savingusmanufacturing.com

While economists debate whether manufacturing is dying or recovering, average Americans realize that the loss of American manufacturing is a big problem.  A recent poll of 1,000 likely American voters conducted by the Mellman Group and Ayres McHenry Associates for the Alliance for American Manufacturing, revealed that Americans are anxious about the economy, specifically the loss of manufacturing, China debt, and government spending.

Americans don’t believe that Congress or the President has done enough to support manufacturing.   Poll results showed that 94% of voters want Washington to focus on jobs even more than on the deficit, with 85% specifying creating manufacturing jobs, and 88% of voters want Congress and the President to strengthen manufacturing in the U. S.  There was very little difference in the opinion of Independents, Democrats, and Republicans (64%, 67%, and 66% respectively) on the viewpoint that “manufacturing is a critical part of the American economy and we need a manufacturing base here if this country and our children are to thrive in the future.”

The Americans polled are worried that we have lost too many manufacturing jobs in our country and that too many jobs are being shipped overseas.   They understand that manufacturing is most important to determining the overall strength of our economy and our national security.  A majority felt that the U. S. no longer has the world’s strongest economy and Washington isn’t doing enough to promote American manufacturing.  Across all demographics, the solutions they support center on trade enforcement, tax credits for U. S. manufacturing, clean energy, and replacing aging infrastructure using American materials.

Alliance for Manufacturing Director, Scott Paul, said that there are only 1,000 U. S. manufacturing firms with more than 1,000 U.S. based employees.  Most American manufacturers are small businesses employing less than a hundred people.  The American-based supply chain of goods is weakening in the manufacturing industry.  Since 2001, the U. S. textile industry has lost 63% of its jobs.  The communications equipment industry has lost 43% of its jobs.  The U. S. machine tool industry consumption fell 78% in 2008 and another 60% in 2009.  The U. S. printed circuit board industry has shrunk by 75% since 2000.  Printed circuit boards are critical to nearly all defense and aerospace products and systems.   We cannot rely on China and other Asian countries as reliable sources for the printed circuit boards our defense industry needs.

American manufacturers supply the military with the essentials needed to defend our country.  America’s national defense will be in danger if we lose the critical mass of our manufacturing base.  It will be difficult, if not impossible to maintain our country’s position as the world’s super power.  Without a strong industrial base, America could lose future wars.

Don’t feel that there is nothing you can do.  Eleanor Roosevelt said, “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”  Remember, our country was founded by a small group of committed people that risked their lives to form the United States of America.  Now is the time for all Americans to stand up and take action – as business owners, employees, consumers and voters.

Thomas Donohue, U. S. Chamber of Commerce President, believes they do.  He blames Labor Unions for blocking the ratification of new trade agreements with Colombia, Panama, and South Korea by the U. S. Congress.  In the May 31^st issue of Manufacturing & Technology news, Mr. Donahue said “and for reasons that defy logic or common sense, they vehemently opposed the very policies that could create millions of new jobs for American workers.  So as the rest of the world races to complete new deals, American is being locked out and left behind …  We’ve been sitting on the sidelines too long.  It’s time to get back in the game.”

The United States has signed only 22 free trade agreements out of a global total of 262.  Let’s take a look at whether they have created millions of new jobs.  The U. S. Congress ratified NAFTA in 1993 and it went into effect in 1994.  Supporters of NAFTA point out that between 1993-2007, trade tripled between the trading partners from $297 billion to $1 trillion.

I do have personal experience with the consequences of NAFTA because I have been selling the fabrication services of American companies for 28 years and my territory has included northern Baja California, Mexico as I speak, read, and write Spanish.  Prior to NAFTA, American companies were required to have “twin plants,” which could be an office in the U. S. and an assembly plant in Mexico.  After NAFTA, the office on this side of the border was eliminated, and engineering and purchasing personnel were moved to the Mexican plant.  At first, American workers crossed the border to work at the Mexican plant, but over the years, Mexican engineers and buyers replaced them.  The ability to meet with employees at the Mexican plants without an appointment changed to the requirement of having written proof of an appointment with a specific person at a company and the purchase a FN certificate to do business in Mexico (per day or annual).  Now, a passport is also required to do business in Mexico.

Opponents of NAFTA and other free trade agreements point out that the “giant sucking sound” predicted by presidential candidate Ross Perot in the 1992 election came true as we’ve lost more than six million manufacturing jobs since 1994.  However, we only lost about a half a million between 1994 and 1999; we’ve lost the other 5.5 million jobs since the year 2000.  This is the year when China was granted permanent Most Favored Nation status (term changed to Normal Trade Relations in 1998), paving the way for China’s accession to the World Trade Organization in December 2000.  It hasn’t been Mexico or Canada that benefited from the majority of these lost U. S. jobs — it’s been China.

In fact, Mexico has also lost jobs to China over the past ten years.  The Mexican shoe industry was the hardest hit by competition from Chinese companies, but many decorative products for the home and garden that were once made in Mexico are now made in China.   Retail stores in Mexico are now just as full of “made in China” products as are retail stores in the United States.  Many American companies that set up maquiladoras in Mexico have closed them and set up manufacturing in China.  Japanese and Korean companies have become the major owners of the maquiladoras plants in Baja California, Mexico as companies from these two countries have been the most reluctant to set up manufacturing in China, have wanted to be closer to the U. S. market, and wanted to take advantage of the trading benefits of being located in a NAFTA partner country.

Thus, the answer to the question posed as the title of this article is “yes” trade agreements create manufacturing jobs, but not necessarily in the United States.  They create higher-paying manufacturing jobs in our trading partners and are the foundation of the developing middle class in Mexico and our other trading partner countries.  Manufacturing jobs are the foundation of the middle class, and the United States is in danger of losing our middle class as we lose more and more manufacturing jobs.

Can U. S. Exports be Doubled in Five Years?

Nicole Lamb-Hale, Assistant Secretary of Commerce for Manufacturing and Services, would say “yes” if manufacturers diversify their sales in multiple markets and take advantage of the Department of Commerce’s International Trade Administration programs to help them.

At the “Pathway to Manufacturing Prosperity” Conference held last week by Industry Week and New Equipment Digest, she said, “While the U. S. is a major exporter, we are underperforming.  Currently, fewer than 1% of American’s 30 million companies export outside the U. S.  There’s great potential for improvement.”

Before charging American manufacturers with “underperforming,” Assistant Secretary Lamb-Hale would do well to acquaint herself with her own Department’s Foreign Trade Regulations administered by the Bureau of Industry and Security (BIS).

After attending a Trade Compliance Update put on by the San Diego World Trade Center in April, I learned how complicated it can be to determine whether or not you need an export license.  Many commercial products are categorized as EAR99 or NLR – No License Required.   The problem is that American companies used to lead the world in exporting commercial products and now China leads the world, and the U. S. imports these products instead of exporting them.

Whether or not you need an export license is determined by what you are exporting, to which country you are exporting, and for what will your item be used.  There are ten categories and five product groups in the Export Control Classification Number system of the Commerce Control List.  The term “Dual Use” distinguishes items that can be used both in military and other strategic uses and in civilian applications.  It can be especially difficult and time consuming to get an export license for “dual use” items.

A recent “Critical Technology Assessment” conducted by the Bureau of Industry and Security found that the American precision machine tool industry is losing out to foreign competitors.  American machine tool companies face a competitive disadvantage because five-axis CNC machine tools are classified as “dual use” and require an export license.  There are now 20 companies in China that produce five-axis machines and 22 in Taiwan.  None of these companies have to deal with the types of export restrictions facing American companies.  From 2004 to 2007, the BIS issued licenses for the sale of 148 machines, but only 34 were sold and delivered.  One company reported that it lost a sale because it took seven months to obtain an export license to sell a machine to a Chinese company.   It doesn’t make sense that there are such tight export regulations on exporting machine tools to China when a Chinese company can easily export one of their machines to U. S. companies.

American manufacturers already face trade barriers and import restrictions from other countries in the so-called “free market.”  The U. S. government shouldn’t be making it even more difficult to compete in the global marketplace by making it difficult and time consuming to get an export license.

The National Association of Manufacturers was assigned the task of coming up with a list of Export Control Modernization Rules under the National Export Initiative announced by President Obama in his State of the Union address in January.  We can hope their recommended rule changes will be adopted.

In the meantime, manufacturers should look at the Department of Commerce website (www.export.gov) to locate an Export Assistance Center to assist them with entering the global marketplace by exporting or contact the World Trade Centers Association to locate the nearest World Trade Center at http://world.wtca.org.  As an example, the San Diego World Trade Center is putting on an “Ignite exports” one-day conference on June 10^th to help companies build profits through international sales.