savingusmanufacturing.com

The Committee to Support U. S. Trade Laws (CSUSTL) is organizing a “Conference on the Renaissance of American Manufacturing” at the National Press Club on September 28^th in Washington, D. C. to discuss how to get the United States back in business as a world leader in manufacturing and create political momentum going into the fall congressional elections that will lead to changes in government policies to benefit U. S. manufacturers and their workers. Other issues to be discussed include structural changes needed in the United States; what must be done to bring manufacturing back; how to make trade laws and trade agreements effective for the manufacturing sector; and the politics of rebuilding manufacturing.  The conference is open to the public.  To register, send an email to privas@kslaw.com.

The CSUSTL is an organization of companies, trade associations, labor unions, workers, and individuals committed to preserving and enhancing U. S. trade laws.  CSUSTL’s members span all sectors, including manufacturing, technology, agriculture, mining, energy, and services.  CSUSTL is dedicated to ensuring that the already weak trade laws are not further weakened through legislation or policy decisions in Washington, D. C., in international negotiations, or through dispute settlements at the World Trade Organization and elsewhere.

Gilbert Kaplan, president of CSUSTL, said “A lot of people are concerned about manufacturing all across the spectrum, in the Democratic and Republican parties. But we keep losing manufacturing jobs, and plants are moving off-shore.  The question is why haven’t we made progress and what do we need to do to make more progress?” (Friday, July 30, 2010 Manufacturing & Technology News)

As reported on September 9, 2009 in PRNewswire, CSUSTL submitted comments to the Office of the U. S. Trade Representative regarding the proposed U.S.-Korea Free Trade Agreement.  CSUSTL strongly objected to the antidumping (AD) and countervailing duty (CVD) provisions of the section on trade remedies, citing concerns that the proposed measures would result in changes to the related legal processes, ultimately jeopardizing the ability of U. S. business to seek relief when harmed by unfairly-priced foreign imports

Mr. David Hartquist, Executive Director of CSUSTL, remarked, “While there is no doubt that the Agreement offers some economic benefits to U. S. industry, there is a strong risk that these U.S.-Korea Free Trade Agreement provision could seriously put at risk the integrity and enforceability of U.S. AD/CVD laws, which should be at the core of U. S. trade policy . . . they would set a very dangerous precedent for future free trade agreements the United States may enter with other countries.”

On Thursday, August 5, 2010, CSUSTL commended U. S. Senators Ron Wyden (D-OR) and Olympia Snowe (R-ME) for their legislation introduced to combat the evasion of U. S. trade remedy laws through custom fraud.  CSUSTL President Gilbert Kaplan said, “Passing this legislation will give the U. S. government the tools it needs to prevent bad actors from committing fraud and evasion to avoid paying antidumping and countervailing duties.  This is particularly crucial for U. S. companies struggling to recover from the recession that have trade orders in place.  It is now more important than ever to have strong and enforceable trade laws in this country.”  The Enforcing Orders and Reducing Circumvention and Evasion Act of 2010 (ENFORCE Act) gives the Department of Commerce the authority to investigate possible circumvention of AD/CVD orders.  It establishes, for the first time, a procedure whereby U. S. industry can petition the U. S. government to investigate specific allegations of AD/CVD evasion.

Roger Schagrin, Chairman of CSUSTL’s Government Affairs Committee urged the House and Senate to “act on enforcement legislation this year, so that we can end evasion that reduces the utility of trade remedy orders and impedes economic recovery.”

The United States and the Republic of Korea signed the U.S.-Korea Free Trade Agreement on June 30, 2007, but Congress hasn’t ratified it yet.

During his presidential campaign, then Senator Barack Obama pledged to “create good paying jobs here in America” in a speech to the United Steelworkers Union in 2008, but now as President, “his insistence to forge ahead with a trade pact negotiated under the Bush administration and almost universally loathed in his own party has baffled some, who say it is a betrayal of his campaign promises on trade.”  While some Congressional Democrats have vowed to fight against the agreement, many critics are now calling for the agreement to be renegotiated instead of scrapped altogether.

In a letter to the president, Senators Sherrod Brown (D-OH) and Debbie Stabenow (D-MI) wrote, We believe the Administration must focus on driving a hard bargain with Korea – one that shows success in gaining market access while combating unfair trade practices, and providing a new framework that gives confidence to American producers and manufacturers that global trade deals product jobs and better living conditions at home and abroad.”

According to the Economic Policy Institute’s estimates, the agreement could cost as many as 159,000 American jobs and increase the trade deficit by $16.7 billion in just the first seven years.  With unemployment hovering around 10 percent and an employment gap of nearly 11 million jobs, the last thing needed is a trade agreement that will cost more American jobs and raise the trade deficit.

Would it be any different on trade issues if Republicans took back control of Congress in November?  Not according to Senate Minority Leader Mitch McConnell.  On August 2, 2010, he reportedly said that voters could expect less spending and government intervention and a renewed push to finish free trade deals with Colombia, South Korea and Panama.

It would seem that no matter which political party controls Congress, American manufacturers and their workers lose, either through oppressive regulations and taxes that drive jobs overseas or through free trade agreements that entice the export of jobs.  Will either party ever come to the realization that what the American people need is jobs?   If our elected representatives don’t wake up, it will not be possible to have an American manufacturing renaissance that would create the jobs our country needs.

Do you remember playing a game when you were a child where you tried your best not to walk on any cracks in the sidewalk so the “big bad bear” wouldn’t get you?  If the sidewalks were old, there were so many cracks that you had to tip toe to get by without stepping on any.  Well, businesses are being forced to play a similar game with government today, and the “cracks” are getting so close together that it’s almost impossible to tip toe through the maze of “cracks” that come in the form of government taxes and regulations.

The new Health Care Reform Act has vastly expanded the requirement for businesses to file IRS Form 1099s for all payments over $600 annually.  Current law requires a business to provide a completed 1099 form to any independent contractors, subcontractors, freelancers, etc. that are not employees or corporations to whom they made more than $600 in payments over the course of a year.  The new law extends this requirement to corporations as well.  This could mean that a business would have to provide a 1099 to their utility company and every other vendor to which they pay more than $600 a year for services.  For metal manufacturers, such as machine shops, sheet metal fabricators, stampers, and casting companies, this could mean they                            have to provide a 1099 for companies that provide surface finishing services such as painting, plating, or powder coating.

A new survey by the National Association for the Self-Employed (NASE) found that self employed and micro-businesses (under 10 employees) are “expecting this new regulatory burden to greatly or somewhat increase the amount they spend on tax preparation.”  With over 40 percent of survey respondents still preparing their own taxes, this added workload will significantly increase the time business owners spent on tax preparation or force them to hire an accountant, adding to their cost of doing business.  This is another example of how the indirect costs of complying with government rules and regulations are just as burdensome to businesses as the direct costs of taxes and regulatory fees.

A study by the Regulatory Studies Program at George Mason University’s Mercatus Center in 2001(“A Review and Synthesis of the Cost of Workplace Regulations”) found that workplace regulations have a significant cost. The researchers surveyed 100 manufacturers in the United States, ranging from 7 employees to 65,400 employees.  The survey showed:

Complying with workplace regulations cost an average of $2.2 million per manufacturing firm or about $1,700 per employee

• Smaller firms (less than 100 employees) faced higher costs than large firms (500 or more) with costs of $2,573 per employee and $1,530 per employee respectively

The survey revealed which types of regulations affect manufacturers the most:

• Worker Health and Safety regulations, including OSHA, accounted for one-third the cost of compliance

• Regulations governing employee benefits ranked second, making up 27 percent of the cost of compliance
• Civil rights, labor standards, and labor-management relations regulations each made up about 10 percent of the cost of compliance

If these amounts were extrapolated to all manufacturing firms in the United States, the total cost of compliance would be about $32 billion.

A 2005 study on “The Impact of Regulatory Costs on Small Firms” by W. Mark Crain, Lafayette College for the Small Business Administration Office of Advocacy showed that small businesses continue to bear a disproportionate share of the federal regulatory burden.  The cost of compliance with all federal economic, workplace, environmental, and tax regulations is an average of $5,633 for all sized firms.  However, for companies under 20 employees, the cost was $7,647 compared to $5,282 for companies over 500 employees.  In the manufacturing sector, the cost per employee is $10,175; nearly double the average for all firms.  For small manufacturers, the cost is $21,919 per employee compared to $8,748 for large firms.  For medium-sized firms, the compliance cost per employee is $10,042.  In the service sector, regulatory costs differ little from small to larger firms.

A recent NAM study showed that U. S. manufacturers face a 22 percent cost premium compared to its trading partners due to excessive regulation and other external costs.   U. S. manufacturers cite the massive amount of government regulation imposed on them, especially environmental regulation, as one of the prime reasons they have made the decision to outsource manufacturing offshore.   Countries such as China may have environmental and labor regulations on the books, but government officials who have been told to look the other way do not enforce them.

If Federal lawmakers want to “save American manufacturing,” they need to wake up to the fact that adding burdensome government laws and regulations will actually reduce the tax revenue the federal government receives by driving manufacturers to export jobs overseas.  There is some talk in Congress about repealing this provision of the Health Care Reform Act.  I certainly recommend that they do so, but this is just another example of the unintended consequences of lawmakers voting on bills they haven’t read.  It’s almost as if government is choking “the goose that lays its golden eggs.”

No president, no member of Congress or the U. S. Senate, no governor, and no member of state legislatures can create private sector jobs.  Government programs may help or hinder businesses, but they all require government employees to administer them.  Government jobs cost taxpayers money while private sector jobs generate tax revenue for government.

Data from the Federal Small Business Administration (SBA) shows that 99.9% of all businesses are small businesses and that 80% of all jobs are created by small businesses. About 99% of all manufacturers are small and medium-sized companies, employing more than nine million workers.  Since the recession began at the end of 2007, these companies have lost more than 850,000 jobs, which is 42% of the total jobs lost in the goods-producing sector.

The question is if we are in a recovery, even though weak, why aren’t businesses creating jobs?  The number one reason businesses aren’t expanding and hiring more people is that they are afraid.  They are afraid the weak recovery won’t last and we will have a “double dip” recession.  They are afraid of the increase in taxes when the Bush tax cuts sunset at the end of the year.  They are afraid of the cost to their businesses to comply with the Obama health care program.   They are afraid of the effect on the economy of the escalating national debt.  They are afraid of the possibility of Kerry-Lieberman cap-and-trade legislation passing Congress and being signed into law.  Even though the latter looks unlikely to pass this year, it could be revived in the next session just as the Obama health care bill was revived and passed earlier this year after seeming dead at the end of last year.

While the business outlook for manufactures improved for the fifth consecutive quarter according to the latest Manufacturing Index by the National Association of Manufacturers (NAM) and Industry Week, 58% of respondents said that uncertainty about the business outlook was delaying both their company’s plans to expand employment and their capital spending.  An additional 8% said it was delaying plans to expand employment and another 8% said it was delaying plans to expand capital spending.

After the Bush tax cuts sunset on December 31, 2010, individual tax rates will increase to nearly 40%.  About 68% of all manufacturers are organized as S-corporations or sole proprietorships that are taxed at the individual rate.  Increasing taxes would deal a painful blow to small businesses recovering from the economic recession.  According to NAM’s economic models, manufacturers would lose an additional 238,000 jobs by 2019 if these tax increases were enacted.

On January 1, 2011, the capital gains tax will jump up 33% – to 20% from 15%, and the tax on dividends will go up 164% – from 15% to 39.6%.  The death tax will go up from a tax rate of zero this year to a rate of 55% on estates of one million dollars or more.  This can have a devastating effect on the ability of small family-owned businesses to continue after the principal owner dies.  This exorbitant tax can force survivors to sell the business in order to pay the estate taxes and thus lose their family’s livelihood.

Many other tax cuts from the Bush administration will disappear, and a new set of tax hikes will appear, such as the elimination of the research and development tax credit and widening the application of the Alternative Minimum Tax so that more individuals pay it.  According to the Association for Tax Reform there will “literally be scores of tax hikes on businesses that will take place.  The Congressional Budget Office estimates that the expiration of the Bush tax cuts will cost taxpayers $115 billion next year alone and $2.6 trillion through 2020.

As reported in the July 23, 2010 Wall Street Journal, “Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the U. S. ‘should maintain or stimulus in the short term.’  Extending the Bush tax cuts ‘is one way’ way of doing that, he said.”   The article also reported, “pressure is growing on the administration from a small number of Democratic lawmakers to extend all the Bush cuts, which include taxes on investment income and capital gains.”

A study conducted by Science Applications International Corporation (SAIC) for the American Council for Capital Formation and the Small Business and Entrepreneurship Council assessed the impact of the proposed Kerry-Lieberman cap-and-trade bill on manufacturers jobs, energy prices, and the overall U. S. economy.  The analysis concluded that as many as 1.9 million jobs would be lost and the cumulative loss to the U. S. Gross Domestic Product (GDP) would be up to $2.1 trillion.    Residential electricity price would increase up to 42% and gasoline prices per gallon would go up 18%.  SBE Council President and CEO, Karen Kerrigan said, “Small business owners cannot create more jobs when costly policies such as Kerry-Lieberman take more of their hard-earned resources.”

As long as the current administration views businesses as “the rich” that need to pay higher taxes, it will be difficult to create the jobs we need to reduce unemployment and foster real economic recovery.  Businesses are employers that provide jobs.  We don’t have an agricultural economy like we did in the Great Depression.  People can’t go back to living off farms when they lose their manufacturing jobs.  We need to help businesses succeed and grow, not put burdens on businesses in the form of tax increases and other onerous laws and regulations.

Government and non-government organizations provide lots of help for San Diego companies.  Whether you are an inventor working on your first product idea, an entrepreneur starting your first business, or an established company, there are a multitude of resources to help San Diego companies grow and succeed.  No matter what the type of business you are starting or have established, there is probably an organization in San Diego that can help you.

If you need basic business consulting, you can get help from the Small Business Administration-sponsored Service Corps of Retired Executives (SCORE) or from one of the government-funded Small Business Development Centers, one located in North County at Miracosta College and the other located in South County at Southwestern College.

If you are an inventor designing your first product, then you should attend the monthly meeting of the San Diego Inventors Forum to learn from and network with other inventors, service providers and successful entrepreneurs.  Topics covered at the meetings include entrepreneurship, all aspects of product development, patents, licensing, manufacturing, funding, and marketing.   An annual best invention competition provides small cash awards.

If you have a technology-based company, then CONNECT would be the best resource for you.  CONNECT was originally launched 25 years ago by the University of California at San Diego (UCSD) as a type of “incubator without walls” program and spun off as an independent non-profit organization a couple of years ago.  CONNECT’s Springboard program is a business creation and development program for innovators at all stages from lab to production, providing hand-on mentoring and coaching by more than 1,000 successful CEO’s, CFO’s and CMO’s in its Entrepreneurs-in-Residence Program. Companies that complete the Springboard program become eligible to present their “pitch” for funding to the Tech Coast Angels.

CONNECT also manages the San Diego chapter of the MIT Enterprise Forum where case studies of local companies are discussed and CEO presenters gain valuable advice to help their company set their course and meet challenges.  CONNECT also gives awards in its annual Most Innovative Product competition.

San Diego Sport Innovators (SDSI) is a new program initiated by CONNECT in the last year to accelerate the growth of San Diego’s vibrant sports economy.  SDSI provides mentoring, education, and capital funding opportunities for startups.  Former basketball star and coach, Bill Walton, became Executive Chairman of SDSI earlier this year.

CommNexus San Diego, formerly the San Diego Telecom Council, is a non-profit network of communications industry companies, defense industry companies, service providers, professional trade organizations, and local government.  CommNexus facilitates new business relationships through their CommNexus Marketlink^TM program and helps early-stage high tech companies through their non-profit incubator, EvoNexus^TM that provides mentoring, education, facilities, utilities, and other services.  The San Diego region has become known as “Silicone Beach” in the telecommunications industry.

There is another incubator for startup companies, the San Diego Technology Incubator, located on the campus of San Diego City College downtown.  SDTI is co-located with the Center for Applied Competitive Technologies, one of 12 centers located through the state to technical assistance, education, manufacturing training, and consulting services to contribute to continuous workforce development, technology deployment, and business development.

Another organization that provides resources for high-tech companies is TechAmerica San Diego, formerly AeA, the largest and strongest voice and resource for technology companies in the United States.  In addition to the usual trade association benefits, TechAmerica San Diego helps member companies through Roundtable groups for chairmen/presidents, operations, marketing, human resources, product development, and CFO’s.  The emphasis for the operations roundtable in which I have participated on the planning group for the past few years has been sharing best practices and tools for continuous improvement in the Lean/Six Sigma journey.

If you have a life sciences or medical industry company, then BIOCOM is the organization for you.  BIOCOM has become the largest regional life sciences association in the world.  BIOCOM

Works to attract investment dollars to its member companies, helps save members money when buying commodity products, helps build professional networks, works with local universities and colleges to partner on professional development courses, and works to provide the life science industry with favorable government policies on the local, state, and federal levels.

Not to be overlooked is the San Diego Venture Group, providing education and networking opportunities for early-stage to well-established companies.  Month after month, 300-400 attendees show up for breakfast at 7:00 AM to network and enjoy a well-prepared presentation, forum, or panel discussion on topics of interest to entrepreneurs.  Entrepreneurs wear blue badges, service providers wear yellow badges, and investors wear green badges.  Of course, some investors want to “hide” as service providers, and some entrepreneurs also invest in other startup enterprises.

A new non-profit organization was formed in 2008 to accelerate San Diego as a world leader in the clean technology economy  — CleanTECH San Diego.  Its mission is to stimulate innovation and advance the adoption of clean technologies and sustainable industry practices for the economic, environmental, and social benefit of the greater San Diego region.

The above-mentioned organizations are by no means a complete list of government and non-government organizations that help business in the San Diego region.  Other organizations can be located using the Biz San Diego directory.

Although San Diego businesses have to contend with the same adverse business climate as the rest of California, the plethora of resources and help available still make it an attractive area for startup companies.  In fact, CONNECT reported in the Sunday, July 18, 2010, issue of the San Diego Union-Tribune that more than 300 technology startups were formed here in 2009 and another 57 startups were formed in the first quarter of 2010.  San Diego has always been a region of startup businesses, especially in the manufacturing and high-tech industries.  American entrepreneurism and inventiveness are the two strongest assets for saving American manufacturing.

The National Institute of Standards and Technology (NIST) is the agency that would get the least amount of funding of the three agencies mentioned in last week’s blog article about the America COMPETES Reauthorization Act of 2010.  However, it is the agency that has ongoing programs benefiting manufacturers, especially through the Manufacturing Extension Partnership (MEP), established in 1988.

The MEP program is a national network with thousands of specialists who understand the needs of manufacturing and small businesses. The MEP program has assisted more than 200,000 firms through a network of centers across the country to assist small-and medium-sized manufacturers adopt and use the latest and most efficient technologies, process, and business practices.

MEP is participating in Manufacture America events launched by the International Trade Administration’s Manufacturing and Services unit.  The Manufacture America program is designed to help American manufacturers rethink, retool, and rebuild their operations through exploring new products, markets, processes, and sources of finance.   A series of Manufacture America regional conferences will convene to allow manufacturers to:

• Learn how they can retool and rebuild through entering new market segments, new industries, or new supply chains and modernize processes to become more sustainable and efficient while lowering operations costs.
• Hear success stories form manufacturers who have successfully retooled.
• Learn about growing industries.
• Learn about export opportunities as well as how to export.
• Learn about resources and funding that are available to help rethink and retool, including technical assistance and financing.
• Discuss issues the manufacturers face with federal, state, and local governments
• Network with representatives from other companies.

The other events will take place between August and October in Morgantown, WV, Pittsburgh, PA, Detroit, MI, Canton, OH, and Chicago, IL.   These states are home to the industries that have been hit the hardest by the recession; namely the automotive and machine tool industries.  The problem with events such as this is that they don’t receive publicity so very few companies are aware of them.

If your company isn’t already involved with a MEP center or with the trade and commerce agencies of one of the states in which an event will be held, you wouldn’t hear about the Manufacture America events. There are MEP programs in nearly every state from Alabama to Wisconsin.  To locate the nearest MEP program, visit www.nist.gov/mep.

In California, two organizations administer the NIST MEP Program:

California Manufacturing Technology Consulting (CMTC) – serving southern California from San Diego up to Fresno County in central California.

Corporation for Manufacturing Excellence (Manex) – serving northern California.

Both organizations leverage NIST funds with California’s Employment Training Panel (ETP) funds to reduce the costs of training to employers.   Companies qualify for ETP funding if they pay into the unemployment insurance fund, have a 20 percent turnover rate or less, and have a manufacturing NAICS code or can prove they face out-of-state competition.   Their employees are eligible for training if they are residents of California, work full time (35 hours a week or more), meet the minimum wage requirements, which vary by county, and have been employed at least 90 days prior to the first day of training.

Both organizations provide industrial services that are divided into practice areas that specifically support manufacturers:

• Strategic Business
• Lean Enterprise
• Information Technology
• Energy Services
• Quality
• Supply Chain Management

CMTC also operates the Small Manufacturers Advantage ™ program in which a no-fee assessment is conducted and a written report of improvement recommendations is provided.  The report includes the assessment, a roadmap, self-implementation tools, relevant articles, and a listing of other California business resources.  The report is designed in a format for self-implementation, but a follow-on “Jump Start” program of consulting by CMTC professionals can be scheduled at no cost.

When budget deficits are so high at the federal and state level, we can’t waste taxpayer money with programs and events that don’t reach the people that would benefit from them.  Now is the time for agencies and organizations receiving government funding to think “out of the box” and use new channels of communication to make people aware of events and programs that would be beneficial to them.  It’s time for all of us to be more proactive in keeping informed about programs and events that could benefit our businesses.  One such site is www.manufacturing.gov

On May 28, 2010, the House of Representatives passed the America COMPETES Reauthorization Act of 2010 (H.R. 5116) on the third try.  The bill would authorize $85.6 billion over five years for research and education programs at key federal agencies in an effort to boost U. S. competitiveness.  The bill moved over to the Senate, and on June 29^th, the Senate referred it to the Committee on Commerce, Science, and Transportation.

The original America COMPETES bill was passed in 2007 as a bipartisan effort in response to the 2005 National Academy of Sciences’ report, “Rising Above the Gathering Storm.  This Act authorized appropriations through FY 2010, and the reauthorization Act would authorize appropriations through FY 2015.  The goal of the original Act was to provide enough funding to double the federal budgets for the physical sciences and engineering over the next five years.  It also established the Advanced Research Projects Agency for Energy (ARPA-E)

The National Science Foundation, the Department of Energy Office Science, and the National Institute of Standards and Technology were appropriated 10.6 billion in FY 2008, 11.8 billion in 2009, and 12.3 billion for FY 2010.  These three agencies were highlighted for their support of economic competitiveness-related basic research.  However, these agencies were actually appropriated one to two billion less for FY 2008 through FY 2010 than the funding plan contained in the 2007 Act.   The reauthorization Act funding plan is even more conservative, only increasing funding for these agencies by 8.4% year over year, meaning that the goal of doubling the 2007 funding for the physical sciences and engineering is not even achieved by 2015.

Federal R& D funding declined between 1985 and 2004, dropping from 1.25 percent of the U.S. GDP to .080 percent in 2004.  What is even more serious is that technology R&D represented 48 percent and life sciences represented 36 percent.  By 2005, technology R&D represented only 32 percent and life sciences represented 54 percent.

Increasing federal R&D spending in technology is critical to maintaining American competitiveness in a global economy.  The maintenance of an effective U. S. R&D network is essential for attracting private domestic and foreign R&D funds and the subsequent manufacturing that results from the innovation process, which increases U S. value-added resulting in economic growth.

Innovation is the hallmark of U. S. manufacturing, and it requires a certain mass of interconnected activities, which like a snowball rolling downhill, grows in size as it proceeds towards end users.  R&D is required to keep the ball rolling to ensure more successes than failures.

Innovation resulting from federally funded research is responsible for the Internet, web browsers, the Mouse, fiber optics, MRI scanners, Doppler radars, global positioning satellites, and Nanotechnology just to name a few.  Consumers have benefited greatly from the large selection and quality of manufacturing goods available as a result of the innovative new products resulting from R&D.

America’s manufacturing innovation process leads to investments in equipment and people, to productivity gains, the spreading of beneficial technology to other sectors, and to new and improved products and processes.  It is an intricate process that begins with R&D.  This intricate process generates growth and higher living standards than any other economic sector.  But, it requires a critical mass to generate this wealth.  If the U. S. manufacturing base continues to shrink at its present rate, the critical mass will be lost.  The manufacturing innovation process will shift to other global centers.

It is imperative that the Senate pass the American COMPETES Reauthorization Act of 2010 without any further cuts in R&D funding.  Doubling or even tripling federal R&D funding for physical sciences and engineering is essential to saving American manufacturing and maintaining America’s competitiveness and national security.   Contact your senator today to support this critical bill.  All you have to do is click on www.senate.gov and type in your zip code, and you are automatically directed to your senator.

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.

After approving one of the largest budget-busting bills in U. S. history (Health Care Reform), the Obama administrations has decided to save money by eliminating the Bureau of Labor Statistics’ International Labor Comparison Program in the Fiscal 2011 Federal budget.

This program provides estimates of international comparisons to equivalent U. S. hourly compensations costs, productivity and labor costs, labor force, employment and unemployment rates, and consumer prices.  This data series is the only one of its kind in the world and has been in operation since the 1960s.  The measly two million dollars saved would be used to fund other BLS programs, such as the unemployment rate or Consumer Price Index.

The justification in the “Terminations, Reductions, and Savings” is that “the data series is used to produce articles, technical papers, or special reports that are not widely used,” which is in direct contradiction to the justification for funding the program in the 2010 budget; i.e., “policy makers through the U. S. government and U. S. business and labor groups who use the data to assess     U. S. economic performance relative to other countries and to provide indicators of the competitive position of the United States in increasingly globalized markets.”

The 2010 Edition has pages and pages of easy to read charts showing data such as industry output as a percent of world industry output in which the United States contribution is 18 percent compared to China’s 12 percent.  The United States still ranked number one in manufacturing output as a percent of world manufacturing output in 2008.  The United States ranked highest in productivity as measured by Gross Domestic Product per employed person at 97.1 compared to China’s rate of 10.2.   India ranked lowest at 7.5

For the first time, the 2010 Edition of Charting International Labor Comparisons included China in its annual series of labor costs based on a 106-page report by Dr. Judith Banister that was commissioned by BLS.   China’s average total compensation for all workers was estimated to be 67 cents per hour in 2007 or about three percent of the average hourly compensation of manufacturing production workers in the United States.   Ten of the 12 European countries, as well as Australia and Canada, had higher hourly compensation than the United States.

Perhaps the Obama administration doesn’t want business and labor groups to have access to data they could use to make decisions on trade policy issues or use to criticize current trade policies.  In the February 12, 2010 issue of Manufacturing & Technology News, retired federal economist, David Martin, commented, “The BLS International Labor Comparisons Office has been documenting global economic change that some people would apparently prefer that we not know about, whether we believe in it or not.  The three-word [Obama] campaign slogan of ‘Yes, we can,’ it would seem, is to be replaced with an older three-word saying, ‘ignorance is bliss.’”

The two largest manufacturing trade associations, the Manufacturers Alliance/MAPI, and the National Association of Manufacturers, have requested the Secretary of Labor and director of the Office of Management and Budget to reinstate the $2 million in funding this program.

If you want to join the effort to reinstate funding for this important program, you can sign the online petition started by Georgetown Public Policy Institute at http://www.ipetitions.com/petition/saveilc/.