Manufacturing a Better Future for America

by James Parks, Jul 15, 2009

The United States cannot revive its economy without first rebuilding the nation’s manufacturing base, several experts say. While most of us understand how devastating the loss of a plant can be to a community and to the economy, policymakers don’t get it, they add. 

During a roundtable discussion yesterday in Washington, D.C., several contributors to a new book, Manufacturing a Better Future for America, spelled out the case for a bold new U.S. industrial policy.

Simply put: For nearly 300 years, the United States invested in producing goods and, as a result, became the richest nation in history. But for the past few decades, policymakers have systematically dismantled our manufacturing base through bad tax policies and short-sighted trade agreements that encourage consumption of cheap foreign imports and provide incentives for U.S.-based companies to export jobs.

As a result, some 40,000 U.S. manufacturing plants closed between 2001 and 2008, resulting in the loss of millions of family-supporting jobs. From 2001 to 2007, some 2.3 million jobs were lost just from the nation’s huge trade deficit with China alone.

Manufacturing is the economic engine of the United States, and the Obama administration must commit to an industrial strategy that puts people back to work and focuses on making things, says United Steelworkers (USW) President Leo Gerard.

Scott Paul, executive director of the Alliance for American Manufacturing (AAM), which sponsored the roundtable and published the book, points out that “much of the conventional wisdom about manufacturing is wrong or out of date.”

To build a strong economy that works, we must understand what’s really happening today.

A big factor in the decline of manufacturing is so-called free trade. The reality is that in a global economy, some other countries don’t always play by the rules, says Economic Strategy Institute President Clyde Prestowitz, who co-authored the chapter on trade. Many nations are actively pursuing investment and production while the United States depends on imports and lets its manufacturing move offshore, he says. At the same time, those nations have laws that restrict the amount of goods that can be imported from other countries.

Prestowitz quotes a top executive of a U.S.-based company building a plant in China saying: “Everybody knows that if you are going to sell anything in China, you have to make it in China,” and the same thing is true in many of the U.S. trading partners. Those countries have thriving manufacturing bases while U.S. lawmakers allow ours to dwindle away, he adds.

Several of the panelists pointed out the Obama administration’s hesitation to insist that the nation’s automakers use U.S.-made parts as an example of the need for the White House to more actively support U.S. manufacturing. 

Peter Navarro, a professor at the University of California-Irvine, who wrote the chapter on foreign incentives, points out that China, for example, manipulates its currency to keep its prices low and make imports expensive, benefits from lax environmental and health rules and forces companies to turn over their technology to do business in China.

At the same time, the promise of new green jobs is not enough to revive the economy alone, Prestowitz said. It actually could increase the trade deficit because so many of the green materials are made overseas. While U.S. workers may get jobs installing green technology, the real wealth is going to the producers.

The bottom line, says Richard McCormick, editor of the book, is that the United States

is broke because it has stopped producing what it consumes. The mindset among America’s economic elite that the country does not need an industrial base has put the country and the world economy in a ditch. Only with a revitalized manufacturing base can America assure itself a prosperous and hopeful future.

 The AFL-CIO long has called for new policies to revitalize manufacturing, including:

• Fair trade policies that reduce the U.S. trade deficit, protect U.S. trade laws and require inclusion of enforceable workers’ rights and environmental standards in trade agreements.
• Revised tax laws that eliminate incentives for corporations to move production overseas and punish those that do; opposition to reform of the Foreign Sales Corporation (FSC) tax that would encourage shifting manufacturing jobs overseas; replacing FSC with tax incentives that help American manufacturers create U.S. jobs and help workers cope with retiree health care and pension costs.
• Legislation that penalizes companies that incorporate overseas to avoid taxes and denies government contracts to these companies.
• Strengthening the manufacturing base for national defense and homeland security through procurement reform, enhanced “Buy American” requirements, an updated assessment of critical defense manufacturing capabilities and limits to “offsets” that drain critical technology and good jobs. 

Print This Article | E-Mail This Article |Comments (1)