Archive for April, 2011

House Judiciary Committee Passes America Invents Act

Tuesday, April 26th, 2011

The House Judiciary Committee approved H.R. 1249, on Thursday, April 14, 2011, by a vote of 32-3, and the bill is expected to reach the House floor in May or June.

Like S. 23, the America Invents Act of 2011, which passed the Senate in March, this bill switches the United States to a first-to-file patent system and allows the U.S. Patent and Trademark Office to keep the fees it collects in order to address the backlog of hundreds of thousands of patents.  Amendments to strike the first-to-file provision and strengthen the grace period failed to pass in committee.

“Patent reform is an important key to our economic recovery and will help America invent its way back to prosperity,” Leahy said.  “Patent reform is supported by Democrats and Republicans alike, by the Obama administration and by businesses, industries and manufacturers across the spectrum.”

A large range of tech firms support the bill, including IBM, Microsoft and GE, as well as several large pharmaceutical companies.  Many small companies and independent inventors have complained the changes will reduce their incentives for innovation by favoring large corporations.

In his April issue of The Inventor’s Mentor, “First to File – Impact on the Small Inventor,” George Levy wrote, “The new law will recognize the first person who files as the legal inventor. Many analysts disagree with director Kappos and believe that it will encourage a rush to the patent office with half-baked inventions and poorly drafted applications and that it will hurt small inventors not supported by the legal and technical resources of large corporations.

Currently an invention cannot be patented if the inventor has publicly disclosed it more than 1 year earlier.  Public disclosure can occur by a public use, public sale, a publication, or a patent (MPEP2133).  If the disclosure is within the year, the inventor can still patent it in the U.S.  In contrast, most countries disqualify inventions immediately after publication.  This time interval called the “grace period” is of great benefit to small inventors who often need to refine their prototypes and test the market before they file.

The new law provides a much weaker grace period protection than the current law.  While it recognizes the first to file, it also states that a public disclosure within one year of the filing date does not count as prior art to the invention.

This provision allows the inventor to lock in his rights to the invention by issuing a defensive publication.  In doing so, he bars anyone else from patenting his invention – except himself.

Unfortunately, such a publication will prevent him from obtaining a patent in most other countries.  In the US, it will start the clock ticking and commit him to file within one year or lose all his rights.

In summary the inventor will have to make a choice:

  • Either to publish early and thereby commit himself to file within a year, losing his international rights and possibly tipping his competitors at a crucial time,
  • Or not to publish and risk being preceded by someone else at the patent office.

It will still be possible for him however, to divulge his invention to others without starting the one year clock, if he does it on a confidential basis. To protect himself, he should have a non-disclosure agreement and record his invention with a time stamp service such as mycreativeregistry.com

The loss of the grace period will significantly impact the small inventor. It is extremely important for inventor associations to lobby their congressional representatives to maintain a strong grace period.”

After passage of the Senate bill, Adrian Pelkus, President of the San Diego Inventors Forum, emailed me the following comments, “This is a game changer for American inventors and the entire entrepreneurial system.  I accept Mr. Kappos reasoning that proving who was first to invent is hardly ever an issue.   I am glad to see the $ stay in the USPTO for much needed improvements! It is the one-year grace year period that is the deal killer.

Here is what I imagine, expect and worry about:  China will bring our ideas to market faster than we can, killing U. S. startups.  Investors leery of this new exposure risk will find safer bets depriving our country the chance to grow new jobs from new products and ideas.  Those that stay in the “Angel” investment game will demand much more (expensive) competitive research and FTO letters more than ever.  Universities may stop publishing research because someone can beat them to the Patent office.  Every student presenting a poster or paper will have to file for a patent to protect their idea?  Startups will have to fully develop their technologies before filing.  What’s the use of continuations if another company can see your path and jump to your next conclusion?  Or even filing if you know a company with more resources can see what you are doing and can out develop you.

Patent filing will become a corporate venture game to beat one another using software that auto generates patent filings based on mined information made public.  So, companies with big $ will have the advantage over startups.  Corporations will have an overwhelming advantage in the process over individuals.

Typically people invent an idea, put some private $ in to develop it to where it is presentable with minimal patents/pending to raise more $ to finish the Design for Manufacturing (DFM), patents, marketing, and launch the product.

Having to raise all the R&D and launch $ at once is an oxymoron.  Just like SBIR grants goes in phases, so does private R&D investment in startups.  Angels fund private R&D; the successes then go on to next round, DFM.   Great risks, great rewards.

Hindering this process because exposing the Intellectual Property too early gives away the opportunities that an investor comes aboard for in the first place is counterproductive to our countries goals of creating jobs. ”

I also received the following email from Gary F. Witting, a Registered Patent Attorney in Scottsdale, Arizona.  “I am writing this note in response to your article that came across my desk this morning.

I am very concerned about the state and future state of the manufacturing and research and development in the United States.  It truly bothers me watching our patent system, which was the best in the world, getting moved around by large powers in the name of harmonization with Europe.  One needs to consider how many sole, small inventors, and small businesses there are in Europe as compared with the United States.  Typically, there are very few sole and small inventors in Europe.  Also, one needs to consider, whether our recent business successes such as Apple, Google, Motorola, and the like would have been able to survive in the proposed intellectual property climate.”

In addition, Newton Ball, emailed me saying, “I am an inventor with more than twenty U.S. issued patents, and several active provisional applications. There is an element of U.S. Patent Law that is even more important to me, than “first to invent”.  Since 1984, Chinese patent law has imposed an obligation to manufacture on patent holders.  A “duty to manufacture” was part of the English law that was the basis for the U. S. early patent law.  Sadly, to the detriment of small U.S. manufacturers, this duty has never been a part of U. S. patent law.  This means that large U. S. corporations are free to patent and shelve inventions, preventing U.S. manufacture and sale.  Several of my own inventions are in this “shelved” state.  I urge savingusmanufacturing.com to join me and my non-profit, Orbic Institute, in bringing this to the attention of the public and congress.  A simple no-cost change to patent law could bring a surge of new manufacturing in the U.S. of innovations, presently shelved.”

Sandy Rios, Vice President of Family-Pac Federal and a Fox News Contributor, commented in The Daily Caller Opinion, “America has always been a country of innovators. Within thirteen years of its first patent law, America had surpassed Great Britain in its number of annual inventions, even though Great Britain had a population twice as large. By 1865, the U.S. was churning out three times as many inventions as Great Britain… According to historians, it was no accident. As the Founding Fathers studied existing patent law, they discovered statutes that gave advantage only to the wealthy, not to the small entrepreneur. So they created a unique system that inventors have enjoyed for 250 years. It’s a first-to-invent system, not a first-to-file one. The first person to invent something gets the credit, not the first one to rush to a bureaucratic office and file a piece of paper.

Now Senator Patrick Leahy and the Obama administration, along with multi-national corporations, have a better idea. They want to change our system from a first-to-invent system to a first-to-file system. Under such a system, anyone who can co-opt the ideas of an inventor and pay the cash would be able to take the credit and reap the rewards. This would hurt inventors and give large corporations — and China — a leg up.

Currently, inventors are given a grace period to perfect their inventions and try to obtain financial backing. The new bill would replace that with a European-style post-grant challenge, which would force inventors to pay $20,000-30,000 every time they modify an invention.

The voices of Edison and Bell, Wright and Ford are crying out. Don’t put a stake in the heart of American innovation and job creation. Say “no!” to this patent reform bill.”

It’s not too late to contact your representative in Congress and urge them to vote no on this bill without amending it to strengthen the grace period to protect individual inventors and small businesses.

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Korea Free Trade Agreement – Beneficial or Harmful?

Tuesday, April 19th, 2011

The Korea Free Trade Agreement (KORUS), originally signed on June 30, 2007 is one of three FTAs that have been concluded but not yet implemented by Congress.  The other two are the Colombia FTA, signed on November 22, 2006 and the Panama FTA, signed on June 28, 2007.

Because of shared authorities on trade and differences of views between successive Congresses and presidents, these FTAs, struck with countries that the United States counts as friends and allies, have been stuck in a procedural no-man’s land between the White House and Congress.

On December 4, 2010, President Obama announced that he had obtained supplemental concessions from the South Korean government on autos significant enough to justify his decision to transmit an implementing bill to Congress. This gave KORUS renewed political life.

As the 112th Congress began, the new Speaker, John Boehner, said that the House intends to move on all three trade pacts.  On January 25, the House Ways and Means Committee held a hearing to consider all three FTAs, setting the stage for consideration of these agreements by Congress in the coming months.

The agreement is an integral part of the President Obama’s efforts to increase opportunities for U.S. businesses, farmers and workers through improved access for their products and services in foreign markets and supports the President’s National Export Initiative goal of doubling of U.S. exports in five years.

According to the Fact Sheet by the U.S. International Trade Commission (ITC), the agreement will promote the further integration of the U.S. and Korean economies and enhance the competitiveness of U.S. businesses in the world’s 12th largest economy.  The agreement is an important demonstration of the Administration’s advancement of free and fair trade and will complement the Obama Administration’s efforts to expand business opportunities for the United States in Asia, including through such initiatives as the Trans Pacific Partnership.  The estimated tariff cuts alone in the U.S.-Korea trade agreement will increase exports of American goods by $10 billion to $11 billion.  The Agreement would eliminate tariffs on over 95 percent of industrial and consumer goods within five years.

The U.S.-Korea trade agreement will open Korea’s $560 billion services market to highly competitive American companies – supporting jobs for American workers in sectors ranging from delivery and telecommunications services to education and health care services.

The U.S-Korea trade agreement creates new opportunities for U.S. manufacturers seeking to export to Korea in two ways: first, it eliminates tariffs, or duties, charged when U.S. exports come into Korea; and it addresses non-tariff barriers to U.S. exports – whether by eliminating barriers that are in place today, or by establishing a framework to prevent non-tariff barriers from arising in the future.  Under the agreement, U.S. exports of aerospace, automotive, consumer goods, electrical/electronic goods, metals, scientific equipment, and shipping and transportation equipment will gain duty-free access to the Korean market.  Beyond tariffs, the agreement establishes strong new rules on how Korea will develop regulations applied to U.S. exports, and contains state-of-the-art protections on intellectual property rights (IPRs).

The U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea’s 49 million consumers, giving American agricultural producers more market access in two ways – by getting rid of tariffs charged when U.S. exports come into Korea, and by laying out a framework to tackle other barriers to U.S. exports –even those that might arise in the future.  Tariff eliminations on Korea’s existing 40 percent tariff will further boost beef exports, saving an estimated $1,300 per ton of beef imported to Korea – savings that would total $90 million annually for U.S. beef producers at current sales levels.

The U.S.-Korea agreement expands U.S. firms’ access to the $100 billion Korean government procurement market, creating new opportunities for exporters, and ensuring that U.S. firms will get to bid on contracts on a level playing field with Korean firms. At the same time, the agreement’s government procurement rules ensure that certain American business sectors – such as small businesses or textile companies bidding on Department of Defense procurement – do not face foreign competition for key government contracts here at home.

The agreement’s procurement obligations also maintain American environmental and labor safeguards.  The Korean government will be held to the same level of accountability for meeting labor commitments as it is for meeting other commitments in the agreement.  Under the agreement, the Korean government – which has already demonstrated a significant commitment to environmental protections – will be held to the same level of accountability for meeting environmental commitments as it is for meeting other commitments in the agreement.

This all sounds great, but the “devil is in the details.”  In the February 18, 2011 issue, Richard McCormack, publisher of the Manufacturing & Technology News, wrote, “If American are interested in determining on their own if the Korea Free Trade Agreement will benefit he U. S. economy (and their own job prospects) good luck!   He quoted a few paragraphs from the six-page addendum released by U. S. Trade Representative Ron Kirk on February 10, 2011 as an example of how incomprehensibly worded this agreement is written.  Check it out for yourself at http:www.ustr.gov/webtm_send/2557.

According to research by the Economic Policy Institute, KORUS  “will increase the U. S. trade deficit by about $16.7 billion and displace about 159,000 American jobs within the first seven after it takes effect.”  Robert E. Scott noted, “The USIT has a history of vastly underestimating the negative impacts that free trade agreements have on the U. S. economy.  In 1999, it estimated that China’s entry into the World Trade Organization would increase the U. S. trade deficit with Chin by only $1.0 billion, and have no significant impact on U. S. employment.  In fact, the U. S. trade deficit with China increased by $185 billion between 2001 (when China entered the WTO) and 2008, and 2.4 million U. S. jobs have been displaced or lost.”

The following list details the reasons why the publisher and staff writers of the Economy in Crisis website opine that this trade agreement would be disastrous for America:

  • It will dramatically export more American jobs and increase our trade deficit.
  • Korea will gain unhindered liberties to change U.S. laws; even prevailing wage laws can be challenged.
  • The U.S. government will lose the ability to regulate the American banking industry as the agreement was negotiated before the financial collapse of 2008.
  • The Korean FTA will allow foreign monopolies to take over U.S. industries, making any laws ore regulations that would stop companies from becoming monopolies illegal. This will make preventing foreign takeovers impossible.
  • Korea will be able to insource low-wage jobs to the U.S., but American companies will NOT get the same access to South Korea.
  • American textile industry will be rendered uncompetitive.
  • The U.S. beef industry will continue to diminish as Korea will not accept our beef, but will have unrestricted access to ship their beef to us.
  • More unchecked contaminated food will legally enter the U.S. – and we won’t be able to stop it.  Korus will put limits on our ability to check food imports.
  • ”Buy American” food support will become illegal. .
  • South Korea will still use barriers that the U.S. does not, continuing their Value-added Tax of 10 percent that will act as a tariff.
  • Korean companies will have right to sue the United States for lost profits, but U. S. companies will not have their right.
  • There is nothing in the Korean FTA to stop South Korea’s currency manipulating practices, which are presently prevalent.

The Coalition for a Prosperous America concurs with the above reasons and outlines a few more reasons for opposing KORUS:

1.      Currency:  South Korea has a history as a currency manipulator.  The trade deal does nothing to prevent a return to massive undervaluation of the “won” which taxes our exports and subsidizes their imports.

2.      Trans-shipping from China/35% Rule of Origin:  Korus requires only 35% of a product to be made in South Korea to be allowed into the U. S. with lower tariffs.  China is Korea’s biggest trading partner.  We will see tremendous volumes of Chinese goods shipped through Korea to the U.S. with nearly two-thirds made in China.

3.      Eroding U.S. Trade Laws:  The KORUS FTA slows the Korean government several avenues to weaken U. S. trade law enforcement when domestic industries seek a remedy for foreign unfair trade practices, including countervailing duties and anti-dumping duties.

“The nine members of the House Trade Working Group released a statement condemning the South Korea Free Trade Agreement (KORUS), in opposition to Republican and presidential support for the disastrous deal.  Rep. Mike Michaud (D-ME) called the proposed deal a “fundamentally flawed trade agreement that will cost us jobs in the United States.”  “The war on the middle class continues. Its greatest battle of 2011 will be the Korea free trade agreement,” said Rep. Brad Sherman (D-CA).  Sens. Susan Collins and Olympia Snowe, both Republicans from Maine, have also refused to sign on to a letter demanding the USTR present Congress with a treaty to vote upon, citing various concerns.”

As bipartisan opposition begins to coalesce against this failed trade deal, other Senate Republicans have threatened to block the nomination of a new Commerce Secretary until KORUS is approved.  Members of the House Working Trade Group have pledged to begin an education campaign to sway their colleagues, but this alone may not be enough.

Staff writer Sam Williford, wrote “We need fair trade agreements that correct America’s trade imbalance as well as protecting the rights of workers and the environment. This agreement is clearly unfair, especially with respect to automobiles.  The U.S. would be allowed to export up to 75,000 a year to South Korea compared to the more than half a million South Korea exports here.  By way of comparison, in 2007, the U.S. sold 7,000 American vehicles in South Korea, or less than one percent of the entire market.  South Korean automakers, on the other hand, sold 615,000 vehicles in the U.S. that same year.  Korea has only 48 million people – the U.S. has over 300 million.  It would not be possible to have anything but a massive trade imbalance with this country.  In addition, KORUS does nothing about South Korea’s value-added tax, or government policy to audit anyone who buys an American vehicle.”

Free trade agreements that increase exports for certain industries and increase imports far more for other industries are not the answer.  Instead of another trade agreement that makes no sense for America, we need a national trade and economy strategy.

In his book, Free Trade Doesn’t Work, What Should Replace It and Why, Ian Fletcher stated, “It has been estimated that every billion dollars of trade deficit costs American about 9,000 jobs.  After losing 5.5 million manufacturing jobs since the year 2000, we can’t afford to lose that many more through another bad trade agreement.

Take action against the U. S.- Korea Free Trade Agreement today!  Our elected representatives need to be held accountable for how they vote. Contact your representative in Congress and let them know they can’t count on your vote if they continue to approve job-killing “free” trade deals!

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The Importance and Promise of American Manufacturing

Tuesday, April 12th, 2011

At a time when most economic news articles are on the negative side, it’s refreshing to read a report that corroborates the “why” portion of my book, Can American Manufacturing be saved?  Why we should and how we can.  Last week, the Center for American Progress released a report titled, “The Importance and Promise of American Manufacturing, Why It Matters if We Make It in America and Where We Stand Today,” co-authored by Michael Ettlinger and Kate Gordon.   The 41 page report is filled with interesting charts and graphs and can be downloaded at www.americanprogress.org.   The Center for American Progress is a nonpartisan research and educational institute dedicated to promoting a strong, just and free America that ensures opportunity for all.

The authors echo what I have been saying – “Manufacturing is critically important to the American economy.  For generations, the strength of our country rested on the power of our factory floors—both the machines and the men and women who worked them.  We need manufacturing to continue to be bedrock of strength for generations to come … The strength or weakness of American manufacturing carries implications for the entire economy, our national security, and the well-being of all Americans.”

The Executive Summary states that supplying our own needs through a strong domestic manufacturing sector protects us from international economic and political disruptions, but most importantly our national security where the risk of a weak manufacturing capability is obvious.   Over reliance on imports and high manufacturing trade deficits make us vulnerable to everything from exchange rate fluctuations to trade embargoes to natural disasters.   The authors conclude that American manufacturing is not too far gone to save, and  that while manufacturing in the United States is under threat, and faces serious challenges, it is by no means a mere relic of the past.  It is a vibrant, large sector of our economy—even if sometimes it’s hard to see that as manufacturing jobs are lost, as factories close, and as sections of the country deindustrialize.

The purpose of the report is to examine where the United States remains competitive in manufacturing at home and abroad.   The authors began by detailing why manufacturing remains so important to our economy, our society, our national security, and our ability to remain the world’s science and innovation leader in the 21st century.  Then it looks at our domestic manufacturing base and our top manufacturing export sectors to gauge where U.S. manufacturing remains competitive.  The report does not outline a manufacturing policy agenda.

The authors state that the health and future of manufacturing in the United States matters, representing 12 percent of the U.S. economy, and put that in perspective by commenting that when the United States recently lost less than 4 percent of its gross domestic product, or national income, the result was labeled the “Great Recession.”  They note that “the manufacturing sector also boasts an outsized importance that is understated by even that 12 percent.”  While the United States will never again dominate world manufacturing the way it did in the decades immediately following World War II and no country is likely to ever do so again, manufacturing is, can, and should remain an important part of our economic future.

The report states that one key reason manufacturing is so important is its position as the cornerstone of the success of many other economically important activities.  This role has been the subject of a longstanding debate as to whether the United States should hold onto its manufacturing sector or instead become a ‘postindustrial’ society.”  This debate started in the 1980s when Japanese goods started flooding the U.S. market.  Some economists argued then that America should move beyond competition for manufacturing jobs and adopt a new economic growth pattern based on service jobs in knowledge-based industries.  These economists argued that just as the United States shifted away from agriculture and into industry, so should it shift from industry into services as the primary source of economic activity for the future.

The authors point out that a strong manufacturing sector does not come at the cost of a strong service sector—each manufacturing job actually supports multiple jobs in other sectors.  “As economists Stephen Cohen and John Zysman wrote in the late 1980s, the manufacturing sector does not just include the group of employees who work  n the factory floor. Instead, the manufacturing sector has “direct linkages” to high-level service jobs throughout the economy: product and process engineering, design, operations and maintenance, transportation, testing, and lab work, as well as sector-specific payroll, accounting, and legal work.”

As an example, they note that motor vehicle manufacturing now creates 8.6 indirect jobs for each direct job. Computer manufacturing creates 5.6 indirect jobs and steel product manufacturing creates 10.3 indirect jobs for each direct job (Authors’ calculation of Bureau of Labor Statistics, “Employment Requirements Matrix: Chain-Weighted Real Domestic Employment Requirements Table, 2008.” Downloaded March 2, 2011)

They conclude that when shop floor manufacturing jobs depart, other jobs go with them—and with those jobs go the ability to create and innovate.  Declines in the U.S. manufacturing sector mean declines in our nation’s overall “industrial commons”—a set of related industries and activities including those in the highly prized knowledge-based economy.  According to Harvard economist Gary Pisano, when manufacturing moves overseas so does this industrial commons, meaning that we lose not only production prowess but also the process innovation that comes from collocating research and development, design, engineering, and manufacturing.

“In addition to undermining the ability of the United States to manufacture high tech products, the erosion of the industrial commons has seriously damaged the country’s ability to invent new ones,” writes Pisano in a recent Harvard Business Journal online debate.  With the loss of the commons and the jobs comes a decline in U.S. workforce skills and the ability to invent and innovate that can only come from the hands-on experience of working in an industry.  The upshot: If we lose our ability to make things, we may well lose our ability to invent them.  (Robert H. Hayes, “Outsourcing Is High Tech’s Subprime-Mortgage Fiasco,” Harvard Business Review, October 7, 2009,  http://blogs.hbr.org/hbr/restoring-american-competitiveness/2009/10/outsourcing-is-high-techs-subprime.html.)

The authors state that there is strong anecdotal evidence that if we cede production on a process invented in the United States then we may lose future iterations of innovation of that process.   They cite solar panels as one example.  Invented in New Jersey at Bell Laboratories in 1954, the production of solar photovoltaic panels has largely moved overseas (China is currently the world’s largest producer), and most new innovations in panel production, such as process improvements that make the panels far more powerful by altering their electrical properties, are happening outside of our nation.  (Kevin Bullis, “Solar’s Great Leap Forward,” MIT Technology Review, July/August 2010, available at http://www.technologyreview.com/energy/25565/5)

They cite a recent set of studies by Carnegie Mellon University engineering professor Erica Fuch, who examined the impact of offshoring production on technological innovation. Her key finding:  When optoelectronics companies offshored production of their original designs to, for instance, Asia, they tended to produce those initial designs cheaply and efficiently.  When these firms then began work on new and improved designs, however, they tended to lose valuable time and knowledge if their operations were off shore.  (Erica Fuchs and Randolph Kirchain, “Design for Location? The Impact of Manufacturing Offshore on Technology Competitiveness in the Optoelectronics Industry,” Management Science 56 (12) (2010):2323–2349, available at http://mansci.journal.informs.org/cgi/content/abstract/56/12/2323

They conclude that “moving manufacturing overseas impeded the companies’ ability to compete and keep at the forefront of design and production and to efficiently push forward new technologies.  These companies will follow other manufacturers who have shifted design and innovation closer to their physical operations— witness the photovoltaic manufacturing industry.”  They note that “Fuchs’s findings are critical not only to the question of why basing manufacturing in the United States matters but also to the analysis of what kinds of policies might best support the types of manufacturing that will ultimately put our nation in the best economic position.  Fuchs’s research shows that when you’re talking about the United States, manufacturing does matter, but advanced and cutting-edge manufacturing matters even more.  When such manufacturing leaves, it takes much more than the factory floor jobs—as important as those may be—it takes technology, innovation, and the next generation of products with it.”

The authors point out that offshoring and outsourcing can grow as parts of different manufacturing supply chains develop elsewhere.  U.S. companies that supply these manufacturing operations offshore find it more and more advantageous to go where their factories are, which is why industries can get slowly hollowed out as other countries become the central places of production.  “The United States risks being relegated to the periphery, which in turn would hurt our capacities at innovation and thus threaten our innovation and technology leadership.  Remaining capacity can hang on for a while but the leadership, the concentration of wisdom, and skill slips away—and once gone is hard to recapture.”

They note that whether the United States still dominates manufacturing as it once did is a different question than whether U.S. manufacturing can compete.  U.S. manufacturers are successfully making and selling their goods on a massive scale.  One reason is that we are the biggest-consuming country in the world, and “one could argue that as a result we cannot avoid being a large manufacturer.  There are enough products that are expensive or difficult enough to ship that it’s hard to avoid making them here.  There’s certainly truth to the story that some U.S. manufacturing succeeds because of this advantage.”

Part of how a business competes is being close to its customers so selling goods in a home market is nothing to be ashamed of.  However, there’s clearly more to U.S. manufacturing success than a captive market.  U.S. manufacturing is also a top exporter.  Proximity is a factor to the extent those exports are to Canada and Mexico as these two countries account for about a third of U.S. manufacturing exports.  But the United States was the third-largest exporter of manufactured goods in the world in 2009 and 2010, behind China and Germany.

The report shows that manufacturing in the U. S. covers a broad range of activities, but there are six large,  subsectors that account for the bulk of U.S. manufacturing.   The top six subsectors by value added are:

• Chemicals, including pharmaceuticals and other chemical products

• Transportation equipment, including, most prominently, automobiles and aircraft
• Food, which includes everything from steaks to potato chips
• Computer and electronic products, including semiconductors, lab equipment, and a host of other products
• Fabricated metal products, including a range of products from pre-fab sheds to I-beams
• Machinery, which includes goods such as air conditioning units and farm equipment

The report does not contain a detailed analysis of the competitiveness of U.S.-based manufacturing, but notes:

• Wage differences aren’t everything
• The overall cost differences between countries aren’t as large as they are sometimes made out to be
• Different industries care about different costs differently29
• Proximity to markets matters
• Proximity to research and management and resources also matters
• Skills matter

They conclude by stating that as “long as there is demand in the United States for manufactured goods as well as the innovators, manufacturing workers, and available capital necessary to remain competitive, manufacturing can continue to be important in the U.S. economy.  U.S. workers are nervous about taking jobs in industries that have seen declining employment.  Other countries offer enormous subsidies in a variety of ways. And we are not alone in being innovators—and have become much less welcoming to innovators from abroad who wish to live in the United States… President Obama’s focus on manufacturing and exports are welcome signs, as is the introduction of a new “Make It in America” agenda in Congress.  But this is an effort that’s going to take more than setting goals and one president’s focus…The United States needs to get into the game and find the right steps for us that will create an environment where a nation’s manufacturing sector can flourish and succeed—not just in selling here, but to the world.”  I heartily concur and have proposed many suggestions for steps to take to preserve American manufacturing in my book.

 

Posted in General, Outsourcing, Reshoring | No Comments »