

27%

28%

28%

28%

32%

35%

35%

38%

40%

41%

41%

41%

46%

48%

49%

50%

51%

54%

57%

57%

59%

61%

62%

62%

64%

64%

68%

68%

71%

77%

79%

83%

89%

IND

TUR

BRA

RUS

JPN

USA

ITA

AUS

MEX

ESP

CHN

GBR

CAN

FRA

FIN

DEU

EST

IDN

ROM

LVA

CZE

KOR

SWE

POL

PRT

BGR

BEL

SVK

SVN

DNK

NLD

TWN

LTU

HUN

AUT

IRL

MLT

CYP

GRC

LUX

Transportation

8%

10%

11%

12%

16%

16%

18%

18%

19%

20%

20%

20%

22%

22%

23%

24%

25%

26%

26%

27%

28%

29%

29%

29%

30%

32%

32%

34%

36%

37%

38%

39%

40%

40%

44%

50%

52%

52%

56%

75%

RUS

BRA

JPN

IND

AUS

USA

TUR

CAN

TWN

IDN

MEX

POL

ESP

ITA

GBR

FRA

CYP

GRC

DNK

PRT

LVA

CHN

NLD

DEU

AUT

EST

SWE

FIN

ROM

SVN

BEL

LUX

SVK

CZE

KOR

LTU

BGR

MLT

HUN

IRL

Retail and 

Wholesale Trade
17

Figure 2.9: Percent of the Manufacturing Supply Chain that is Imported, 1995-2009 (Rentals, 

Computer Services, R&D)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 20% 40% 60% 80% 100%

2009

1995

United States

China

Canada Germany

Japan

Mexico

Ireland
18
19

3 Conclusion

This analysis utilized the World Input-Output Database (WIOD), which provides data for 

35 industries spanning 40 countries between 1995 and 2009. These countries represented 

approximately 88 % of manufacturing value added in 2009, according to United Nations 

data. In terms of 2009 imported supply chain value added used by a nation’s 

manufacturing industry as a percent of all value added associated with that nation’s 

manufacturing industry, the U.S. imported 10.8 % of its supply chain, the 3rd lowest 

percentage, meaning that in relation to other countries the U.S. imports a smaller

proportion of its supply chain for manufacturing. Between 1995 and 2009, the percentage 

of imported supply chain value added increased for 32 of the 40 countries examined and 

for the U.S. it increased by 1.96 percentage points. The average increase for the 32 

countries was 4.67 percentage points and the average change for all countries was an 

increase of 2.78 points; thus, the U.S. percentage increase in supply chain imports is 

slightly below the average. China increased by 4.92 percentage points while Japan 

increased by 4.59. The U.S. peaked in 2008 at 14.2 % and ranked as the 6th lowest at that 

time. As a share of the supply chain, the U.S. imported 15.4 % of its supply chain and 

ranked as the 4th lowest; thus, the U.S. imports a smaller proportion of its supply chain

compared to other countries. Between 1995 and 2009, the U.S. percentage increased as 

did 33 other countries out of the 40 total. For the 34 countries with increases, the average

increase was 6.55 percentage points while the U.S. increased by 3.07 percentage points. 

Germany, China, and India grew by 8.75, 7.24, and 8.32 percentage points. The average 

change for all countries was an increase of 4.94 percentage points; thus, the U.S. 

percentage increase in supply chain imports was slightly below the average. These 

figures confirm that foreign suppliers have replaced some domestic suppliers in the U.S., 

suggesting that some hollowing may be occurring; however, the increase may also be the 

result of the specialization in the production of goods. 

U.S. final product value added grew by 21.6 % between 1995 and the peak of final 

product value added in 2007. Meanwhile, domestically produced supply chain value 

added increased 11.8 %. During the same period, foreign-produced supply chain value 

added grew 74.7 %. It is important to note that foreign activity may be replacing both 

domestic supply chains and manufacturing activity itself, as there is a trend where 

manufacturing activities are being unbundled into other industries.
20
21

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