Archive for July, 2013

What are the Obstacles to More Companies Reshoring?

Tuesday, July 30th, 2013

While there is still a debate about how much reshoring is actually taking place, there is no doubt it is happening, especially in the seven tipping-point industries that the Boston Consulting Group predicted would reshore:  transportation goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics.

For example, we’ve read about General Electric reshoring appliances such as water heaters, washing machines, and refrigerators to a factory in Kentucky, and Caterpillar is opening a new factory in Texas to make excavators. And, yes, even furniture manufacturing is coming back. At the High Point Furniture Show in April 2012, where the Made in America Pavilion housed 50 U.S. manufacturers, Ashley Furniture announced that it was building a new factory in North Carolina. Lincolnton Furniture also announced they had broken ground on a new furniture factory.

Earlier this year, Apple’s CEO Tim Cook said the company would invest $100 to build a factory in Texas to assemble Macintosh computers, which would include components made in Illinois and Florida, and rely on equipment produced in Kentucky and Michigan.

The results of February 2012 survey from the Boston Consulting Group (BCG),  showed that 37 percent of U.S. manufacturers with sales above $1?billion said they were considering shifting some production from China to the United States, and of the very biggest firms, with sales above $10 billion, 48% were considering reshoring. The factors they pointed to were not only that wages and benefits were rising in China, but the country is also enacting stricter labor laws and experiencing more frequent labor disputes and strikes.

According to BCG, pay and benefits for the average Chinese factory worker rose by 10% a year between 2000 and 2005 and speeded up to 19% a year between 2005 and 2010. Wages have been predicted to rise by 60% this year alone after additional strikes.

So, we might ask, “Why aren’t more companies reshoring? There are three main reasons:

  1. Most companies don’t conduct a Total Cost of Ownership Analysis when making a decision to outsource manufacturing.
  2. The United States has a high overall cost of manufacturing.
  3. There are still tax incentives to offshore manufacturing.

Total Cost of Ownership Analysis

In spite of the fact that I have spoken to hundreds and hundreds of people about the importance of doing a Total Cost of Ownership Analysis since my book came out in 2009, and Harry Moser, founder of the Reshoring Initiative, has spoken to thousands and thousands of people since releasing his free Total Cost of Ownership Estimator™ in 2010, we have only reached a small portion of the people making the decisions about outsourcing.

Most manufacturing companies that have sourced and are still sourcing parts and products offshore don’t do a Total Cost of Ownership (TCO) analysis. They base their decisions largely on low pieces that are based on cheaper foreign-labor rates and government subsidies by the governments of foreign countries to their manufacturers as part of their country’s predatory mercantilist practices.

If a company chooses not to practice TCO, it will impact their success or failure in the long run. It would be better if more companies would move forward by utilizing the freely available TCO spreadsheets, such as the one developed by Harry Moser that will allow you to quantity even the hidden costs and risk factors of doing business offshore.

After doing a thorough TCO analysis on all of outsourced parts for your products, the next step is to build an integrated team will periodically refine and refresh the analysis. You can even expand the definition of TCO to include the physical length of the entire supply chain and the lead times associated with the entire process.

American manufacturers need to embrace the New Industrial Revolution recently written about in the June 11, 2013 Wall Street Journal by columnist John Koten. He wrote, “Welcome to the New Industrial Revolution – a weave of technologies and ideas that are creating a computer-driven manufacturing environment that bears little resemblance to the gritty and grimy shop floors of the past. The revolution threatens to shatter long-standing business models, upend global trade patterns and revive American industry.”

Koten quotes Michael Idelchik, head of advanced technologies at GE’s global research lab, who said, “The future is not going to be about stretched-out global supply chains connected to a web of distant giant factories. It’s about small, nimble manufacturing operations using highly sophisticated new tools and new materials.”

High Cost of Manufacturing in America

While the difference in labor rates between the U. S. and Asia is diminishing, the U. S. has the highest corporate tax rates now after Japan reduced their corporate tax rate last year. In addition, the U. S. has high health care costs that are getting worse instead of better under the Affordable Care Act, and the U. S. has the most stringent environment regulations in the world.

In his November 2011 column in Industry Week, Stephen Gold, president and CEO of the Manufacturers Alliance/MAPI, wrote, “While manufacturers face a host of challenges, the data demonstrate that domestically imposed costs ? by commission or omission of government ? further undermine our ability to compete by adding at 20% to the cost of making stuff in the country…The single most significant drag on manufacturing competitiveness is the United States’ high corporate tax rate ?an average federal-state statutory rate of 40% that has not changed in decades.”

According to the second quarter 2013 survey of 317 manufacturers by the National Association of Manufacturers (NAM)/Industry Week, concerns over health care and insurance costs caused by the Affordable Care Act are mounting. Key survey findings include the following:  82.2 percent of manufacturers identified rising health care and insurance costs as their top challenge, an increase from 74.0 percent in the previous survey and 66.9 percent identified the unfavorable business climate due to taxes and regulation as an important challenge.

Other pressures for American manufacturers are revealed by the results of a joint survey conducted by MSC Industrial Supply Company and Industry Week Custom Research, nearly half (49.3%) of the manufacturing executives polled listed “raw material costs as one of the top market pressures, followed by “attracting and retaining talent” at 36.6%, “competition from countries offering lower costs” at 31.5%, and “expansion into new markets” at 31.0%. To help them be as competitive as possible in the global marketplace, 46% have implemented lean practices, and 26.5% have plans underway to implement lean.

Tax Incentives for Offshoring

According to an article in the Houston Chronicle, the U.S. tax code provides the following deductions, offsets, tax credits and incentives to corporations to “offshore” their profits overseas:

Tax Havens ? “The Organization for Economic Cooperation and Development (OECD) defines a tax haven country as one that imposes no or low taxes, does not exchange information about economic activity and lacks economic transparency.” Tax havens are used by a majority of the largest American corporations.

Offshore Deferral ? U.S. citizens and corporations are supposed  to pay tax on income earned abroad, but  “multinational corporations are allowed to “defer” paying income tax on profits made overseas until — or if ever — those profits are repatriated back to the United States.” U.S. corporations take advantage of this offshore deferral rule by setting up subsidiaries in lower tax countries. Subsidiaries, even when they are wholly owned by a U.S. parent company, are not subject to U.S. taxation. The deferral clause has been in the tax code for more than half a century and has outlasted numerous reform efforts. A USA Today article states that in April 1961, President Kennedy asked Congress to rewrite tax provisions that “consistently favor United States private investment abroad compared with investment in our own economy.”

Profit Shifting ? A U.S. corporation can also avoid paying taxes on its income by shifting its income to its foreign subsidiary in a practice called profit shifting. “Profit shifting involves an accounting practice of transferring assets, such as intellectual property rights and patents, to subsidiaries in tax haven countries. All royalty income earned from these assets is booked by the foreign subsidiary and so is not subject to U.S. taxation.” This practice is particularly prevalent in the pharmaceutical and computer industries; for example, pharmaceutical company Merck made more than $9 billion in profits in 2010 but paid no U.S. taxes.

Earnings Stripping ? Earnings stripping is a practice in which a U.S. parent corporation undergoes a corporate inversion so that its foreign subsidiary in a tax haven country becomes the parent company and the U.S. corporation becomes the subsidiary. This “paper inversion” allows all of the corporation’s global income to be booked by its new foreign parent. In addition, the new foreign parent can “loan” money to its U.S. subsidiary. Because it is a debt of the subsidiary, the money is not taxable. What’s more, the interest on the “loan” that the subsidiary pays to the foreign parent is tax deductible in the United States for the subsidiary.

The same USA Today article states, “Corporate lobbyists say that any move to eliminate deferral would have to be packaged with a significant cut in the 35% corporate tax rate…Otherwise, the largest companies, facing an effective tax increase, would have an incentive to switch their legal residence to another country.” Obviously, no one would want large American corporations to move totally out of the U. S. so the only way to address this problem is to eliminate these tax loopholes while significantly reducing the corporate tax rates. We are long overdue for comprehensive tax reform for both personal and corporate taxes.

At the “Manufacturing in California – Making California Thrive” economic summit that was held on February 14th in San Diego, attendees voted regulatory reform and a national manufacturing strategy as the top two critical issues to be addressed. A national manufacturing strategy would encompass such issues as corporate taxes, intellectual property protection, trade reform, and other factors adding to the high cost of manufacturing in the U. S. If you have a strategy that supports manufacturing, it will alleviate these other issues. A Manufacturing Task Force was formed after the summit, of which I became chair. We have been visiting the elected representatives in our region to provide them with our Task Force report and make them more aware of the needs of American manufacturers. Now our Task Force is evolving into the California chapter of the Coalition for a Prosperous (CPA) which had facilitated the summit. CPA has established state chapters in Ohio, Pennsylvania, and Colorado and is developing chapters in Florida, Michigan, and New York. If you would like to support our work in California, please contact me at or contact CPA at for involvement in other states.

Made in USA Products Succeed in Home Décor Market

Tuesday, July 23rd, 2013

When ABC began the “Made in America” series on the World News with Diane Sawyer on Monday, February 28, 2011, the ABC team examined three rooms of the home of John and Ana Ursy in Dallas, Texas and removed all foreign-made products. The result was a virtually empty house – no beds, no tables, no chairs, no couches, and no lamps. Only the kitchen sink, a vase, a candle, and some pottery remained.

If the ABC team conducted the same examination today, they might find more Made in USA products. Every season, more and more Made in USA products are available in retail stores, such as Home Depot and Lowes. Consumers are choosing to buy Made in USA products, and retailers are paying attention. Even Walmart, the nation’s largest retailer, announced that it would increase sourcing of American-made products by $50 billion over the next 10 years.

One company was ahead of the trend by providing Made in USA carpet products to the home decor market ? FLOR, owned by $1.1 billion Atlanta-based textile manufacturer, Interface Inc.

In my recent interview with FLOR President Greg Colando, he said, “In 2003, I was requested by Interface founder Ray Anderson to start a company that would use 100% recycled material to make carpet tiles for the consumer market.”

Colando continued, “We started FLOR with three employees in a small office on the west side of Chicago. Our strategy was to grow this brand by word-of-mouth. We sought out design influencers (bloggers, designers, design celebrities) to introduce them to the product, let them fall in love with it, and then spread the word through their own influence.”

We weren’t able to start off with 100% materials in 2003 as they just weren’t available. It was a practice that evolved over many years. First, we committed to the idea that carpet could be 100% sustainable. Back 10-15 years ago, it seemed unattainable to be able to make carpet using recycled materials as you drove through neighborhoods and saw rolled up carpeting at the end of driveways headed for landfills.

We began the process of working with our vendors and demanding they supply us with the materials we were seeking. And here we are, about to celebrate our 10-year anniversary, and our entire line consists of 100% recycled nylon face fibers as it is now possible to get 100% recycled nylon yarn from suppliers. We have some unique texture products, like Fedora (a best seller) where each square you purchase removes five plastic water bottles from a landfill and diverts it into our carpet.”

Today, FLOR is headquartered in Chicago, IL, but their carpet tiles are finished in their manufacturing plant in La Grange, GA. The company has grown from the original three founding employees to more than 100. From their distribution center near Atlanta, their employees are bringing a smarter solution for floor covering to the market place to every store in all the major markets in the United States.

Instead of downsizing during the recession of 2007-2009, Mr. Colando said, “We actually grew our business during the recession. A new idea/product combined with a large home/design market place provided a great deal of room for growth, even as the rest of the world around us seemed to be crumbling. One wonderful asset we had was our ability to trim down spend while increasing efficiency and staying flexible. Now, we are a rapidly growing business, opening 20 of our own stores in the past couple years.”

FLOR’s products are an innovative system of carpet squares that you assemble to create custom area rugs, runners, or wall-to-wall designs of any shape or size. Using FLOR’s patented adhesives, you connect the carpet squares together and not to your floor. In addition to dozens of patterns and colors of carpet tiles that you can design and assemble yourself, FLOR offers 75 pre-designed combinations of rugs ranging from simple two-tile mats, iconic button rugs, to unique shapes such as the Hop-Scotch rug and Faux Hide rug.

Mr. Colando said, “Our Georgia manufacturing plant is not an automated manufacturing plant using robotics. It is a simplistic “pick and pack” product where members of the FLOR team work hard each and every day to put forth the best possible end customer experience. The majority of our orders ship the same day, which shows the efficiency of the operation.”

“Pick and pack” means that an employee selects the carpet design styles and colors to fill a customer’s specific order and packs them in the shipping box. FLOR doesn’t manufacture the actual carpet tiles; they are manufactured in traditional rolls at one of Interface’s domestic plants and shipped to FLOR, where they are cut into carpet squares and stored in the warehouse by color and design.

FLOR’s becoming a success as an environmentally responsible company, making products for the domestic market in the USA was the result of one man’s vision ?Ray Anderson, who founded Interface Inc. in 1973 to produce the first free-lay carpet tiles in America. Interface is now one of the world’s largest producers of modular commercial floor coverings, with sales in 110 countries and manufacturing facilities on four continents. Interface manufactures carpet for the commercial market ? corporate, healthcare, education, retail, hospitality and government. While Interface manufactures carpet in Australia, England, Holland, Shanghai, China, and Thailand for markets in those countries and regions to eliminate shipping products across the ocean, 90% of the carpet for the domestic market is Made in USA.

Anderson first turned his focus toward the environment in 1994 when he read The Ecology of Commerce by Paul Hawken, and also Ishmael by Daniel Quinn, seeking inspiration for a speech to an internal task force on the company’s environmental vision. Hawken argues that the industrial system is destroying the planet and only industry leaders are powerful enough to stop it. Anderson made a decision to transform the company into using recycled materials wherever possible to become a sustainable company.

He made a promise to have the company eliminate any negative impact it may have on the environment by the year 2020 through the redesign of processes and products, the pioneering of new technologies, and efforts to reduce or eliminate waste and harmful emissions while increasing the use of renewable materials and sources of energy. Interface now leads the industry in environmental achievement and the exploration of environmentally efficient products and processes.

In 2009, Anderson said, “Fifteen years later, we’re only halfway there. But we’ve saved over $400 million, which has more than financed everything else that we’ve done — the R&D, the capital expenditures, the process changes, employee training, the whole ball of wax.

Interface’s Mission Zero Progress has been remarkable. The use of recycled and biobased materials has gone up from 1% in 1996 to 49% in 2012. The water use (gallons per square yard) has gone down from 1.9 gallons in 1996 to .4 in 2012. The waste to landfill from Interface’s carpet products has gone down from 12.5 million pounds in 1996 to 2.0 million pounds in 2012. The Greenhouse Gas Emissions (pounds of CO2e per square yard) from Interface’s carpet factories dropped from 2.8 pounds to 1.6 pounds.

In other words, “Between 1996 and 2008, the company cut its net greenhouse gas emissions by 71 percent (in absolute tons), yet sales increased by two-thirds and earnings doubled.”

Anderson chronicled the Mission Zero journey in two books, Mid-Course Correction: Toward a Sustainable Enterprise: The Interface Model (1998) and Confessions of a Radical Industrialist: Profits, People, Purpose: Doing Business by Respecting the Earth (2009). The latter was released in paperback as Business Lessons from a Radical Industrialist in 2011.

As we can see, one man with a vision can have a huge impact. Anderson’s bold vision and ambitious goal has already accomplished things not thought to be possible, but it is a goal that demands constant improvement and attention. The management of Interface and FLOR are committed to continue with the ambitious sustainability goal to achieve a zero environmental footprint by 2020.

Unfortunately, Ray Anderson died on August 8, 2011 after a 20-month battle with cancer. On July 28, 2012, Anderson’s family re-launched the Ray C. Anderson Foundation with a new purpose. The Foundation’s mission is to create a brighter, sustainable world through the funding of innovative projects that promote and advance the concepts of sustainable production and consumption.

Interface and FLOR stand in sharp contrast to many other American companies that have offshored manufacturing to China and other parts of Asia to escape what they perceive as onerous environmental regulations in the U. S., reduce labor costs, and increase profits. If Interface and FLOR can be financially successful American companies in highly competitive markets while exercising environmental responsibility in the conduct of their business and supporting Made in USA products, they should be rewarded by consumers with more business.


What is the Importance of Unmanned Vehicles to our Economy?

Tuesday, July 16th, 2013

We’ve heard a great deal about “drones” or unmanned vehicles over the last decade of the “war on terror” in Iraq and Afghanistan. While these terms are used interchangeably in the news media, the members of the Association for Unmanned Vehicle Systems International (AUVSI) are quick to point out that the term “drone” was originally coined to refer to pilotless aircraft used for “target” practice by the military while an unmanned vehicle includes the technology on the ground, often with a human at the controls.

The mission of AUVSI is to advance the unmanned systems and robotics community internationally through education, advocacy and leadership. AUVSI represents more than 7,000 individual members and more than 600 corporate members from 60+ allied countries involved in the fields of government, industry and academia. AUVSI members work in the defense, civil and commercial markets.

In March 2013, AUVSI released a report, titled “The Economic Impact of Unmanned Aircraft Systems Integration in the United States” to document the economic benefits to the  U.S. once Unmanned Aircraft Systems (UAS) are integrated into in the National Airspace System (NAS) after the federal government tasked the Federal Aviation Ad­ministration (FAA) to determine how to integrate UAS into the NAS in 2012. This report estimates the economic impact of this integration and estimates the jobs and financial opportunity lost to the economy if there is a delay in enacting the regulations needed to do the integration.

The report states that “the main inhibitor of U.S. commer­cial and civil development of the UAS is the lack of a regulatory structure.” Non-defense use of UAS has been ex­tremely limited because of current airspace restrictions.

The combination of greater flexibility, lower capital and lower operating costs could allow unmanned vehicles to transform fields as diverse as urban infrastructure management, farming, and oil and gas exploration to name a few. The use of UAS in the future could be” a more responsible approach to certain airspace operations from an environmental, ecological and human risk perspective.”

Present-day unmanned vehicles have longer operational duration and require less maintenance than earlier models and are more fuel-efficient. These aircraft can be deployed in a number of different terrains and may not require prepared runways.

The Executive Summary states, “While there are multiple uses for UAS in the NAS, this research con­cludes that precision agriculture and public safety are the most prom­ising commercial and civil markets. These two markets are thought to comprise approximately 90% of the known potential markets for UAS.”

UAS are already being used in a variety of applications, and many more areas will benefit by their use, such as:

  • Wildfire mapping
  • Agricultural monitoring
  • Disaster management
  • Thermal infrared power line surveys
  • Law enforcement
  • Telecommunication
  • Weather monitoring
  • Aerial imaging/mapping
  • Television news coverage, sporting events, moviemaking
  • Environmental monitoring
  • Oil and gas exploration
  • Freight transport

While there are a number of different markets in which UAS can be used, the report concentrates on the two markets, commercial and civil, with the largest potential. A third category (Other) summarizes all other markets: Precision agriculture, Public safety, and Other.

“Precision agriculture refers to two seg­ments of the farm market: remote sens­ing and precision application. A vari­ety of remote sensors are being used to scan plants for health problems, record growth rates and hydration, and locate disease outbreaks. Such sensors can be attached to ground vehicles, aerial vehicles and even aerospace satellites. Precision application, a practice especially useful for crop farmers and horticulturists, uti­lizes effective and efficient spray techniques to more selectively cover plants and fields. This allows farmers to provide only the needed pes­ticide or nutrient to each plant, reducing the total amount sprayed, and thus saving money and reducing environmental impacts.”

Public safety officials include police officers and professional firefighters in the U.S., as well as a variety of profes­sional and volunteer emergency medical service providers who protect the public from events that pose significant danger, including natural disasters, man-made disasters and crimes.”

If sensible regulations are put in place, authors Darryl Jenkins and Dr. Bijan Visagh foresee few limitations to rapid growth in these industries because these products use off-the-shelf technology and thus impose few problems to rapidly ramping up pro­duction. The parts comprising these unmanned systems can be purchased from more than 100 different suppliers so prices will be stable and competitive. They can all be purchased within the U.S. or imported from any number of foreign countries without the need of an import license. For this report, they assume necessary airspace integration in 2015, which is on par with current legislation.

UAS have a durable life span of approximately 11 years and are relatively easy to maintain. The manufacture of these products requires technical skills equivalent to a college degree so there will always be a plentiful market of job applicants willing to enter this market. “The average price of the UAS is a frac­tion of the cost of a manned aircraft, such as a helicopter or crop duster, without any of the safety hazards. For public safety, the price of the product is approximately the price of a police squad car equipped with standard gear. It is also operated at a fraction of the cost of a manned aircraft, such as a helicopter, reducing the strain on agency budgets as well as the risk of bodily harm to the users in many difficult and dangerous situations. Therefore, the cost-benefit ratios of using UAS can be easily understood.”

The authors estimate enormous economic benefits to our country. To calculate the benefits, they forecast the number of sales in the three market categories. Next, they forecast the supplies needed to manufac­ture these products. Then, they forecast the number of direct jobs created using estimated costs for labor. Finally, using these factors, they forecast the tax revenue to the states.

In addition to direct jobs created by the manufacturing process, the authors state that there would be additional economic benefit by the new jobs created and income generated spread to local communities. “As new jobs are created, additional money is spent at the local level, creat­ing additional demand for local services which, in turn, creates even more jobs (i.e., grocery clerks, barbers, school teachers, home build­ers, etc.). These indirect and induced jobs are forecast and included in the total jobs created.”

The economic benefits to individual states will not be evenly dis­tributed. Ten states are predicted to see the most gains in terms of job creation and additional revenue as production of UAS increase, totaling more than $82 billion in economic impact from 2015-2025. In rank order they are:

  • California
  • Washington
  • Texas
  • Florida
  • Arizona
  • Connecticut
  • Kansas
  • Virginia
  • New York
  • Pennsylvania

“The economic projections contained in this report are based on the current airspace activity and infrastructure in a given state. As a result, states with an already thriving aerospace industry are projected to reap the most economic gains. However, a variety of factors—state laws, tax incentives, regulations, the establishment of test sites and the adoption of UAS technology by end users—will ultimately determine where jobs flow.”

The authors conclude:

1. The economic impact of the integration of UAS into the NAS will total more than $13.6 billion in the first three years of in­tegration and will grow sustainably for the foreseeable future, cumu­lating to more than $82.1 billion between 2015 and 2025.

2. Integration into the NAS will create more than 34,000 manufac­turing jobs and more than 70,000 new jobs in the first three years.

3. By 2025, total job creation is estimated at 103,776.

4. The manufacturing jobs created will be high paying ($40,000) and require technical baccalaureate degrees.

5. Tax revenue to the states will total more than $482 million in the first 11 years following integration (2015-2025).

6. Every year that integration is delayed, the United States loses more than $10 billion in potential economic impact. This translates to a loss of $27.6 million per day that UAS are not integrated into the NAS.”

They base the 2025 state economic projections on current aerospace employment in the states and presume that none of the states have enacted restric­tive legislation or regulations that would limit the expansion of the technology. Future state laws and regulations could also cause some states to lose jobs while others stand to gain jobs. States that create favorable regulatory and business environments for the industry and the technology will likely siphon jobs away from states that do not.

In conclusion, the study “demonstrates the significant contribution of UAS development and integration in the nation’s airspace to the economic growth and job creation in the aerospace industry and to the social and economic progress of the citizens in the U.S.

As the top ranked state and home to UAS manufacturers General Atomics and Northrop Grumman, California has active chapters of AUVSI, and the San Diego region chapter is AUVSI San Diego Lindbergh. Since both General Atomics and Northrop UAS plants are located in San Diego’s north county, in 2012, the North San Diego Chamber of Commerce commissioned the National University System Institute for Policy Research to conduct an economic assessment of the industry’s impact on San Diego’s defense economy. The report is titled, “Unmanned Aerial Vehicles:  An Assessment of Their Impact on San Diego’s Defense Economy. The report states, “Unmanned aerial vehicle (UAV) production neared $1.3 billion in San Diego during 2011, according to analysis of federal government Depart of Defense (DoD) contract spending. UAV spending has grown significantly in San Diego over the past five years, nearly doubling since 2008. This growth parallels the increasing role played by UAVs in the U.S. military and the leadership position San Diego companies occupy in the UAV industry.”

While San Diego is still struggling to emerge from the 2008 national economic downturn, “the bright spot in the San Diego economy in recent years has been defense-related spending. Local defense expenditures grew substantially the past decade while military base operations and payrolls expanded. “Many economic observers, including the National University System Institute for Policy Research (NUSIPR), conclude that absent San Diego’s prowess in defense manufacturing and its role in hosting major military facilities, the local unemployment rate would have been significantly higher.”

At the peak of the recession, civilian unemployment in the county climbed to nearly 11 percent, and todaystill hovers around 9 percent. Companies have shed more than 50,000 jobs in the region. Local wages have fallen the past two years, while per capita income remains well below pre-recession peaks.

The important role of UAVs to the San Diego economy is emphasized by the fact that “UAV contracting activities in 2011 supported 7,135 direct and indirect jobs throughout San Diego County,” and “UAVs now comprise the largest segment of San Diego’s defense manufacturing sector. UAV production comprises more than 12 percent of all DoD contracting activities in San Diego County.” While DoD contracting in San Diego started to decrease in the past three years, UAV activity continued to expand.

“Since 2004, San Diego’s aerospace employment, now primarily focused on unmanned aircraft systems, has increased by 1,200 jobs. Just since early 2010, the sector has added 600 jobs. The two major UAV firms locally, Northrop Grumman and General Atomics Aeronautical Systems, each conduct billions of dollars in UAV unclassified contract work in San Diego County. According to Northrop Grumman Vice President Jim Zortman, ‘The center of the unmanned business for aerial vehicles is right here in San Diego.’”

The report states, “Production of UAVs is forecast to double by the end of the decade. Several forecasting firms have predicted the global demand for UAVs will reach $12 billion by 2019, even in the face of significant reductions in U.S. military spending.” There is every reason to believe San Diego is positioned to benefit from this trend given the leadership of Northrop Grumman and General Atomics Aviation in UAV technology.

However, several other states and regions are actively working to attract UAV researchers and manufacturers, and their efforts include the development of specialized educational programs and the preservation of airspace assets. Many states are setting aside dedicated airspace to support the UAV industry. Before the end of this year, the FAA will designate six areas around the country as UAS test sites.

In April of this year, the AUVSI San Diego Lindbergh Chapter joined the San Diego Regional Economic Development Council (EDC), the San Diego Military Advisory Council (SDMAC), the Imperial County EDC, County of Imperial, Holtville Airport, Indian Wells Valley Airport District (IWVAD), and defense contractors including General Atomics, Cubic Corporation, and Epsilon Systems Solutions, Inc. to respond to the Federal Aviation Administration’s (FAA) Screening for Information Request (SIR) and develop an Unmanned Aerial Systems (UAS) Test Range in a partnership with civil and military government agencies, academia, and industry. This coalition has joined an already established entity called the California Unmanned Systems Portal (Cal UAS Portal), which is based in Indian Wells, to create a proposed UAV Test Site that would extend from the NAS China Lake/Edwards Air Force Area, West to the Pacific Ocean, South to the Mexican border, and East to the Arizona border.

If San Diego wants to continue as a leading region for unmanned vehicles, it will be necessary for leaders in the private and public sectors to determine how best to support this industry and influence policymakers to address the high cost of doing business in California that is creating cost pressures on UAS manufacturers’ competitiveness in the worldwide UAS industry. As the report concludes, “Complacency could cause the region [and our country] to lose its leadership position and miss an opportunity to support an industry posed for growth.”

The Trans-Pacific Partnership Trade Agreement Would Harm our Environment

Tuesday, July 9th, 2013

Proponents say that the Trans Pacific Partnership (TPP) trade agreement would be a platform for economic integration and government deregulation for nations surrounding the Pacific Rim and facilitate free trade to counter China’s financial influence in Asia and the Pacific. The negotiating parties include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. Japan also announced its intention to join the agreement last spring. Because the TPP is intended as a “docking agreement,” other Pacific Rim countries could join over time, and the Philippines, Thailand, Colombia, and others are already expressing interest.

The TPP is poised to become the largest Free Trade Agreement in the world. The ongoing, multi-year negotiations over the TPP are supposed to conclude this year, so the window of opportunity for preventing this free trade agreement is rapidly closing.

Among other reasons about which I have written previously, opponents of the TPP say it would harm our planet’s environment, subverting climate change measures and regulation of mining, land use, and biotechnology. The Pacific Rim is an area of great significance from an environmental perspective. It includes Australia’s Great Barrier Reef, the world’s largest coral reef system, home to more than 11,000 species. It includes Peru and its Amazon Rainforest—one of the most biologically diverse areas on Earth.

In May 2007, citizen-led advocacy groups including the Sierra Club forged a bipartisan consensus   that set the minimum standards for environment, labor and other provisions to be included in future trade agreements. According to sections of the TPP that have been leaked, it appears that these minimum standards are being ignored.

It is essential that the environment chapter of the TPP build on the environmental protection progress that has been made. “At a minimum, the environment chapter should be binding and subject to the same dispute settlement provisions as commercial chapters; ensure that countries uphold and strengthen their domestic environmental laws and policies and their obligations under agreed multilateral environmental agreements; and include biding provisions to address the core environment and conservation challenges of the Pacific Rim region, such as efforts to combat illegal trade in wood, wood products, and wildlife and to strengthen fisheries management.”

If you “Google” TPP and the environment, you come up with more than 20 pages of articles by one organization after another and one author after another expressing reasons why the TPP would harm the environment. The opposition to the TPP began as early as 2011 when the first drafts were leaked and intensified in 2012. These organizations include the Sierra Club, Public Citizen group (founded by Ralph Nader), the Citizens Trade Campaign, and Economy in Crisis, among many others.  A common thread of the articles is either a subtle or overt accusation that President Obama has “sold out” to Wall Street/big banks and multinational/transnational corporations.

On their website, Union-backed We Party Patriots states, “…the Trans-Pacific Partnership (TPP) is being put together in extreme secrecy. This secrecy comes complete with a total lack of mainstream media coverage despite serious potential long-term effects. Leaked documents show that the TPP will have a chilling effect on the ability of the United States government to take legal action against multi-national corporations for their abuses of environmental, agricultural, and labor laws.”

The Fair World Project’s website states that in late 2012, “a group of labor leaders, trade justice advocates, family farmers, environmentalists, food sovereignty groups and others from the U.S., Canada and Mexico created a ‘North American Unity Statement Opposing NAFTA Expansion through the Trans-Pacific Partnership (TPP),’ with the goal of uniting 1,000 organizations in opposition to the TPP.”

On March 7, 2013, Friends of the Earth announced that it had released a new video, “Peril in the Pacific: Trans Pacific trade agreement threatens people and the planet.” The video illustrates these threats by telling the story of “Chevron v. Ecuador” international investment suit brought under an existing U.S. treaty. The video raises questions like: “Who should pay to clean up what has been called the “Rainforest Chernobyl” in the Ecuadorian Amazon? Why are the people of the rainforest who suffered the most not represented at the international tribunal hearing the case? Is it U.S. policy to favor the financial interests of multi-national corporations over people and the environment in such disputes?”

The video also asks why the negotiating framework for the TPP favors Wall Street and multinational corporations at the expense of current U. S. environmental and climate policy and why does it  allow multinational corporations to challenge laws that protect our air, land and water.

Because the Asia-Pacific region accounts for about one third of all the threatened species in the world, Friends of the Earth is concerned that the TPP trade agreement potentially checkmates many of our country’s past environmental victories and would block new initiatives. The natural environment and rich biodiversity of the Pacific Rim are threatened by illegal and/or unsustainable commercial exploitation of the ocean, natural resources, and forests.

Friends of the Earth recommends that the TPP negotiators must address the following issues to avoid the most serious environmental harms by:

  • Including an environment chapter that would obligate countries to enforce domestic environmental protections and abide by global environmental agreements that are enforceable through international lawsuits.
  • Rejecting the proposed TPP investment chapter that would authorize foreign investors to bypass domestic courts and bring suit before special international tribunals biased in favor of multinationals to seek awards of unlimited monetary damages in compensation for the cost of complying with environmental and other public interest regulations.
  • Rejecting “provisions of the TPP intellectual property chapter that would provide international legal protections for corporate patents on plant and animal life, granting companies ownership and sole access to these building blocks of life.”
  • Rejecting the regulatory coherence chapter that could hamstring environmental regulation and “encourage cost-benefit analysis that exaggerates financial costs and minimizes the intrinsic value of protecting living things, wild places, and the stability of the ecosystem.”

Friends of the Earth urges that the TPP “must serve to strengthen environmental protection and support the biodiversity in the Pacific Rim and not facilitate a race to the bottom in environmental deregulation.”

What surprises me is that all of the above organizations supported President Obama in his bid for re-election last year despite the fact that he had gone back on his pledge “to oppose Bush-style free trade agreements that lead to thousands of lost American jobs”  and his word to ”not support NAFTA-type trade agreements” in his 2008 campaign. Now that he is elected for his second and last term, what incentive does he have to listen to the opinions of these organizations that oppose the Trans-Pacific Partnership agreement? None!

A few conservative news outlets such as WorldNet Daily began to recognize the dangers of the TPP early this year, beginning with the article, “Obama skirting Congress in globalist plan?” in which Jerome Corsi warn that “the administration apparently plans to restrict congressional prerogatives to an up-or-down vote” utilizing the  “fast-track authority,” a provision under the Trade Promotion Authority that requires Congress to review a FTA under limited debate, in an accelerated time frame subject to a yes-or-no vote. Under fast-track authority, there is no provision for Congress to modify the agreement by submitting amendments to ensure foreign partners that the FTA, once signed, will not be changed during the legislative process.

In a more recent article, “Obama’s 2-ocean globalist plan,” Jerome Corsi writes, “Quietly, the Obama administration is systematically putting into place a two-ocean globalist plan that will dwarf all prior trade agreements, including NAFTA, with the goal of establishing the global sovereignty envisioned by New World Order enthusiasts. The two agreements are the Trans-Pacific Partnership, or TPP, and the Transatlantic Trade and Investment Partnership, or TIPP. WND has learned the Obama administration plans to jam the TPP through Congress no later than Dec. 31.”

We certainly cannot expect to influence the President to oppose the TPP near the end of three-years of negotiations that took place under his direction. With the virtual black out  of coverage about the TPP in the mainstream media, the best we can do is make our opinions heard loud and clear to our Senators and Congressional representatives and urge our family, friends, and  members of our personal and business network to do the same. We must urge our elected representatives to vote against granting President Obama “fast track authority” under the Trade Promotion Authority. There is no time to waste. Contact your congressional representative and tell them we cannot afford another damaging “free trade” agreement that would destroy our national sovereignty, hurt American manufacturers, and harm our environment. Tell them to vote “no” to granting the President “fast track authority.”