Author Samuel L. Clemens (Mark Twain) once remarked, "reports of my death are greatly exaggerated." The same can be said for American manufacturing. Despite losing almost 3 million jobs over the past 3 years, manufacturing is still alive.
A landmark report recently released by the U.S. Department of Commerce (Washington, DC) addresses numerous challenges that have plagued domestic manufacturers. Several days before President Bush delivered his fourth State of the Union address, he unveiled a major initiative aimed at restoring luster to American manufacturing. The state of manufacturing report outlines an ambitious game plan.
However, some critics believe it's too little too late. They suggest that it's just a ploy to generate key votes for Republicans during the upcoming election. Ironically, on the same day that the report was released, Electrolux AB (Stockholm, Sweden) announced that it is closing its refrigerator factory in Greenville, MI. More than 2,000 assembly jobs will be relocated to a new plant the company plans to build in Mexico.
The much-anticipated Bush administration manufacturing report was unveiled in mid-January by Commerce Secretary Donald Evans. It serves as a blueprint for helping American manufacturers expand their business, create new jobs and spur economic growth.
Happy Days Here Again?
"President Bush is dedicated to growing the manufacturing industry and creating new jobs," says Evans. "This is our strategy to remove the barriers that are holding back American manufacturers and costing jobs. This report is a single step in an ongoing process: Ensuring that American companies are competitive in every part of the world."
The Manufacturing in America report includes recommendations that will:
• Establish a President's Manufacturing Council that will implement the recommendations in the manufacturing report. An advisory group of executives from various types and sizes of companies will provide input on the unique needs of the manufacturing sector. Evans will chair the council and Grant Aldonas, undersecretary for the International Trade Administration, will be the executive director. Aldonas also will serve in an interim capacity as point man for manufacturers until Congress passes legislation to create and fund the position of assistant secretary of manufacturing and services.
• Create the Office of Industry Analysis to gather data to help lawmakers understand the impact of government decisions on the manufacturing sector's ability to compete.
• Call on the Treasury Department to lead a tax simplification study addressing such issues as depreciation, the corporate alternative minimum tax and the cost of complying with corporate tax laws.
• Improve coordination of more than $15 billion in economic development programs to help address the challenges facing distressed communities that depend on manufacturing. Coordination of these funds will help workers and their families weather tough times during a downturn in manufacturing.
• Ask the Office of Management and Budget to lead a comprehensive regulatory review (assisted by the Office of Industry Analysis) to inventory existing regulations, evaluate proposed reforms and then implement those reforms on a priority basis.
Grassroots Input
The recommendations are based on input from more than 20 regional roundtables held last year by the Commerce Department to identify the challenges facing manufacturers. The roundtables included small, medium and large companies from a broad range of industries, including automotive, aerospace, medical devices, electronics and consumer products. Leading manufacturers such as Boeing, DaimlerChrysler, Delphi, Ford, General Motors, IBM, Illinois Tool Works, Medtronic, 3M, Northrop Grumman, Pratt & Whitney, Solectron, Toyota and TRW were represented.
"This is the first time in modern history that an administration has made manufacturing in America a top national priority," claims Jerry Jasinowski, president of the National Association of Manufacturers (NAM, Washington, DC). "The Bush administration has broken new ground acknowledging that manufacturing is vital to the nation's economy. [They] have backed up their commitment with specific policy recommendations and organizational changes."
The report provides an overview of the domestic and international economic environment facing American manufacturing and highlights the views of manufacturers regarding the challenges they face. It also outlines policy recommendations to help ensure that government is doing all it can to create the conditions that will allow U.S. manufacturers to maximize their competitiveness and spur economic growth.
Today's Challenges
Manufacturing executives participating in the roundtables identified six key areas that require immediate attention:
• Manufacturers perceive a lack of focus within government on manufacturing and its competitiveness. They are looking for a commitment to understanding the unique challenges that the manufacturing sector faces in competing in a rapidly globalizing economy. Roundtable participants want government to take the steps needed to foster the manufacturing sector's ability to adjust to the new competitive reality.
• Manufacturers want the government to focus on encouraging stronger economic growth both at home and abroad. Most roundtable participants understand that the recent recession was led by a sharp drop in business investment and that both monetary policy and fiscal policy have worked to set the economy on the route to recovery. But, there are still steps that manufacturers feel are necessary to encourage business investment, and to reinforce the recovery under way in the economy as a whole and in the manufacturing sector in particular.
• Manufacturers want the government to match the effort that they have made in controlling costs. As manufacturers have focused on reducing costs to improve productivity and ensure their competitiveness, they often find their efforts eroded by costs they cannot control-costs that result in part from government policy. Manufacturers seek a commitment from the government to reduce these costs and, in the process, create an economic environment that is attractive to investment in manufacturing within the United States.
• Manufacturers believe that enhancing America's technological leadership is critical to their future. There is widespread recognition that the United States remains the world's leader for investment in R&D, and that investments in technology have paid significant dividends in current manufacturing competitiveness. Manufacturers also acknowledge that technology is now more widely diffused throughout the world economy and that this trend risks eroding the principal competitive advantage of the United States. They want the government to encourage the process of bringing innovations to the marketplace.
• Manufacturers regard education as crucial. They are extremely interested in addressing the shortcomings of the U.S. educational system. According to the roundtable participants, the future success of manufacturing relies on individuals entering the workforce with greater problem-solving abilities. These workers must continually sharpen their skills through lifelong learning. In addition, manufacturers are concerned that the United States risks losing an innovation infrastructure if the nation fails to produce enough scientists and engineers. Manufacturers seek a renewed emphasis from all levels of government to invest in educational programs and training institutions.
• Manufacturers want international trade and monetary policies that ensure that global competition is free, open and fair. In particular, most manufacturers point a finger at China. American manufacturers don't want protection from competition; they want the ability to compete on equal terms. They strongly support leveling the playing field internationally by lowering barriers to trade and eliminating efforts by foreign governments to confer unfair competitive advantages for their manufacturers.
Encouraging News
The 88-page Manufacturing in America report recommends specific steps that should be taken to reduce the external costs imposed upon U.S. manufacturers far in excess of China, Mexico, South Korea, Taiwan and other major trading partners.
"This report is comprehensive and is a launching point for addressing the domestic and international challenges that have had such a negative impact on U.S. manufacturers and their workers," says NAM's Jasinowski. "The primary cost factors are regulations, excessive litigation, taxes, health care and rising energy costs. Recent movement of the dollar back toward its 30-year average is already removing one of the biggest impediments to U.S. competitiveness."
Jasinowski claims that manufacturing has begun a cyclical recovery stemming largely from the Bush administration's tax cuts and from continued low interest rates. "The task now is to address the long-term structural challenges to manufacturing and its workers, and that is what this unprecedented report is all about," he explains.
According to Thomas Duesterberg, president of the Manufacturers Alliance/MAPI (Arlington, VA), the report's analysis of the internal and external challenges facing manufacturing is "very realistic. The report successfully avoids any suggestion of a federal industrial policy and instead offers a series of effective remedies for the problems that affect manufacturing.
"We are especially pleased with the emphasis on helping bring under control the cost pressures-from excess litigation, high taxes on capital, rising health care costs, command-and-control regulation, and rising energy prices-which handicap U.S. producers in comparison to major foreign competitors," adds Duesterberg. "Its emphasis on expanding overseas markets for U.S. goods and addressing the problem of currency manipulation in Asia are key elements of a successful manufacturing strategy."
"This report should be seen as a first step, and we strongly welcome it," adds Jasinowski. "What we need to do now is convert the report into real world action. As we move ahead, [we] will seek an early emphasis on dealing with two of the principal issues raised by small- and medium-sized manufacturers-the special challenge of China and expanding and improving the manufacturing extension partnerships."
However, Jasinowski warns that the report is "the beginning of a process, not the end. [We have to] continue to pursue policies that will help keep American manufacturing ahead of the global curve. We have the best workers in the world, and when they're given a fair chance to compete, there's little doubt they'll succeed."
