Clearly the great challenge foremost on everyone’s mind right now is the global financial crisis. Nobody is immune to financial uncertainty, shaken public confidence and drying-up of credit.
The job for American manufacturers is to keep doing what we do best: creating wealth, making products that strengthen our economy and enhancing the quality of people’s lives. In fact, the financial crisis may elevate manufacturing’s importance even higher around the world. Financial engineering is falling into disfavor. But mechanical, electrical and industrial engineering may be coming back – the engineering that designs and make products that historically have been responsible for creating substantial wealth and good jobs all around the world.
The U.S. manufacturing sector remains the most productive in the world, creating $1.6 trillion in wealth this year. It is the strongest arm of our economy, generating $85 billion per month in exports – a figure that could be a lot more.
We cannot go it alone. The U.S. has 305 million people, while the world has 6.7 billion people. Ninety-five percent of the world consumers as well as the fastest growing populations and markets lie outside our borders.
Trade agreements are a sure-fire way to increase our exports and open new markets. In fact, we have a trade surplus in manufactured goods with our 14 free trade agreement partners. That’s right: free trade agreements, which have been blamed for job losses are in actuality agreements that have cut our global trade deficit.
And we need to recognize that nearly every other major country in the world is convinced the path to growth, prosperity, and jobs is through market liberalization, trade and open investment, not protectionism and building walls around one’s country. All our major economic partners – the European Union, Japan, China, Korea, India and certainly our NAFTA partners in Canada and Mexico – are not waiting for the U.S. They are all marching forward aggressively to negotiate and implement more trade agreements that will, unfortunately, increasingly put U.S. manufacturers and exporters at a disadvantage in key fast-growing markets.
NOT CHINA, BUT THE EU
Many people today seem to think the manufacturing and trade world now rotates around China, and of course China is important. With its aggressive commitment to expanding its manufacturing sector, and awesome population of more than 1.3 billion, China looms large.
But the European Union, with its 27 countries, is the largest market for the United States – 21 percent of our global exports and our largest supplier – and 18 percent of our global imports. And in terms of the dollar value of exports it is growing considerably faster than China. Our exports to the EU increased by over $32 billion last year, whereas our exports to China increased by only $10 billion.
In a world where capital may be less available and profit margins are smaller, we should pursue strategies that reduce the cost of capital, the cost of trade and the cost of the product. An agreement between the United States and the EU could do just that and could be advantageous in other key areas.
On the environmental front, admittedly, trying to predict the future of EU and U.S. laws and regulations is difficult. But if carbon falls under a consistent regulatory regime, then we certainly need transparency and accountability on the carbon content of products.
The implementation and enforcement of safety standards could be coordinated, reducing costs and improving the safe use of consumer products – including vehicles.
Testing of products would also benefit from harmonization. I think we should do all we can to reduce the duplicative testing of pharmaceuticals and other lifesaving products.
Border security is another area in which there is already a lot of cooperation and coordination, but where more can be done – especially consistent and intelligent monitoring of cargo facilities and ports as well as aggressive, risk-based enforcement, targeted on the riskier shipments. The threat of terrorism is real and it is global, but that response must be in cooperation with our economic and political partners around the world and also must reflect the reality of today’s global economy.
Two powerful trading blocks like the EU and the U.S. coming together could also mean a reassertion of a pro-trade philosophy in the political sphere and, with an open architecture, could encourage other nations to seek to participate in the liberalized U.S.-EU trade area.
We at the NAM will be working with our members and with partner organizations in Europe to study carefully the potential for negotiation of a comprehensive U.S.-EU Free Trade Agreement. Certainly, it would not be easy or without controversy. Agricultural issues and many others pose significant hurdles. We all need to review the whole issue very carefully. But I certainly am optimistic that we at the NAM, our partners at Business Europe and the business communities on both sides of the Atlantic can explore the pluses and minuses. If we agree the step is worth taking, we can help move our respective governments into action on a comprehensive, Gold-
Standard Transatlantic FTA.
Ultimately, for every step backward on manufacturing and global competitiveness, we can and must take at least two steps forward. We must not let a financial crisis frighten us into inaction on issues like trade, education and innovation. We must find what benefit we can in, including a renewed appreciation of manufacturing’s role in providing prosperity to our citizens.
At the NAM, we have a slogan: “We are the people who make things.” That’s more important now than ever. But we don’t do it alone, and we don’t do it without suppliers and customers all over the globe. So the coming year will bring with it serious challenges for all of us – whether politically with a new President and new Congress in Washington – or the continued fallout of the financial crisis.
John Engler is president of the National Association of Manufacturers, whose mission is to enhance the competitiveness of manufacturers by shaping a legislative and regulatory environment conducive to U.S. economic growth and to increase understanding among policymakers, the media and the general public about the vital role of manufacturing to America’s economic future and living standards. Visit: www.nam.org.