Manufacturing Resurgence Hangs in the Balance

Jul 24, 2013

The first in a series on manufacturing's challenges and potential. 

The good news is: there is ample potential for U.S. manufacturing to undergo a resurgence that by 2025 would lead to significantly more good paying manufacturing jobs, add to GDP growth, and help create the first surplus in the nation’s goods and services balance of trade since 1975.

Now for the bad news: the manufacturing sector will not get there without policies that bolster the industry.

“With no changes in public policy the manufacturing base will continue to shrink as a share of GDP as it has for the past decade,” said Stephen Gold, president and CEO of the Manufacturers Alliance for Productivity and Innovation (MAPI). “With just a few policy shifts, however, manufacturing in America can experience a resurgence that will ensure new innovation, increased productivity, more jobs, and a rise in living standards on our shores.”

Gold delivered the keynote speech at the July 24 Business Horizon Series event “Today’s Manufacturing: Unlocking Unlimited Potential.” The event hosted by the U.S. Chamber of Commerce Foundation (USCCF) was held to “raise the level of dialogue on manufacturing so that others can better appreciate the industry’s potential,” explained Al Martinez-Fonts, executive vice president of the USCCF. (Read tweets from the event)

We can’t go on with business-as-usual when it comes to manufacturing, Gold says. He pointed to a recent economic forecasting model developed by MAPI and The Aspen Institute that looked at two different future manufacturing scenarios: a resurgence scenario and a “business as usual” or baseline scenario.

The report found:

  • The manufacturing share of value-added in the resurgence scenario would grow to 15.8% of GDP in 2025, a proportion not seen since 1998, compared to 11.1%  in 2025 under the baseline forecast.
  • Manufacturing employment in the resurgence scenario would grow by 307,000 per year, or an increase of 3.7 million jobs by 2025, compared with essentially flat growth, or 23,000 workers per year, in the baseline scenario;
  • Under such a scenario, by 2025, the nation’s GDP would be $1.5 trillion larger than under “business as usual,” with most of the increase coming from the manufacturing sector.  

Gold said that by focusing on key economic drivers—trade, energy, taxes and regulations, and education—the growth path for manufacturing and the U.S. economy could improve dramatically.

Gold called for a trade policy focused on completing more trade-opening agreements, such as the current negotiations with Asia and Europe, and trade that lowers barriers and harmonizes standards.

On energy, he challenged state and federal lawmakers to work to sustain the current energy boom in oil and gas production by “first doing no harm.” He said policy makers should “step back and let the ‘shale gale’ occur.”

Lawmakers and agencies should reduce overlapping and layered regulations through elimination of duplicative regulations, and more rigorous review of costs and impacts of new regulations. Furthermore, Congress should bring the United States in line with its’ international competitors by reducing corporate taxes to OECD average levels, and adopting a territorial tax regime.

Finally, the manufacturing sector needs public policies to tackle the skills gap, including improvements to K-12 performance, particularly on science, technology, engineering and mathematics (STEM) education. Gold also called for the development of nationally recognized skills certification programs and certificates, and reforming immigration to support permanent work status for skilled workers, engineers, and research personnel. 

(Photo by Ian Wagreich for U.S. Chamber of Commerce)

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