CHICAGO — The United States will “never realize its full potential to grow the manufacturing sector of the economy without a robust strategy and aggressive set of public policies to complement private-sector efforts by business and labor to maintain a globally competitive industry,” according to Scott N. Paul, executive director of the Alliance for American Manufacturing (AAM).
Paul was one of several people from both industry and Congress to urge the Joint Economic Committee, a panel of Senate and House members that focuses on promoting maximum employment, production and purchasing power in America, to formulate goals to engender the long-term health of the U.S. manufacturing sector.
A manufacturing strategy has been at the core of U.S. economic policy for all but a few, brief periods of the nation’s history, Paul testified. “Today’s dearth of public policy to boost manufacturing is the exception, not the rule,” he said.
He credited the Obama administration and Congress for providing loans “and the breathing space our domestic auto industry needed to rebuild, retool and thrive. The effort wasn’t perfect, but it was a necessary step to stabilize one of the support structures for domestic manufacturing employment and production.”
It was, however, “an emergency-room manufacturing strategy, and not a long-term effort to grow manufacturing jobs, capacity and output.”
In addition, there are larger goals that cannot be achieved by the private sector alone, including research and development on advanced batteries, the Smart Grid, policies that promote exports and push back against unfair trade, and those that help give manufacturers access to credit.
Paul said that U.S. manufacturing employment “has dropped precipitously since China entered the World Trade Organization in 2001, and our bilateral trade deficit has exploded. Outside the collapse of the auto and housing markets in 2008, the single most detrimental factor to manufacturing employment in the United States has been the expansion of our one-sided trade relationship with China.”
Although China is not America’s only competitor engaged in unfair, predatory or protectionist policies, “the scale of their activities swamps that of many of our other trading partners,” Paul testified.
The decline of manufacturing “is not inevitable,” he said. Other nations, even high-cost nations like Germany, have been able to boost manufacturing activity and employment because they have a targeted strategy to do so. Germany also has balanced trade with China.
Paul suggested that Congress allow U.S. companies and their employees to “seek relief from the effects of currency manipulation by China and other countries using our existing trade laws. When we deploy our trade laws, we achieve results: Industries such as tires and oil country tubular goods have stabilized in states across the nation.”
If China appreciated the yuan to a market-based level, over the next two years America would see a boost in gross domestic product of up to 1.9 percent, 2.25 million more jobs and $71 billion annually in deficit reduction, he said, citing an Economic Policy Institute study.
He asked that Congress also address China’s “web of industrial subsidies and state-owned enterprises, its rare earth minerals export restrictions and its rampant intellectual property theft.”
Mark Zandi, chief economist for Moody’s Analytics, presenting his personal views to the committee, said that despite its “travails” over much of the past few decades, “manufacturing has made a strong contribution to current and previous recoveries, (and its) prospects are bright given its much-improved international competitiveness and strong demand from fast-growing overseas markets for U.S.-produced goods.
“With some deft policymaking,” Zandi said, “manufacturing will be an important driver of this nation’s long-term economic growth.”
He agreed with Paul that U.S. policymakers “should continue to pressure China to further revalue the yuan,” which remains 25 percent undervalued against the dollar. “This gives Chinese manufacturers an unfair competitive advantage in global markets.”
“The success of manufacturers is vital to our broader economic success,” Zandi told the committee. “Taxes, legal costs, energy prices and burdensome regulations make it 18 percent more expensive to manufacture a product in the United States than in any other country.”
Jay Timmons, president and chief executive officer of the National Association of Manufacturers (NAM), said that layered on top of these higher costs is the broad uncertainty faced by U.S. businesses that includes “on-again, off-again” tax policies and an unpredictable regulatory environment.
NAM is looking for pro-competitiveness tax rules, a 21st Century trade policy, a viable and globally competitive domestic energy industry, common-sense regulatory reform, critical infrastructure improvements and a skilled work force that is able to understand new technologies and manufacturing processes.
Should Congress support such initiatives, they “will go a long way to creating a climate that is more suited to the global competitiveness challenges that manufacturers face,” Timmons said. “At the same time, a serious effort to get our nation’s fiscal house in order will lead to much-needed stable and durable economic growth.”