A Comparative Time-Series Investigation of China and U.S. Manufacturing Industries’ Global Supply-Chain-Linked Economic, Mid and End-Point Environmental Impacts

Abstract

Manufacturing activities of China and the U.S. account for a substantial portion of the global manufacturing output and environmental sustainability impacts. The two countries’ economies account for one third of the global economic output. Their supply chains are critically linked with and serve most of the production and service industries across the globe. Recent global trends in manufacturing necessitate a study that comparatively analyzes the two countries’ manufacturing industries from an economic and environmental perspective. In this paper, U.S. and China manufacturing industries were investigated to analyze the economic and mid and endpoint environmental impacts over a 20-year study period. The literature is abundant with single period and single country focused works, and this study contributes to the state-of-art by extending the temporal dimension to 20 years and spatial focus to the global economy (40 countries and rest of the world). In terms of the methodology, Multi-region input-output (MRIO) models were built using the World Input-Output Database (WIOD) as the primary database, global input-output tables, environmental impact and economic output multipliers, and manufacturing industries’ final demand. Twenty MRIO models, each comprised of 40 major economies and the rest of the world (ROW), were built to cover the global trade linkages, which yielded the global supply chain linked cradle-to-gate life cycle inventory (LCI) of economic outputs and environmental impacts. The environmental LCI was extended to midpoint (Global Warming Potential (GWP) and Ozone Depletion Potential (ODP)) and endpoint (human health and ecosystem) impact dimensions by ReCipe framework. Lastly, the relative impact of a unit change in Leontief inverse, final demand and Green House Gas (GHG) emission multipliers on the total economic output and environmental impacts were explored with structural decomposition analysis (SDA). Results indicated that both countries’ manufacturing industries experienced positive economic output growth, in which China was more dominant in recent years. Both countries’ manufacturing industries’ midpoint and endpoint impacts were found to be steeply rising despite the negative growth observed in emissions intensities. The amount of GHG emissions and related midpoint (global warming and ozone depletion) and endpoint (damage to ecosystems and human life) impacts seemed to be quickly worsening in China compared to the USA.