You got it half right. US Manufacturing in 2006 added more $ to US GDP than ever before. The labor content of US Mfg has been continually declining. US Mfg has been damaged by unfair competition but mostly by bad policies and regulations as well as idiot tax strategies.
You got it half right...manufacturing has been damaged mostly by very bad free trade policies and to a lesser extent excessive regulation- we could never have the level of deregulation that China enjoys unless you want the US to become a cesspool in terms of pollution and use child labor as well as slave labor. American companies can not compete against bowl of rice type wages,slave labor, child labor, no environmental regulations and of course the trade barriers erected by all of our trading partners except Canada. the bottom line is that the loss of manufacturing is very bad for this country...how long can we keep borrowing from China because of the trade imbalance? This has national security implications as well as societal implications (socialism).