June 26, 2010 Strategy for Competitiveness

Volume 13 | Issue 3

NAM’S plan: maintaining U.S. manufacturing’s preeminence.

Manufacturing made America. The 17th- and 18th century mills and factories – and their talented craftsmen – forged distant East Coast colonial settlements into a single nation. Later, the 19th century’s Industrial Revolution established the United States as a global economic power. In the 20th century, manufacturing stood strong as the Arsenal of Democracy, and technological progress created unprecedented prosperity and opportunity.

Today, the United States is the leading global manufacturing economy: It produces 21 percent of the world’s manufacturing output. Comparatively, Japan and China only produce 13 percent and 12 percent, respectively. Yet U.S. manufacturers now face the toughest global competition they ever witnessed. China’s entire economic program is based on the export of manufactured goods, and the rising industrial powers of India and Brazil define their national success through their burgeoning manufacturing sectors. Elsewhere across the globe (Asia, Europe, South America, Canada, Australia) nations negotiate trade agreements that expand their markets to the disadvantage of U.S.-based manufacturers.

Response is disheartening. Some have given up (“We just don’t make things anymore,” they say). Others react passively, as if our past greatness entitles the United States to remain the world’s most powerful manufacturing force. Meanwhile, too many elected officials propose new laws, regulations and taxes as short-term economic and political tactics, acting upon the mistaken belief that industry is strong enough to shoulder government-demanded burdens. To others, only the “right” kind of manufacturing warrants attention.

A MODEST PROPOSAL
These views drag down U.S. manufacturing even as international competitors rev up their efforts. The issue needs immediate addressing. Consider: The U.S manufacturing sector surrendered more than two million jobs during the Great Recession. Will an uncompetitive America regain these jobs?

We need to adopt a new approach to regain and sustain manufacturing competitiveness. The government needs to collaborate with business, and the strategy must include policies and legislation that not only supports manufacturing jobs and investments but also recognizes the global challenge that lies ahead. We can’t take our previous manufacturing pre-eminence for granted. It’s a new world, and we’d be naïve to believe that America can “protect” its industry into success or assume that manufacturing pre-eminence is our birthright.

KNOWING WHO TO HEED
Both politicians and the public seem increasingly receptive to the message. Indeed, the National Association of Manufacturers (NAM) is not alone in calling for a national strategy to strengthen U.S. manufacturing and, in turn, its competitiveness. More and more, business executives, elected officials and opinion leaders recognize that the United States must engage more aggressively – and more intelligently – in the global economy.

In a late-June speech at the National Press Club, Ivan Seidenberg, chairman and chief executive officer of Verizon and chairman of the Business Roundtable, expressed executives’ frustrations with the Obama Administration’s policies and outlined a five-point plan designed to reinvigorate U.S. economic growth and create private-sector jobs. Competitiveness was a major theme.

Almost simultaneously, the Council on Competitiveness launched its own initiative to enhance U.S. competitiveness through the manufacturing sector. The strategy draws together chief executives from industry, academia, national laboratories and organized labor. Coinciding with the initiative was the Council’s release of the Global Manufacturing Competitiveness Index. Produced by Deloitte, the professional services group, the index quantified the growing competitive challenges, and it also included some startling conclusions. For instance, Brazil should overtake the United States in terms of manufacturing competitiveness within five years.

The news media noticed. Newsweek’s international editor, Fareed Zakaria, recently used his Washington Post column to examine the tensions between President Obama and the business community. He concluded:

“The economic crisis forced the government into expansions of its authority in dozens of areas, from finance to automobiles. But precisely because of these circumstances, Obama now needs to outline a growth and competitiveness agenda that will seem compelling to the American business community.”

Zakaria proposes a “competitiveness agenda” as a political strategy, and certainly, NAM’s “Manufacturing Strategy for Jobs and a Competitive America” policy guide contains a political element. In laying out a comprehensive strategy for U.S. competitiveness, we are calling on political leaders to consider the big picture – what it will take for manufacturers to succeed in the global marketplace. Too often, members of Congress and candidates feel it’s sufficient to say, “I support manufacturing” or “manufacturing jobs are important.” Meanwhile, politicians will only occasionally vote for a bill or two endorsed by manufacturers.

NAM STRATEGY
NAM intends its policy guide to be a resource when local manufacturers and the public talk to candidates leading up to the November elections. It contains a checklist of policies needed to strengthen U.S. competitiveness such as the steps necessary to create a pro-manufacturing tax climate: Reduce the corporate tax rate to 25 percent or lower, promote fair rules for taxation of active foreign income of U.S.-based businesses, institute permanent lower tax rates for individuals and small businesses. Candidates should be able to say whether or not they support those policies.

In addition, NAM’s policy guide is intended to do more than just help query candidates or argue for specific policies that Congress should enact. The document sets out to make Americans think about manufacturing and its value to U.S. economy and the larger society. It starts with jobs, but it also entails values like productivity and innovation.

To compete successfully in the global economy, we must recognize the nature of global competition and respond with a plan. And that’s encapsulated in the title of the NAM policy guide: “A Manufacturing Strategy for Jobs and a Competitive America.”

John Engler is president of the National Association of Manufacturers (NAM), whose mission is to enhance the competitiveness of U.S. manufacturers while helping to foster a stronger economy. Learn more about NAM’s manufacturing strategy at www.nam.org/manufacturingstrategy.

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