Save American Manufacturing

The Following article is from the site AmericanEconomicAlert.org. As crafters who take great pride in our work we know how difficult it is to help American manufacturers of the products we need when it is incredibly difficult to the Made in USA. Fellow crafters support our economy by searching high and low for your raw materials to make you craft.
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UNITED STATES BUSINESS AND INDUSTRY COUNCIL
FIGHTING FOR AMERICAN COMPANIES AND AMERICAN JOBS SINCE 1933
UNITED STATES BUSINESS AND INDUSTRY COUNCIL • 910 16TH ST. NW, SUITE 300 • WASHINGTON, DC 20006
(202) 728-1980 • (202) 728-1981 FAX • COUNCIL@USBUSINESS.ORG • WWW.USBUSINESS.ORG

TO SAVE AMERICAN MANUFACTURING:
USBIC’S PLAN FOR AMERICAN INDUSTRIAL RENEWAL
Kevin L. Kearns, Alan Tonelson, and William Hawkins

Although warnings about the crisis engulfing American manufacturing have been intensifying for several years now, the sector’s woes continue to be significantly underestimated – certainly by official Washington and even by many manufacturers themselves. In fact, despite the current boost in growth fueled by deficit spending, tax cuts, mortgage re-financings, and other one-time stimuli, the decline of American manufacturing is fast nearing the point of irreversibility -- at least from the standpoint of restoring to world leadership a critical mass of industries producing in the United States. The nation, in short, faces a manufacturing emergency. Unless drastic measures are taken quickly, this emergency will turn the United States into a second-class manufacturing power, greatly diminishing its own future economic prospects. Further, national security and flexibility in foreign affairs will be severely compromised.
Finally, the international imbalances being created by the manufacturing crisis will likely push the world into a major dollar crisis and could cause a protracted depression.
In part, the manufacturing crisis reflects the economy’s latest cyclical downturn and the deflating of the bubble of the 1990s. Likewise, the manufacturing employment portion of the crisis stems in part from the increases in productivity in recent years. But neither of these factors sufficiently explains the root cause of manufacturing’s current troubles, which are the worst by many measures since the end of World War II, and that is the cumulative and continuing effects of two decades of misguided, ill-advised, and weak-willed U.S. trade and
globalization policies.

During this period, Washington has consistently failed to open foreign consumption markets adequately to U.S. producers – despite years of promises and the fanfare that greeted each new trade agreement. In addition, the
American government has failed miserably to combat predatory foreign trade practices aimed at undermining U.S. producers in their home market. Perversely, Washington has responded to these failures by encouraging U.S. manufacturers to supply their home market from low-cost third world production platforms like Mexico and China. And most U.S. multinational corporations, and indeed some of their smaller suppliers, have responded with enthusiasm.

NO TIME TO LOSE
The most serious global macroeconomic dangers stemming from the continued flight of American manufacturing overseas have to date been avoided and may be postponed still further by continued financial policy legerdemain – though the faster America’s international debts keep rising, the more difficult the challenge of correcting the imbalances. But regardless of when the crunch actually comes, the weakening of domestic manufacturing is already undermining the material foundations of American national success. The prolonged wage slump triggered by the overseas migration of America’s best-paying jobs on average has
been rippling through the U.S. economy and American society for at least two decades. The loss of these important jobs represents a shrinking of the employment base needed for a middle-class standard of living, table families, and the local and state tax revenues necessary for a first-world level of responsibly financed public infrastructure and social services. Consequently, Americans find increasingly at risk their hard-won 20th
century gains in access to quality education, health care, and retirement security (whether paid for by a solvent public sector or a sufficiently broad-based and profitable private sector).

TO SAVE AMERICAN MANUFACTURING: USBIC’S PLAN FOR AMERICAN INDUSTRIAL RENEWAL PAGE 2
UNITED STATES BUSINESS AND INDUSTRY COUNCIL • 910 16TH ST. NW, SUITE 300 • WASHINGTON, DC 20006
In addition, the manufacturing crisis raises serious questions about the U.S. economy’s ability to maintain a high-tech, world-leading military without worrisome dependence on foreign products and technologies. Although it is true that defense-related imports come overwhelmingly from long-time allies or traditionally friendly countries, it is just as true that they are growing rapidly at a time when major disagreements increasingly mark the relationships between the United States and these countries.

Further, the massive loss of tax revenue – both corporate and personal – directly attributable to a disappearing industrial base will undoubtedly constrain America’s ability to sustain military operations in both peacetime and wartime at levels that U.S. policymakers have come to take for granted. Thus the country faces a future in which the ability to project power and thereby affect events and outcomes the world over will be much more limited than anytime in the last century and a quarter. Most worrisome, the decline of American manufacturing is quickly feeding on itself and gaining unstoppable momentum. Washington’s continuing failure to secure equitable terms of trade forces more and more U.S. firms to compensate by outsourcing. These moves create powerful pressure for growing numbers of the remaining hold-out companies to follow suit. The migration of prime contractors overseas inexorably pulls much of their supply chains with them. The export of blue-collar production work leads to the export of white-collar manufacturing-related work, as companies seek the advantages of locating researchers and designers near the factories they service. In fact, there is a continuous feed-back loop between R&D efforts and the factory floor, with the two functions, R&D
and production, operating in tandem. And as is well documented, R&D and other technology work often produce a clustering effect, which draws labs and similar facilities from other industries in search of new synergies. The notion that the United States will retain high-end design functions while letting production migrate overseas is wishful thinking. Without major globalization policy changes, this vicious cycle of manufacturing flight cannot be turned into a virtuous cycle of manufacturing resurgence.

About the Authors: Kevin L. Kearns, President of the United States Business and Industry Council (USBIC) and the USBIC Educational Foundation, is a former U.S. Foreign Service Officer with extensive defense trade experience. Alan Tonelson is a Research Fellow at the USBIC Educational Foundation and author of the recent book on globalization, The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards. William Hawkins is Senior Fellow for National Security Studies at the
USBIC Educational Foundation.
The United States Business and Industry Council (USBIC) is a non-profit, business advocacy organization of more than 500 firms from across the nation. From its founding in 1933, USBIC has championed America’s domestic family-owned or closely-held companies—our nation’s “main street” businesses—who create new products, jobs and growth here in the United States. The Council’s mission is to expand our domestic economy, with particular emphasis on our manufacturing, processing, and fabricating industries, and through the resulting growth to extend a high standard of living to all Americans. USBIC positions on tax, business regulation, and international trade issues always receive significant attention, as Congress, the Administration, and the media know they can count on the Council for objective, principled viewpoints. USBIC plays a critical national policy role through its education campaigns, lobbying efforts, press conferences, bipartisan staff briefings, op-ed pieces, and publishing.
(202) 728-1980 • (202) 728-1981 FAX • COUNCIL@USBUSINESS.ORG • WWW.USBUSINESS.ORG