There is no reason to resign ourselves to defeat or to sugarcoat the challenges we face. We possess the tools, talent, and resources to revive manufacturing. But to do so we need a national strategy for manufacturing renewal.
This year, the Information Technology & Innovation Foundation (ITIF) released a report titled "The Case for a National Manufacturing Strategy". The report, a two-part PDF complete with graphs, charts and solutions, highlights a tiered approach, beginning with the philosophical understanding of manufacturing need and ending with the reformation of tax, regulatory and investment incentives, to achieving greater self-sufficiency and international competition for the United States. An event was held to release the study.
Examples of growth and prosperity resulting from manufacturing incentives are beginning to pop up. The Alliance for American Manufacturing reported last week in "New Continental Tire Plant Demonstrates Why Enforcing Trade Laws Works" that a new tire plant "will help cover rising tire demand in North America" and is a direct result of policy President Obama implemented in 2009.
Below, some excerpts from the ITIF report, which you can download in its entirety HERE.
Until there is a consensus that manufacturing is important, that it is not healthy, and that a national manufacturing policy is needed, it will be difficult to create a platform for reframing the conversation. Meanwhile, other nations are putting in place manufacturing strategies that include key components such as tax incentives and large investments in research, skills development, infrastructure, and technology transfer and technical assistance. Every day we do nothing we risk falling further behind...
To call for a U.S. manufacturing strategy is not to call for the same kind of sectoral or occupational composition in manufacturing that the United States had twenty or fifty years ago. It’s not to nostalgically wish for the re-creation of all the lost jobs from factories employing low-skill workers and producing commoditized products. Obviously the profile of manufacturing evolves over time, just as the U.S. economy evolves. Rather, it’s a call to restore U.S. manufacturing to a competitive position in the global economy, even though the industries and jobs will look very different than they did a generation ago.
Moreover, to call for a national manufacturing strategy is not to call for a de facto, heavy-handed industrial policy that “picks winners and losers” (for example, by picking Duracell to be the nation’s lithium-ion battery champion). Rather, we mean a process of designing our nation’s tax, regulatory, and innovation policy environments to make the United States the world’s most attractive location for advanced manufacturing (including both domestic and foreign direct investment).
The Brookings Institution’s Howard Wial has examined export growth rates for services, non-manufactured goods, and manufactured products (or combinations thereof) that would be required to balance the U.S. trade deficit over the next decade. He finds that to balance the trade deficit through increased services exports alone would require them to grow at an annual compound rate of 13.5 percent over the next decade, whereas their annual growth rate from 2001-2010 was 7.9 percent. To balance trade through increases in non-manufactured goods exports would require them to grow at a 23.7 percent rate over the next decade, whereas they grew at a 11.1 percent rate over the past decade. However, to balance trade by 2019 with only manufacturing exports, they would have to grow at a compound annual growth rate of 9.4 percent, compared to their growth rate of 6 percent over the prior decade. In other words, manufacturing has a “shorter road to hoe” in terms of the increase in exports required of it to balance the trade deficit.
Moreover, even if the U.S.’s services surplus grew 10 percent every year (a highly unlikely scenario) it would take fifteen years before it would equal the amount of the goods trade deficit in 2010, whereas that gap could be closed in just two and a half years if both exports of goods and services increased at a 10 percent annualized rate. Thus increases in services and non-manufactured goods exports will be necessary but not sufficient; to balance its trade the United States must have a robust manufacturing sector.
