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Are We Sufficiently Protecting our National Security?

Tuesday, February 6th, 2024

The answer is a resounding, “No!” For decades, we Americans have blithely ignored the long-term effects of allowing foreign investors or corporations to purchase the assets of our country in the form of companies, land, and mineral resources. We have been selling off our ability to produce wealth by allowing foreign corporations to purchase American companies, real estate, mines, and farm land. It is not just foreign companies buying our assets that is the problem ? it is the state-owned and massively subsidized companies of China that are the danger because China uses its state-owned enterprises as a strategic tool of the state. By pretending they are private companies abiding by free-market rules makes us the biggest chumps on the planet.

We didn’t let the USSR buy our companies, real estate, or farmland during the Cold War. We realized that we would be helping our enemy. This was pretty simple, common sense, but we haven’t had this same common sense when dealing with China.

Most foreign countries don’t allow 100% foreign ownership of their businesses, but sadly, the United States does not exercise the same prudence. We allow sales of U. S. companies to foreign companies unless there are national security issues, such as technologies that are utilized by our military and defense systems. We should be equally protective of our natural resources and farmland to ensure the health and welfare of all Americans.

In theory, we have the means to prohibit certain foreign investors or companies from acquiring U.S. assets that would pose a threat to our national security. The Committee on Foreign Investment in the United States (CFIUS) is the inter-agency body charged with conducting national security reviews for certain foreign investments in the United States. CFIUS retains the authority to review a transaction that could result in foreign control of any U.S. business and has the power to regulate, approve and deny these acquisitions. Australia, Canada, New Zealand and the United Kingdom are exempt from CFIUS reviews CFIUS submits an annual report to Congress and the most recent report was submitted on July 31, 2023.However, CFIUS has not been a member of the interagency Committee, so acquisitions of farmland were not reviewed with regard to impacting our national security.

CFIUS reviews were expanded when the President Bush signed H.R. 556, Foreign Investment and National Security Act of 2007(FINSA) on July 26, 2007 after the Dubai Ports World transaction passed through CFIUS without a formal investigation, leaving a surprised and angry Congress determined to avoid a repetition of that scenario.

The scope of CFIUS reviews was expanded when the Foreign Investment Risk Review Modernization Act of 2018 was passed by Congress on June 26, 2018. “The FIRRMA-amended CFIUS process maintains the President’s authority to block or suspend proposed or pending foreign “mergers, acquisitions, or takeovers” of U.S. entities, including through joint ventures, that threaten to impair the national security.” It expanded the jurisdiction of CFIUS to address growing national security concerns over foreign exploitation of certain investment structures which traditionally have fallen outside of CFIUS reviews.

According to the IPM News article of June 27, 2023, “Chinese firms and investors own just over 383,934 acres in the U.S., less than the state of Rhode Island, and far less than how much Canada, Netherlands, Italy, the U.K. and Germany, in that order, each own. China is No. 18 on the list of foreign investors.” Sen. Jon Tester (D-Montana) who is skeptical of Chinese land ownership in the U.S., told NPR, “I don’t know that we know for sure all the foreign land that potentially is owned by Chinese individuals or folks controlled by the Chinese government…Any company and any individual living in China that comes and tries to buy land can be controlled by the Chinese Communist Party because they have that kind of control over their people.” Tester said.

What is enabling Chinese companies to go on a buying spree of American assets? Trade deficits – our ever-increasing trade deficit with China over the past 20 years is transferring America’s wealth to China and making millionaires out of many Chinese. In 1994, our trade deficit with China was $29.5 billion, and it grew to $83.8 by 2001 when China was granted “Most Favored Nation” status and admitted to the World Trade Organization. By 2004, it had doubled to $162.3 billion. After a slight dip in 2009 during the depths of the Great Recession, the trade deficit grew to a high of $418 billion in 2018. It dropped down in $352.8 billion in 2021 and $382 billion in 2022 due to the COVID Pandemic shutdowns and was $257 billion in 2023.

On January 26, 2017, Robert D. Atkinson, President of the Information Technology and Innovation Foundation, testified at a hearing on “Chinese Investment in the United States: Impacts and Issues for Policymakers” before the U.S.-China Economic and Security Review Commission. He testified: “For many years, China has recycled the earnings from its large and sustained trade deficit with the United States into U.S. Treasury bills. But the last few years have seen a marked increase in the amount of inward foreign direct investment (FDI) from China to the United States, across a range of industries. While the underlying motivation for some of this investment is commercial, at least one-third is from Chinese state-owned enterprises, and it is likely that considerably more is guided and supported by the Chinese government, specifically targeting sectors that are strategically important for U.S. national security or economic leadership.”

As reported in The China Project article of November 6, 2023, “Chinese ownership of American farmland came under increased scrutiny at both the national and local level after the Fufeng Group, producer of the flavor enhancer MSG, announced in November 2021 its intentions to invest near Grand Forks, North Dakota…Arkansas, Florida, Louisiana, Montana, North Dakota, Ohio and three more states have since passed legislation that restricts some land ownership for Chinese citizens or companies.

The Florida law, for example, bans Chinese owners from buying land “within 10 miles of any military installation or critical infrastructure facility” such as seaports, airports and wastewater treatment plants. The law doesn’t apply to purchases made before July of 2023, but current owners must register their property with the state by January 2024 or face fines and the risk of state authorities seizing their land.

Montana’s governor in May signed legislation that prohibits Chinese individuals and companies from buying farmland, critical infrastructure, and homes near military facilities. Other states have passed laws that put a cap on the number of acres Chinese buyers may own.”

However, on February 2, 2024, the Epoch Times reported, “A federal appeals court has issued a limited temporary block on a Florida law that bans citizens of China from buying property in the state that Florida Gov. Ron DeSantis said was needed to counteract the “malign influence” of the Chinese Communist Party (CCP) in his state.”

It is probable that the prohibition of Chinese investors and companies buying agricultural land will have to be handled at the national level, instead of by states. On January 5, 2024, the Congressional Research Service issued a brief, titled, “Selected Recent Actions Involving Foreign Ownership and Investment in U.S. Food and Agriculture” stating “Some Members of Congress have introduced a series of bills that would amend existing federal law to impose additional requirements on and review of foreign ownership of U.S. agricultural land and/or foreign investment in the U.S. food and beverage industry…Bills in the 118th Congress that would establish additional restrictions include H.R. 212, H.R. 344, H.R. 683/S. 168, H.R. 809, H.R. 840, H.R. 917/S. 369, H.R. 1448, H.R. 3357/S. 926, S. 684, and S. 1136.”

In addition, the House Select Committee on China released a bipartisan report on U.S.-China economic competition on Dec. 12, 2023 that “includes nearly 150 policy recommendations, of which a majority are supported by bipartisan members of the CSC, geared toward strengthening U.S. economic competitiveness vis-à-vis China.”

I am happy that legislators are finally waking up to the real dangers of our relationship with China. The Communist Chinese government is not our friend. China a geopolitical rival that has a written plan to become the Super Power of the 21^st Century. Letting Chinese corporations acquire American companies, especially energy or technology-based companies is the biggest threat to rebuilding American manufacturing. Protecting our food supply is also an important component of protecting our national security. Therefore, we must prohibit Chinese acquisition of American farmland.

Tags:legislation, national security
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Why a Market Access Charge is Urgently Needed

Tuesday, January 23rd, 2024

Recently, John R. Hansen, PhD, Founding Editor of Making America Competitive Again, emailed me his latest white paper titled, “To Fight Inflation, Avoid a Recession, and Stop the Coming Budget Crisis, Implement the MAC – NOW” to review. Dr. Hansen is the creator of the Market Access Charge (MAC) about which I have written previously in articles and my book, “Rebuilding Manufacturing – the key to American Prosperity.

In his latest white paper, he explains that the MAC is “a small charge that would be collected on all foreign-source money entering America’s financial markets…which would probably start at two percent (about half the Fed Funds Rate at the beginning of 2024) would be collected by US banks receiving foreign money transfer orders via systems like SWIFT.” [The fee] would be adjusted periodically to reduce or eliminate the spread between higher US interest rates and the lower foreign interest rates that attract foreign money.”

Previously, I have explained that Dr. Hansen believes that the overvalued U.S. dollar has caused a currency misalignment with other currencies since the 1970s and “has thus been a major factor causing America’s rising trade deficits, increasing burden of debt to foreigners, lost jobs, slowing growth, increased budget deficits, and socio-economic polarization.”

Other countries such as China, Vietnam, Korea, and Japan have undervalued their currencies, making their products more competitive in the global marketplace, while our overvalued dollar makes American products more expensive in the global marketplace. As a result, we import more products than we export, causing the increasingly large trade deficits in the past 20 years. Trade deficits have grown from $451 B in the year 2000 to more than double at $945 B for 2022 (2023 data not released yet).

In turn, when we import goods from foreign countries instead of buying American made products, we hurt American manufacturers by reducing their sales of goods, and this has greatly contributed to the closing of over 70,000 manufacturing firms in the past 20 years and the loss of 5.8 million manufacturing jobs between 2000 – 2010. While we have regained over a million manufacturing jobs due to the efforts of the Reshoring Initiative that I mentioned in my last article, we haven’t been creating new manufacturing companies to replace the thousands we lost.

Dr. Hansen stresses the urgent need to adopt a MAC in order to make “a major contribution to balancing the US budget, thus reducing the risk that Congress fails to reach a budget agreement in time to avoid another disastrous Government shutdown [as well as] “reducing the inflow of over $90 trillion of foreign-source money into America would also make it far easier for the Fed to kill inflation without killing the economy.”

Dr. Hansen believes that by “Reducing the interest rate spread would sharply reduce the speculative gains that currently attract tens of trillions of foreign-source money into America each year [so that] the Fed could to set domestic interest rates high enough to control inflation without causing a recession.”

He provides the following ten reasons why a MAC should be urgently adopted:

Fight Currency Misalignment – “the MAC would control the currency inflows that destroy the competitiveness of Made-in-America goods both here and abroad.”
Potentially eliminate US budget deficits, reduce America’s outstanding national debt, and reduce interest payments on debt – “Interest payments alone currently drain nearly two billion dollars per day out of our national budget…. about forty percent of America’s total public debt was owed to foreigners. “
Make it possible for the US Government to implement and sustain important programs – “investments in better national security, infrastructure, environmental protection, and social programs… without raising taxes or increasing the public debt.

4. Fight inflation with less risk of causing a recession – “When the Fed raises interest rates to fight inflation, the spread between average interest rates here and abroad widens, creating an irresistible incentive for foreign speculators to bring their money into America’s financial markets and purchase dollars and dollar-based assets.”

5. Increase domestic and foreign demand for Made-in-America goods – “A more competitive dollar would create at least 3-5 million well-paying middle-class jobs, not only in manufacturing and associated sectors, but also in sectors producing internationally traded products such as agricultural and other natural resource products, as well as services such as movies and other intellectual property.”

6. Trigger real domestic and foreign investments in American manufacturing – “97 percent of net foreign investment flows into the US last year went into portfolio investments – the purchase of existing financial assets such as stocks, bonds, and derivatives. Only 3 percent of net annual direct foreign investment went into the creation and expansion of real physical capacity that improves America’s productivity, leading to lower prices, less inflation, greater competitiveness, more rapid economic growth, higher living standards, increased revenues, and balanced budgets.”

7. Be far more effective than tariffs in reducing overall US trade deficits with countries like China – “Tariffs can be evaded rather easily with widely known tricks like shipping through third countries, rebranding, and under-invoicing. In contrast, evading an exchange rate is virtually impossible.”

8. Reduce America’s debt service burden.

9. Increase economic growth – “The MAC would stimulate domestic production and exports while reducing our excessive dependence on imports. With the MAC in place, America could roughly double its current rate of economic growth.”

10. Put America back onto the path to the American Dream – “the dream of sustained economic growth based on rising productivity, not rising debt, with benefits shared more equitably by all Americans.”

Dr. Hansen states that “The MAC, which is fully legal under US and IMF rules, could be implemented in a matter of weeks by legislative action or by the President under the International Emergency Economic Powers Act (IEEPA). No new administrative structures would be needed. Existing US correspondent banks would be directed (a) to collect the MAC as a routine part of processing SWIFT and similar international payment orders and (b) to immediately send the proceeds minus a modest processing fee for the bank to the US Treasury. As a single MAC rate would apply to all inflows, no additional time or skill would be required for processing at the border.”

The Coalition for a Prosperous America supports the Dr. Hansen’s Market Access Charge as a strategy to balance the overvalued dollar, stating online: “Persistent U.S. dollar overvaluation fuels much of America’s global trade deficit by raising the price of U.S. goods and services in global markets. While the United States has an array of fiscal and monetary tools to manage its internal economy, it lacks effective exchange rate management tools to manage trade flows that have a powerful effect on the domestic economy.

For this reason, CPA advocates for The Competitive Dollar For Jobs And Prosperity Act, introduced by Senator Baldwin & Senator Hawley. This bill tasks the Federal Reserve with achieving and maintaining a current account balancing price for the dollar within five years.”

This bill, S. 2357, was introduced on July 31, 2019 by Senator Tammy Baldwin (D-WI) in the 116^th Congress (2019-2020), but it died in committee without receiving a vote. This Bill would have implemented the “Market Access Charge.” CPA continues to advocate for this strategy to be included in new bills introduced into Congress.

More recently, American Compass, a 501(c)(3) non-profit organization, issued Policy Brief No. 5 v.1.1 on October 19, 2022, supporting The Market Access Charge – Make American Goods More Attractive to Foreigners Than American Assets. The brief states, “This approach addresses a root cause of America’s trade deficit: its capital account surplus. America only runs a trade deficit because its trading partners prefer to exchange their goods for our assets rather than our own goods. By raising the cost to foreigners of purchasing American assets, such as stocks and bonds, foreign demand would shift toward American goods. “Trade” would shift toward genuine trade, of one country’s product for another’s, in exchanges beneficial to both.”

It’s time to stop the destruction of American industry and innovation, the loss of high-paying manufacturing jobs, and the collapse of communities. We must stop importing more goods than we export, leaving us deeply indebted to our trading partners. I urge Congress to urgently pass a bill that would implement the Market Access Charge. Call your Congressman and Senator today to urge them to introduce such a bill.

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What is the Outlook for American Manufacturing for 2024

Tuesday, January 9th, 2024

The ISM Purchasing Manager’s Index was below 50% for the 14^th consecutive month in December. In particular, new orders and backlogs were contracting in December. A figure below 50% is an indication of a contracting economy. ISM doesn’t make any predictions in their reports. What is interesting is that the contraction coincides with the Fed raising interest rates. When interest rates are high, consumers have less money to buy “wants” vs. necessities, and companies have less money to use for capital improvements. The initial inflation was caused by shortages from supply chain disruptions and shutdowns during the COVID pandemic, so I don’t understand the theory that raising interest rates would curb inflation. To me, raising interest rates causes more inflation.

The good news is that several organizations have a more positive outlook for 2024, especially with regard to certain trends.After reviewing several newsletters and articles about the 2024 manufacturing outlook, there is considerable consensus about trends that will continue and grow in the coming year.

Deloitte’s 2024 Manufacturing Industry Outlook states, “In 2023, the US manufacturing industry capitalized on the momentum generated by three significant pieces of legislation that were signed into law in 2021 and 2022—the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA). Together, these laws prioritize rebuilding infrastructure, advancing clean energy initiatives, and building out the domestic semiconductor industry, while also aiming to foster job growth, workforce development, and equity. By introducing an infusion of funds and tax incentives into US manufacturing across various sectors…the IIJA, CHIPS, and IRA have already spurred record private sector investment in the manufacturing industry.”

AME’s Manufacturing Today magazine features an article titled, 10 Manufacturing Trends for 2024: Shaping the Future of Industry. These trends include:

Digital Twins – “The adoption of digital twins, virtual replicas of physical manufacturing systems, will skyrocket. These digital simulations enable real-time monitoring and optimization, enhancing efficiency and reducing downtime…facilitate advanced scenario planning and troubleshooting, enabling manufacturers to simulate and predict the impacts of various operational changes and external factors on their systems.”

Reshoring – “With a focus on supply chain resilience, manufacturers are increasingly bringing production back to their home countries. Reshoring efforts aim to reduce dependency on foreign suppliers and mitigate supply chain disruptions.”

Reskilling Workforce – “Training programs will focus on digital skills, automation, and data analysis. The reskilling initiatives will likely focus on interdisciplinary skills, blending traditional manufacturing knowledge with digital expertise.”

Industrial Automation – “Automation will continue to expand across manufacturing processes, with robots and cobots boosting productivity and accuracy. Advanced automation will not only include robotics but also incorporate AI for more intelligent decision-making processes.

Additive Manufacturing – “3D printing and additive manufacturing will become even more integral to the production process. This technology allows for rapid prototyping, customization, and reduced waste.”

Industrial Internet of Things (IIoT) – Increased connectivity through IIoT devices will provide real-time data for better decision-making. This will lead to improved asset management and predictive maintenance. The IIoT will lead to more interconnected and smart supply chains, where data from various stages of manufacturing can be integrated for more cohesive and transparent operations.”

The December 12, 2023 Thomasnet.com Insights newsletter reported that when The Association for Supply Chain Management held their annual conference in September, ASCM members voted on what they believe are the top trends in supply chain for 2024. The top three trends were:

1. Digital Supply Chains – “As antiquated paper processes go the way of the dinosaur, it brings along with it improvements in streamlining, resilience, and agility. Supply chain leaders who leverage digital tools will find themselves better prepared and more able to handle dynamically changing orders.”

2. Supply Chain Investments – “A newcomer to the ASCM list this year — and the fastest climbing — is supply chain investments in both systems and people. This emphasizes just how much corporate leaders now see the value in prioritizing their supply chains and the benefits of adding talent and tech tools to ensure visibility and, ultimately, success.”

3. Relocation – Reshoring continues to hit record levels, and Accenture adds that many companies are turning local for their supply chain needs. Specifically revealing that, by 2026, 85% of companies plan to manufacture and sell their products in the same region. In this way, companies ensure they are addressing the vulnerabilities that arose from their highly globalized supply chains in recent years.”

The December 19, 2023 thomasnet.com Insights newsletter featured an article titled, 2024 Trends: AI, Automotive, Sustainability, and Reshoring, that stated, “2024 is the year that every company will adopt artificial intelligence to further modernize operations. More than 70% of the manufacturing CEOs who have already implemented AI have already seen a significant return on investment in areas such as supply chain management and procurement, according to Xometry’s Q4 CEO Sentiment Survey, which was completed with Forbes and John Zogby Strategies.”

Another one of the trends is “In 2024, we won’t just see companies talk-the-talk on a net-zero emissions future. Instead, we will watch them proactively take steps to limit greenhouse gas emissions across industrial supply chains through investments and decarbonization tracking tools.”

The article states, “Finally, a greener supply chain isn’t the only logistics trend to expect in 2024. With an ongoing emphasis on the importance of domestic manufacturing, U.S. companies will continue to reshore at greater rates this year, creating resiliency to withstand future shocks. In fact, 76% of manufacturing CEOs at the end of 2023 had already reshored — up significantly from earlier in the year. nvestments in reshoring have been accelerated by the “Build America, Buy America” initiative.”

Note that “reshoring” is a trend mentioned by all three organizations. This is a trend that was increasing every year since 2011, but accelerated as a result of the supply chain disruptions during the COVID pandemic. According to the Reshoring Initiative 2022 Data Report, “In 2022, 364,000 jobs were reshored (up 53% from 2021), according to the Reshoring Initiative. The reasons for this new growth were threefold:

Manufacturers are nervous about relations with China and are bringing production back to the U.S.
Biden administration initiatives—the Inflation Reduction Act, the Infrastructure Bill, and the Chips Act—have offered both direction and financial security for companies willing to invest in American manufacturing.
Third, tariffs are working. A good example is the Section 232 tariffs for the steel and aluminum industries.

The problem is that at the current rate, it would take 30 years to recoup the +5 million jobs we lost between 2000 and 2010. If we kept up the pace of 2022, it would still take 15 years. We need to implement some of the policies I have recommended in previous articles to incentivize more reshoring, such as my article, “How Could we Reduce Inflation and Balance Foreign Trade & the Federal Budget?” Balancing the overvalued dollar would go a long way toward increasing reshoring by making American goods more competitive on the world market. Fixing the U.S. dollar would also expand the manufacturing workforce. In addition, across the board tariffs on Chinese goods would reduce imports and encourage more people to Buy American, incentivizing manufacturers to reshore to take advantage of increased consumer interest in buying Made in America goods. We must become self-sufficient again in producing manufactured goods if we want to remain a free and independent country. Our national security is at stake.

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What is the State of the U.S. Economy?

Tuesday, December 12th, 2023

There are many different opinions on the state of the U.S. economy. This is normal when we are entering an election year. The political party in power wants the economy to appear good or better than the previous administration, and the opposing political party wants it to appear worse than when they were in power.

Let’s examine what are the key economic indicators as well as other data to determine the true state of the U.S. economy. According to the website, USA Facts, the key economic indicators are: GDP, inflation, Federal Reserve interest rates, workers’ average hourly wages, unemployment rate, ratio of unemployed people related to job openings, labor force participation rate, trade deficit (imports vs. exports), and Federal debt. USA Facts only reports the figures at the end of the year so the data shown is for 2022 since 2023 hasn’t ended yet.

Gross Domestic Product 1970 – 2023

Labor Force Participation Rate

The rate is calculated as the labor force divided by the total working-age population. The working age population refers to people aged 15 to 64. This indicator is broken down by age group and it is measured as a percentage of each age group.

The labor force participation rate was 66.0% in 2008, and gradually dropped down to 63.3% by January 2020. As a result of the COVID-19 pandemic, it dropped to a low of 61.5% in November 2020 before gradually rising to 62.8% in November 2023.

Ratio of Unemployed People to Job Openings

According to the Bureau of Labor Standards, “The ratio of unemployed people to job openings ranged from 0.8 to 1.0 during 2018 and 2019. Over the past 5 years, the number of unemployed people per job opening reached a high of 4.9 in April 2020, when there were 23.1 million unemployed people and 4.7 million job openings. Since October 2021, the ratio has been 0.5 or 0.6 every month…When ratios equal 1.0, there is approximately 1 unemployed person per job opening. When less than 1.0, the labor market is tight, as job openings outnumber the unemployed. When greater than 1.0, there are more unemployed people than available jobs..”

The unemployment rate of the United States which has been steadily decreasing since the 2008 financial crisis, but spiked to 8.1 percent in 2020 due to the COVID-19 pandemic. The annual unemployment rate of the U.S. since 1990 can be found here.

Federal Fund Interest Rates

The Federal Reserve raised interest rates seven times in 2022 and four times in 2023, increasing the target rate from nearly zero (0.25%) in 2020-2021 to 5.25%-5.50% currently. The Fed is expected to hold rates steady when they meet this month. The Fed rate affects the consumer interest rates for mortgages and installment loans for things like cards, home furnishings, and other consumer goods. Mortgage rates have risen from 2.75-3.25 in 2021 to 6.0%-7.9% in 2023. This has stagnated sales for homes and automobiles.

National average wage indexing series, 2001-2022

Year	Annual Wage	Year	Annual Wage
2001	$32,921.92	2012	$44,321.67
2002	$33,252.09	2013	$44,888.16
2003	$34,064.95	2014	$46,481.52
2004	$35,648.55	2015	$48,098.63
2005	$36,952.94	2016	$48,642.15
2006	$38,651.41	2017	$50,321.89
2007	$40,405.48	2018	$52,145.80
2008	$41,334.97	2019	$54,099.99
2009	$40,711.61	2020	$55,628.60
2010	$41,673.83	2021	$60,575.07
2011	$42,979.61	2022	$63,795.13

Data source: https://www.ssa.gov/oact/cola/AWI.html

It looks like wages have nearly doubled in 21 years, but the value of the dollar has changed over time. According to the CPI Inflation Calculator, the ”U.S. dollar has lost 42% its value since 2001; $100 in 2001 is equivalent in purchasing power to about $173.73 today…The dollar had an average inflation rate of 2.54% per year between 2001 and today, producing a cumulative price increase of 73.73%.” This we need to deduct 42% from the 2022 wage to compare it to 2001 ($63,795.13 – $27,431.91 = $42,363.23). Thus, the wages only went up by 34% while inflation increased 73.73%.

U.S. Private Sector Job Quality Index

The November Job Quality Index report by The Coalition for a Prosperous America states, “The Job Quality Index measures job quality for U.S. production and non-supervisory workers by comparing workers’ weekly wages to the mean weekly wage for all non-supervisory workers. Those jobs above the mean are classified as high-quality and those below the mean are low-quality…Over the past three decades, the JQI declined because the U.S. economy created more low-quality jobs than it has high-quality jobs. As shown in Figure 1, the JQI is down 12.8% from 1990 illustrating the disproportionate growth in low-wage, low-hour jobs.”

The last year that the U.S. had a positive trade balance by exporting more than we imported was 1979. The trade deficit grew gradually from 1980 – 1999, but accelerated after China was granted Most Favored Nation status in the year 2000. In 2022, the trade deficit of $948.1 billion a 3.9% increase from 2021.

For my industry of manufacturing, there are two other measures that can be examined to determine the true state of the economy. They are:

US ISM Manufacturing PMI

The Institute of Supply Management Purchasing Managers Index “is a diffusion index summarizing economic activity in the manufacturing sector in the US. The index is based on a survey of manufacturing supply executives conducted by ISM. Participants are asked to gauge activity in a number of categories like new orders, inventories, and production and these sub-indices are then combined to create the PMI… A PMI above 50 would designates an overall expansion of the manufacturing economy whereas a PMI below 50 signifies a shrinking of the manufacturing economy.

US ISM Manufacturing PMI was at a level of 46.70 on November 30, 2023, unchanged from 46.70 for October and down from a recent high of 64.70 in March 31, 2021. The PMI dropped to 49.00 for the November 30. 2022 report, so we have been in a shrinking economy for 13 months.

U.S. Manufacturing Technology Orders

According to the November report published by AMT, The Association For Manufacturing Technology, “orders for manufacturing technology…continued to fall relative to 2022. Through October 2023 orders totaled $4.05 billion, 13.5% behind the total for the first 10 months of 2022.

Conclusion: Adding to the above data is the fact that vehicle gas prices have escalated since 2020. According to Finder, “Gas prices in over the last 12 months are well above the national average over the last six years, hitting $4.99 a gallon in the week of June 16, 2022 — a week in which Californians paid a whopping $6.43 per gallon…The national average gas price this week [December 7^th] is $3.22, down from $3.27. US gas prices over the last year are among the highest since 2018. California has the highest gas prices in the nation, followed by Hawaii as a close second, and Washington, Nevada, and Oregon making up the top five. Texas has the lowest gas price ($2.68) in the nation followed closely by Mississippi ($2.72) and Oklahoma ($2.74).

According to the U.S. Government Accountability Office, “Last year, U.S. consumers saw the largest annual increase in food prices since the 1980s. While food prices generally increased about 2% in prior years, they increased about 11% from 2021 to 2022…Food prices increases also varied by locality. For example, the highest increase between 2021 and 2022 was seen in Detroit Michigan (about 14.5%). The lowest (about 5%) occurred in the Miami-Fort Lauderdale, Florida metro area…Finally, food price increases from 2021 to 2022 varied by food group. For example, prices for grains and bakery products increased by about 13%, while fruits and vegetables increased by about 9%. Similarly, dairy products increased by about 12%, but meats, poultry and fish increased about 10%.”

I am not an economist qualified to do an educated analysis of all of the above data, but it is obvious to me that the U.S. economy has some serious problems that need to be urgently addressed if we want to avoid a prolonged recession. The question that voters ask themselves in an election year, “Am I better off now than I was under the previous administration.” The answer to that question will determine the outcome of the next election.

Tags:Economy
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Are Southern California Trade Shows Recovering from Pandemic Shutdowns?

Tuesday, October 3rd, 2023

There have been four trade shows in Southern California that I have either attended or participated as exhibitor this year. The first show I attended was the five in-one show, MD&M West, WestPack, ATX West, D&M West, and Plastec West held February 7-9, 2023 at the Anaheim Convention Center in Anaheim, CA.

These shows take up all of the halls in the largest building of the Anaheim Convention Center complex. Besides the several hundred companies exhibiting in the show, it also offers educational conferences held by the various trade shows concurrently with the show.

There were five free education stages on the show floor that provided in-depth discussions and instructions from industry experts on the latest need-to-know information for their industry. In addition, there were paid conference sessions in meeting rooms on the second floor. I attended the IME West conference on February 8^th and gave a presentation titled, “The Future of Manufacturing.” I discussed how manufacturing revitalization has been hindered by misperceptions, what is happening in our current period of creative disruption, and what vibrant opportunities exist now and in the future. I also attended all of the other conference sessions held that day, and they were all well attended.

When I walked the show on the 7^th, it seemed to be as well attended as a pre-pandemic show. The plastic molding company we represent, Hi-Rel Plastics, exhibited in the MD&M show and was happy with the quantity of their show leads, but the quality of the leads wasn’t as good as pre-COVID shows.

The second show was the Del Mar Electronics & Manufacturing Show held April 26^th & 27^th at the Del Mar Fairgrounds in San Diego County. My company, ElectroFab Sales, has exhibited in the show since 1997, and this year, we had two exhibit booths featuring the fabrication services of four of the ten companies we represent. I also gave a presentation on the first morning of the show on “How to Select the Right Processes and Sources for your Products.”

This show has an extensive free conference schedule both days of the show and also features a free reception at the end of the first day of the show which encourages late afternoon attendees to stay for the reception and skip the worst of rush hour traffic to go home. Another added benefit for attendees is free parking for the show.

We had very good traffic the first day of the show, and more traffic than some previous years on the second day of the show. The second day of the show ends at 3:00 PM so there is less time to collect show leads. We got about 50 leads from our exhibit which was about 30% higher than 2022. However, there were very few leads from well-established or larger companies. Most of the leads were entrepreneurs with new products or from small companies designing a new product.

Show manager, Connor Good, told that the number of booths was up by 25% and attendance was up by 30% over 2022. He said, “What felt like a long time coming the first year back after the pandemic, attendee numbers were promising. It showed us the industry is ready to get back to business and people are eager to network face to face.”

The third show of the year was the Design-2-Part Show, held September 13^th & 14^th at the Ontario Convention Center. This show alternates between held in Long Beach, Pasadena, and Ontario in Southern California. The Design-2-Part shows have been held for 42 years and feature only American manufacturers; no reps or distributors are allowed to exhibit. An average of 10-11 shows have historically been held around the country each year.

President, Rober Eichner, “We were even able to conduct a show in Texas in 2020 and conducted nine shows around the country in 2021 and 10 shows in 2022. We have held 11 shows this year and 12 shows are scheduled for 2024. Show attendance at many of the shows this year approached attendance levels of 2018 and 2019. We purchased the AMCON shows last year, so we plan on holding shows in Denver, CO and Novi, MI in 2024. We also skipped doing the Santa Clara show last spring, but plan on being back there in 2024.”

This makes these shows the most efficient place to meet hundreds of high-quality American suppliers of custom parts, stock parts, and manufacturing services.

I attended the show on Thursday, September 14^th to do booth duty for the rubber molding company we have represented for 29 years, Century Rubber Company. My husband and partner had done booth duty at the show on the 13^th. He said the show was very busy the first day. The second day is never as busy because it ends at 3:00 PM, but I thought it was busier than the second day of the Long Beach show in October 2022.

The last show I attended was the Anaheim Electronics & Manufacturing Show held September 27^th & 28^th at the Anaheim Convention Center in Anaheim, CA.

This show featured hundreds of companies exhibiting in the following categories:

Telecom Manufactures

Defense Contractors
Plastic and Rubber Molders
Medical Device Companies
Electronics OEM’s
Bio-Pharma Device Manufactures
Sports Products Developers
Coil Winding
Machine Shops
Castings
Sheet metal fabrication
3D printing…. and More

This show is owned by the same owner as the Del Mar Electronics & Manufacturing Show and allows reps and distributors to exhibit. The same benefits of free parking and a free reception at the end of the first day of the show encourages show attendance.

I attended the show on Thursday, September 28^th to walk the show and give a presentation at 1:00 PM on “How to Select the Right Processes and Sources for Your Products”

Assistant Show Manager, Connor Good, told me that the number of booths this year was up 30% from the fall 2022 show, and attendance the first day was 20% higher than the both days last year. He said, “The show was held in the convention center’s newest hall, the ACC North. We tried to combine the easy going and stress-free environment of the Del Mar show with the professionalism and company dense area of Anaheim. We encouraged business development of all sizes and opportunities through free attendance and parking even if signing up on show day.”

There is one more trade show coming up in Southern California this fall

WESTEC/AeroDef

Tuesday, November 7 through Thursday, November 9

Long Beach Convention Center
300 East Ocean Boulevard
Long Beach, CA 90802

I have been to WESTEC many, many times starting in 1990 when I attended comprehensive technical sessions on manufacturing processes such as investment casting. The amount of time you spend there is well worth the effort. You can literally spend hours and not take in all that there is to offer.

WESTEC has been providing solutions to manufacturing challenges for 58 years. You can see more than 400 exhibitors, face-to-face, at WESTEC — all in one place, over a three-day period. WESTEC gives you face-to-face access to hundreds of experts in critical industries such as aerospace, medical, industrial machinery and consumer goods. You can find new manufacturing technology to make your vision a reality. The variation at WESTEC is vast. Here’s just a small sampling of what you’ll discover at WESTEC: aerospace manufacturing, castings, forgings, CNC Machining, Waterjet, Advanced Materials, 3D printing, and much more.

WESTEC has manufacturing education sessions that focus on teaching you about new technologies, new processes, and trends that can transform your business. All show floor education is included with the show floor pass. Attendees come from a variety of industries including aerospace, medical, industrial machinery, automotive, and more.

You can sign up to attend at no charge at the official website www.westeconline.com

Trade shows are even more important than they once were because most large companies eliminated “vendor days” decades ago where sales reps could schedule appointments with buyers in their purchasing departments. In addition, many buyers and even engineers are not back to working full-time at their offices and may still be working remotely from home two-three days a week, making it very difficult to connect with them. Meeting a potential customer at a trade show is the first step in developing a relationship to become a regular vendor for a manufacturer. Trade shows also provide the opportunity for inventors and entrepreneurs to explore the possible sources for parts, assemblies, and fabrication services for their new products. Be sure to make it a priority in your schedule to attend a trade show next year.

Tags:American manufacturing, innovation
Posted in General, Manufacturing | No Comments »

Southern California Fall Trade Shows Feature Made in America

Tuesday, August 22nd, 2023

Southern California offers two trade shows this fall for manufacturers to locate processes and sources to make their products.

The first show is the Design-2-Part Show, which is the region’s largest design and contract manufacturing trade show. It features only American manufacturers; no reps or distributors are allowed to exhibit. This makes it the most efficient place to meet hundreds of high-quality American suppliers of custom parts, stock parts, and manufacturing services. Over 300 service categories will be represented at this show. From design and prototypes to production, finishing, and assemblies — you will find the answers you need at this show at the Ontario Convention Center in Ontario, CA.

I will be at this show on Thursday, September 14^th doing booth duty for the rubber molder we represent, Century Rubber Company.

When: September 13th & 14th, 2023

Hours: Wednesday 9:30 am – 3:00 pm

Thursday 9:30 am – 3:00 pm

Where: Ontario Convention Center

Ontario, CA

Cost: Free Admission

The second show is the Anaheim Electronics & Manufacturing show to be held September 27^th & 28th at the Anaheim Convention Center in Anaheim, CA.

This show will feature hundreds of companies exhibiting including reps and distributors.

Telecom Manufactures
Defense Contractors
Plastic and Rubber Molders
Medical Device Companies
Electronics OEM’s
Bio-Pharma Device Manufactures
Sports Products Developers
Coil Winding
Machine Shops
Castings
Sheet metal fabrication
3D printing…. and More

I will be attending the show on Thursday, September 28^th to walk the show and give a presentation at 1:00 PM on “How to Select the Right Processes and Sources for Your Products”

Pre-register here and a Free parking voucher will be sent to you prior to the show.

Join our reception. September. 27th, 5-7 pm for munchies , drinks, and more! Converse and commingle whether you are an Exhibitor or Attendee stop in, enjoy.

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Solutions to Address Outsourcing by Multinationals & Rebuild American Manufacturing

Tuesday, May 9th, 2023

Michael Collins wrote, “Hope is not a plan” in his book Dismantling the American Dream, How Multinational Corporations Undermine American Prosperity. In other words, we cannot hope to rebuild American manufacturing without doing things differently than we’ve done in the past 30 years. The industrial policies we have been following resulted in the decimation of the U.S. manufacturing base with the loss of over 70,000 manufacturing companies and 5.8 million manufacturing jobs.

Michael proposes a number of solutions in his book, some of which are the same or similar to solutions I proposed in my book, Rebuild Manufacturing – the key to American Prosperity. First, we both agree that we need a new industrial policy and plan. The free trade policy we’ve followed since WWII has only benefited multinational corporations at the cost of millions of manufacturing jobs and an escalating trade deficit. Every President in the past 30 years had the goal of doubling exports and creating more manufacturing jobs, but the trade and industrial policies they promoted did just the opposite. President Biden’s Build Back Better Plan has the goal of creating five million jobs, but without measurable objectives and a plan to achieve those objectives, Michael feels “nothing will change.”

Michael points out that “it will take a reduction in the trade deficit of 20 percent to bring back one million manufacturing jobs.” That means, we would have to reduce our trade deficit by 100% of the 2020 trade deficit total to create five million jobs. However, the opposite occurred as the trade deficit increased from “$676.7 billion in 2020 to $861.4 billion in 2021… [and] $945.3 billion in 2022” according to the Bureau of Economic Analysis.

Michael notes that “politicians, Democrats or Republicans, don’t seem to be willing to publicly commit to an objective of reducing the trade deficit.” He comments, “This is dangerous territory, and government is the only entity that can do anything about the trade deficit.”

I came to a similar conclusion in the chapter on “Have Free Trade Agreements Benefited American Manufacturing” of my book. I also recommended that the U.S. do not enter into any new trade agreements, and Michael agrees, writing. “We should oppose any FTA that will cost jobs or increase the trade deficit.”

The question is how do you reduce a trade deficit.? Since Michael and I are both members of the Coalition for a Prosperous America (CPA), we support addressing currency manipulation and the overvalued dollar as two of the main ways to balance trade. Michael wrote, “The root cause of the trade deficit is that the United States is not price competitively primarily because the dollar is overvalued by 20 to 30 percent.” However, he wrote, “Most of the large importer corporations and Wall Street do not want the government to enforce the current WTO and IMF laws against currency manipulation or to devalue the dollar because they want to keep foreign import prices low.”

Michael summarizes four methods that can be used to reevaluate the dollar:

Impose countervailing duties (CVDs) – tariffs or taxes on imported goods that offset subsidies by trading partners.
Tax purchases by using a Market Access Charge (MAC) on all foreign investments in the U.S., including stocks, bonds, real estate, companies, or intellectual property.
Implement a withholding tax on the profits and dividends earned by foreign inventors that finance the dollar.
Tax sellbacks – impose a 30% tax on the profits of companies that have offshored.

Michael wrote that “A new working paper from the CPA called ‘Imports Growth and Job Creation from a Competitive Dollar’ reveals that if the dollar value could be reduced by 27 percent it would result in export growth five times faster than baseline, while imports would grow more slowly.”

Another CPA proposal that Michael supports is “Make existing China tariffs permanent” and “impose the 4A and 4B tariffs.” He wrote, “The Trump tariffs with China are working, and in fact, are our only defence against China’s mercantilist cheating.” He recommends that “Congress should limit tariff exclusions for importers, especially those that are not using the imports to manufacture in the United States.”

Michael also recommends creating “a more level playing field with our trade partners” by building reciprocity into our trade agreements. This would “allow the United States to impose reciprocal duties on all countries who have higher tariffs if they do not lower their tariffs and VATs.” I wrote in my book, “Over 150 countries in the world have shifted a significant portion of their tax mix to border adjustable consumption taxes —Value Added Taxes (VATs) or goods and services taxes (GSTs)…The rates range from 12% to 24% and average 17% globally.” In 2017, CPA proposed a 12% GST to be applied as a credit to the 15.3% payroll tax. Michael wrote, “We should level the playing field by introducing a program to match the foreign country’s VAT…”

In order to reduce the unfair advantage that multinational corporations have under current U/S. trade policy, Michael supports CPA’s proposal for “Sales Factor Tax Apportionment” that “would tax profits based on where the product is sold and eliminate the ability of multinational companies avoiding taxes by shifting profits offshore.” I had explained that this tax proposal would be “determined solely on the percent of a company’s world-wide sales made to U.S. customers.”

He also recommends the new proposal for a “Global Minimum Corporate Tax of 15 percent”, which “would give government the ability to tax our home company’s overseas profits at 15 percent, and deter them from us9mg tax shelter countries to avoid taxes.”

Michael supports CPA’s proposal for the U. S. to withdraw from the World Trade Organization (WTO) because the requirement of consensus on trade rules and decisions by the 164 member countries have “turned out to be detrimental to the United States,” In addition, he supports “repealing the Permanent Normalized Trade Relations (PNTR) with both Russia and China.”

He writes that these actions are first steps in “decoupling form China” and then lists a dozen different steps to be taken thereafter that CPA recommends as part of the decoupling process.

Michael also briefly mentions the work of Harry Moser, founder of the Reshoring Initiative, to help companies use the Total Cost of Ownership Estimator™ to reshore manufacturing to America. I have had the pleasure of collaborating with Harry Moser since 2010 as an authorized presenter on how to use TCO to return manufacturing to America and devoted a whole chapter on reshoring in my book.

The Reshoring Initiative 2022 Data Report states, “Jobs announced in 2022 were a record-breaking 364,000 – up from 238,000 in 2021. The totalnumber of jobs announced since 2010 is now nearly 1.6million.” However, Michael notes that “at the current rate of reshoring, it will take over 30 years to reach Biden’s goal of five million jobs.”

Michael’s last chapter makes a brief mention of the need for workforce training and comments that instead of training, “MNCs have used stop gap measures such as outsourcing, automation, buying services from foreign vendors, and poaching trained workers from their suppliers, but these strategies no longer work and the shortage of workers has caught up to American companies.”

I felt that workforce training was so important to rebuilding American manufacturing that I included a chapter on the subject of how to foster and develop the next generation of manufacturing workers in my book. Since my book was published, I have written many articles on this topic.

Most of the above recommendations are focused on government policies, but the likelihood of making such major changes in policies is slim to none at the present time. That is why we need to shift the mindset from a prevailing worldview of ‘inevitable decline’ of American manufacturing to one of ‘vibrant opportunity. We need a new level of thinking and action that scales solutions at hand with unprecedented collaboration and organize our efforts to achieve the following true north goals by 2030:

50,000 world-class domestic manufacturing small – medium– large enterprises (10x increase)
Add 5 million middle-income manufacturing jobs (40%)
Add $1 trillion to the economy (40% increase)

We need to focus our attention on disruptive and emerging opportunities that create new growth opportunities for companies, people, communities. We welcome collaboration with Industry Reimagined 2030.

Posted in General, Manufacturing, Trade Policy | No Comments »

How We Can Stop China’s Global Strategy to Cripple America

Tuesday, February 21st, 2023

Two years ago, Curtis Ellis, one of my heroes died after losing his battle with cancer. Curtis was a prominent trade expert and an astute architect of economic nationalism. In my tribute article to him, I wrote “Curtis was a true patriot and defender of liberty, who believed in all of the greatness of our country and devoted much of his life to putting America first in economic policies to benefit American workers and not just Wall Street.” He believed that we have to fight to save America to create jobs and prosperity by bringing higher paying manufacturing jobs back to America. He was a patriotic crusader against the unfair trade agreements that had caused the loss of millions of manufacturing jobs and our enormous trade deficits year after year.

I knew Curtis had been working on a book before he died, but didn’t know if he had finished it. I was pleased to learn that he had. His longtime partner, Maxine Albert, found a publisher for this timely book – that just launched. Maxine wrote: “He pushed himself to finish this book because he saw the Chinese Communist’s Party as the most dangerous threat to the nation he loved. Curtis saw something truly sinister in China’s trade abuse as economic warfare.”

It was a great honor to be able to read an advanced copy to write this review of his vitally important book, Pandemonium – China’s global strategy to cripple America, available on amazon and Barnes & Noble. https://amzn.to/3RNWHf1Curtis Ellis

Curtis Ellis was one of the early policy experts to realize the danger the Chinese Communist Party posed to America. He understood the world economy and pointed out that “free trade” was a fallacy because of the mercantilist, totalitarian dictatorship in China. He sounded the alarm on the gathering storm with a chilling account of China’s assault on America in its quest to be the Superpower of the 21^st Century. He foresaw that a crisis with China is inevitable because of their increasing aggression and frightening military buildup that has been funded by America’s manufacturers and consumers.

He had the talent to be able to transform a complicated economic topic into an easily understandable and compelling narrative that would motivate people to act, and he does that by giving us a detailed, comprehensive and winning plan to declare our independence from China.

In the introduction, Curtis reminded us “Americans lived in a global economy when we wrote the first Declaration of Independence. At that time, the ‘global economy’ was known as the British Empire“ He wrote, “Americans were compelled to send their fiber, timber, and ore on ships across the ocean to ‘the workshop of the world,’ where they were fashioned into finished goods, then sent back and sold to Americans at prices set by others…Today the ‘workshop of the world’ is not Britain, but China.”

In his first chapter, “How America Became an Invalid,” he outlines how our present position “didn’t just happen. It was not inevitable. It was the result of specific decisions made by specific people in specific places and specific positions of power.”

From my own research for my own books, I was aware of some of these key decisions that led to the decimation of American manufacturing, but I didn’t realize that the ideology of “globalism” started so long ago. Curtis wrote about a hearing held by the Joint Economic Committee of the U.S. Congress on “the future of manufacturing” that occurred in Washington, D. C. in June 1967. He wrote, “At the hearing, George Ball, a Wall Street grandee who served in the State Department under presidents Kennedy and Johnson, laid out the ideology of globalism” in which “earth straddling corporations should replace the ‘crazy quilt” of independent nations as the organizing principle of society.” Ball recommended that “Washington should work for “a considerable erosion of the rigid concepts of national sovereignty…the ‘common philosophy’ and ‘common goal’ should be economic efficiency and corporate profits…”

The adoption of this globalist ideology by government and industry certainly explains what has happened in the past 55 years— tax policies that favor multinational global corporations and American corporations moving manufacturing to other countries to maximize profits, first to El Salvador, Puerto Rico, the Philippines, Mexico, and finally China.

In chapter II, “A Dysfunctional Relationship,” Curtis gives a detailed description of how the U.S. relationship with China has become dysfunctional over the past five decades since President Nixon opened our doors to China.

In chapter III, “Meet the New Boss: The Global Elite,” he describes how “What’s good for America” became replaced by “What’s Good for the Global Economy” to the detriment of patriotic American businessmen and women.

Chapter IV, “How China Buys Influence” outlines China’s strategy “to shape American public opinion and influence our economic and government policies to benefit the Beijing regime.”

Chapter V covers a subject near and dear to my heart, “The American System —The Origin of America’s Prosperity” that I wrote about in the first chapter of my book, Can American Manufacturing be Saved? Why we should and how we can. He uses many of the same quotes of the founders of our country that I used, such as “A free people…should promote such manufactories as tend to render then independent from others for essential, particularly military supplies,” from George Washington’s first address to Congress.

Curtis wrote that the American System was conceived by Treasury Secretary, Alexander Hamilton, by imposing tariffs on imported goods to “raise revenue and protect American industries from predatory competition…. The American System…guided U.S national economic development from the earliest days of the republic, through the Civil War, and into the better part of the twentieth century.”

In chapter VI, “Setting the Record Straight on Adam Smith,” Curtis clarifies the “foundational economic treatise on the principles of the free market system” proposed by Adam Smith in his book, The Wealth of Nations, published in 1776.

Chapter VII, “Tearing Down ‘The House of World Order” describes how “the international rules-based order,” which is a “euphemism for globalism” that is the basis for the World Trade Organization. Curtis wrote ”The pandemic showed that the true cost of the China price is very high indeed. It showed how an economy reliant on global supply chains and just-in-time inventory management is fragile.”

In Chapter VIII, Curtis outlines how to hold China accountable, and Chapter IX describes how to defund China. In chapter X, Curtis provides common sense on Communist China, and Chapter XI outlines a plan to restore our economic independence. Chapter XII concludes with a new declaration of independence.

I don’t want to spoil any of these well thought out prescriptions by providing any quotes from these chapters. It’s critical that you read these chapters yourself and make your own decision on how you can play a part in saving our country. I conclude my review with what Maxine wrote as her concluding words in the Foreword: “As I wrote these words, I can hear Curtis saying something he often told me. ‘Each of us has a part to play to stand up for American. You can change the world, one person at a time.’”

I have endeavored to change the world as one person by writing three books and hundreds of blog articles and will continue to do so until the day I die or can’t write or speak any longer. I’m enjoying the greater role I now have the opportunity to play as part of Industry Reimagined 2030 to revitalize American manufacturing to achieve the goals of our vision. I urge you to take these words of Curtis to heart and do what you can do so our country can become independent from China.

Posted in Economy, General, Manufacturing | No Comments »

Action on China or Yet Another Charade by Congress?

Tuesday, January 17th, 2023

On January 10, 2023, the House voted to pass a resolution “to create a select committee focused on U.S. competition with China, fulfilling a campaign promise Republicans made in the lead-up to the 2022 midterm elections.”

An article in The Hill, stated: “The select committee, chaired by Rep. Mike Gallagher (R-Wis.), will zero in on the Chinese Communist Party’s economic, technological and security progress and the strategic competition between Beijing and Washington. The resolution tasks the panel with investigating and submitting policy recommendations on those matters.” The Committee will be “made up of seven Republicans and five Democrats” and “has the authority to hold public hearings.”

The question that should be on everyone’s mind is — Will this Committee have any real impact when Congress has not taken any action on recommendations provided by the annual report they have received from the U.S.-China Economic and Security Review Commission for 20 years?. Will this Committee just be another “dog and pony” show to demonstrate that Congress is taking the threat China poses to the U.S. more seriously?

For those of you who have never heard of such a Commission, it “was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act of 2001, Pub. L. No. 106–398 (codified at 22 U.S.C. §7002) …” This was after China was granted “Most Favored Nation” status, now known as Permanent Normal Trade Relations (PNTR) and allowed to become a member of the World Trade Organization by President Clinton.

The stated “purpose of the Commission is to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China. “

The main duty of the Commission is to provide an annual report to Congress — “Not later than December 1 each year (beginning in 2002), the Commission shall submit to Congress a report, in both unclassified and classified form, regarding the national security implications and impact of the bilateral trade and economic relationship between the United States and the People’s Republic of China. The report shall include a full analysis, along with conclusions and recommendations for legislative and administrative actions, if any, of the national security implications for the United States of the trade and current balances with the People’s Republic of China in goods and services, financial transactions, and technology transfers…”

Each report was required to include full discussion of key factors of the U.S.-China relationship that are very comprehensive. The following briefly summarizes the key factors:

(A) “The role of the People’s Republic of China in the proliferation of weapons of mass destruction and other weapon systems…”

(B) “The qualitative and quantitative nature of the transfer of United States production activities to the People’s Republic of China, including the relocation of manufacturing, advanced technology and intellectual property, and research and development facilities…”

(C) “The effects of the need for energy and natural resources in the People’s Republic of China on the foreign and military policies of the People’s Republic of China, the impact of the large and growing economy of the People’s Republic of China on world energy and natural resource supplies, prices, and the environment…”

(D) “Foreign investment by the United States in the People’s Republic of China and by the People’s Republic of China in the United States…”

(E) “The military plans, strategy and doctrine of the People’s Republic of China…and the implications of such objectives and trends for the national security of the United States.”

(F) “The strategic economic and security implications of the cyber capabilities and operations of the People’s Republic of China. “

(G) “The national budget, fiscal policy, monetary policy, capital controls, and currency management practices of the People’s Republic of China, their impact on internal stability in the People’s Republic of China, and their implications for the United States.”

(H) “The drivers, nature, and implications of the growing economic, technological, political, cultural, people-to-people, and security relations of the People’s Republic of China’s with other countries, regions, and international and regional entities…”

(I) “The compliance of the People’s Republic of China with its commitments to the World Trade Organization, other multilateral commitments, bilateral agreements signed with the United States, commitments made to bilateral science and technology programs, and any other commitments and agreements strategic to the United States (including agreements on intellectual property rights and prison labor imports), and United States enforcement policies with respect to such agreements.”

(J) “The implications of restrictions on speech and access to information in the People’s Republic of China for its relations with the United States in economic and security policy, as well as any potential impact of media control by the People’s Republic of China on United States economic interests.”

(K) “The safety of food, drug, and other products imported from China…”

The report was also required to “include recommendations for action by Congress or the President, or both, including specific recommendations for the United States to invoke Article XXI (relating to security exceptions) of the General Agreement on Tariffs and Trade 1994 with respect to the People’s Republic of China, as a result of any adverse impact on the national security interests of the United States. “

The 2022 Annual Report to Congress was submitted on November 15, 2022 to Patrick Leahy
President Pro Tempore of the U.S. Senate and Nancy Pelosi, Speaker of the U.S. House of Representatives. “The Commission conducted seven public hearings, taking testimony from 74 expert witnesses from government, the private sector, academia, think tanks, research institutions, and other
backgrounds.”

This report contained the following chapters:

Chapter 1 – CCP Decision-Making and Xi Jinping’s Centralization of Authority

Chapter 2 – U.S.-China Economic and Trade Relations

Section 1 – U.S.-China Economic and Trade Relations
Section 2 – Challenging China’s Trade Practices
Section 3 – China’s Energy Plans and Practices
Section 4 – U.S. Supply Chain Vulnerabilities and Resilience

Chapter 3 – U.S.-China Security and Foreign Affairs

Section 1 – Year in Review: Security and Foreign Affairs
Section 2 – China’s Cyber Capabilities: Warfare, Espionage, and Implications for the United States
Section 3 – China’s Activities and Influence in South and Central Asia

Chapter 4 – Taiwan

Chapter 5 – Hong Kong

The report made 39 very specific recommendations for Congressional consideration to address the key factors covered in the above chapters of the report. The Executive Summary states: “The Commissioners agreed that ten of these recommendations, which appear on page 10, are the most important for congressional action.” However, the concluding comment of the Executive Summary states: “There remains a gap between America’s growing recognition of the challenges China presents and our responses to date in dealing with them. The purpose of this report is to assess recent developments and to recommend a set of actions that Congress can consider to help meet the challenges, and seize the opportunities they present.”

Space doesn’t permit considering the ten most important recommendations, but I will at quote the shortest recommendation as an example:

#7. “. Congress create an authority under which the president can require specific U.S. entities or U.S. entities operating in specific sectors to divest in a timely manner from their operations, assets, and investments in China, to be invoked in any instance where China uses or threatens imminent military force against the United States or one of its allies and partners.”

I’ve wondered for years if any Congressional Representative actually read the annual report because I never saw any actions taken by Congress with regard to the recommendations I read in the reports of 2008, 2011 and 2016 when I was writing my three books. It seems to me that the new select Committee on China should review the Commission’s 2022 report and propose legislation to act on the recommendations of the report instead of starting all over with holding hearings.

Our national security is at stake, and we don’t have time to “start from scratch” with a new committee conducting hearings to replicate the work that has already been done by the U.S.-China Economic and Security Review Commission. It would be a far better service to our country to have Congress actually take action to pass legislation recommended by the Commission to protect our country from the plans of China to destroy our country economically and militarily to become the “super power” of the 21^st Century.

Posted in General, Legislation, National security | No Comments »

2023 Offers Vibrant Opportunities for American Manufacturing

Tuesday, January 3rd, 2023

While some industry leaders are predicting continued supply chain disruptions and even an economic recession, I believe that American manufacturers are poised to enjoy vibrant opportunities in 2023 after nearly three years of economic turmoil and supply chain disruptions.

Americans had a wakeup call during the COVID-19 pandemic when we realized that we had become vulnerable because of our dependency on suppliers from other countries, particularly China. Our national security and the health of Americans became at risk because of the supply chain disruptions of the goods we needed.

The Industry Week article, titled “Why the US Needs Manufacturing to Succeed”, on Dec. 16, 2022, stated, “With newly focused attention on supply-chain availability and resilience, U.S. manufacturing is at an inflection point. The recently passed infrastructure and CHIPS acts enable direct investment of billions of dollars into the manufacturing sector responsible for critical components, again to improve capacity and supply certainty.”

Manufacturing matters because the high-wage jobs it provides are the foundation of the middle class. Besides these high-wage jobs, the Brookings Institution says it provides “commercial innovation (the nation’s largest source), a key to trade-deficit reduction and a disproportionately large contribution to environmental sustainability.” In fact, U.S Census data shows that manufacturing still ranks fourth out of the top five employment sectors in the country.

In their annual report dated April 26, 2022, the Reshoring Initiative reported that manufacturing added 1.3 million jobs to the economy between 2010 and 2019, after losing 5.8 million jobs over the previous 10 years. “For the second year in a row, reshoring exceeded FDI by 100%, continuing a recent trend not seen since 2013. Additionally, the number of companies reporting new reshoring and FDI set a new record of over 1,800 companies.”

I predict that the reshoring data for 2022 will show a continued trend because with today’s heightened need for national security, sustainability and self-reliance, reshoring of U.S. manufacturing, has become, a matter of survival.

I am not alone in predicting “vibrant opportunities” for 2023. The Manufacturing.net blog of December 14, 2022, “Predictions for Manufacturing in 2023 – Part I,” provided thoughts on trends from several executives.

A few key thoughts on trends for the upcoming year shared by James DeMuth, CEO of Seurat Technologies, were:

“Localization of manufacturing near to customers will reduce economic and environmental costs. Currently, the cost to ship a 40’ container from Asia to the U.S. West Coast is 5X more than pre-pandemic levels.
Unpredictable policymaking and inflationary pressures will have less impact on companies that strategically place manufacturing of key components within the U.S. and near to assembly plants.
Domestic manufacturing will be emphasized as a matter of national security.”

A few of the key thoughts shared by Molex, a leading provider of electronic components and connectivity solutions, were:

Major investments in battery management, zonal architectures and EV charging stations will dominate.
Emerging demand for Infrastructure advancements is expected to escalate, which will place greater emphasis on the need for intelligent sensors and high-speed connectors.
Investments in Industrial IoT will grow. Robotics and AI will see a surge in usage, as businesses roll out investments made over the last few years.
The migration towards Extended Reality (XR) will move data processing to the Edge, allowing inferencing to happen more frequently in real time to match performance expectations.

Another manufacturing.net blog article, “Key Trends to Remember for 2023,” dated December 29, 2022, predicts:

Continuing Supply Chain Disruption – “The need to be flexible, and efficiently manage multiple sources of supply while managing overall profitability means sharing information not just within the organization but upstream, driving increased collaboration with suppliers.”

Smart Factories – smart factories encompass two domains:

“Improving the capture of data and the operational context to surface the information needed to inform better decisions.
Providing the insights and information to more stakeholders, in a more consumable manner, specifically, active rather than passive presentation of impactful data at, or even before, the time of need.”

Continued skills shortages – “Modular robotics in both the physical world and the data environment (through robotic process automation) are reaching levels of maturity that make them more accessible from the perspectives of both cost and complexity.”

Notice that investing and adopting new technologies such as IIOT, Robotics, AI, Industry 4.0 are incorporated into these predictions. These are examples of “vibrant opportunities” that are happening now, but are not being widely scaled.

Deloitte’s 2023 manufacturing industry outlook “explores five manufacturing industry trends that can help organizations turn risks into advantages and capture growth.”

Technology – Investing in advanced technologies to help mitigate risk

“Manufacturers have increased their digital investment over the past few years and accelerated the adoption of emerging technologies. Companies with higher digital maturity have shown greater resilience, as did those that accelerated digitalization during the pandemic. Continued investments in advanced manufacturing technologies can help develop the required agility.”

Talent – Implementing a broad range of talent management strategies to reduce voluntary exits

“Addressing the tight labor market and workforce churn amid shifting talent models is expected to remain a top priority for most manufacturers in 2023. Despite a record level of new hires, job openings in the industry are still hovering near all-time highs…”

Supply chain – Relying on time-tested mitigation strategies with enhanced tactics to achieve supply assurance

“Of surveyed executives, 72% believe the persistent shortage of critical materials and the ongoing supply chain disruptions present the biggest uncertainty for the industry… Manufacturers are mitigating these risks not only with increased utilization of digital technology…building local capacity and moving from just-in-time sourcing to create redundancy in the supply chain.”

Smart factory – Taking a holistic approach to smart factory initiatives to unlock new horizons

“Many manufacturers are making investments in laying the technology foundation for their smart factories. One in five manufacturers is already experimenting with underlying solutions or actively developing a metaverse platform for their products and services.”

Sustainability – Focusing on corporate social responsibility

“The fast-evolving environmental, social, and governance (ESG) landscape may require close monitoring in 2023 for manufacturers…regulators globally are also moving toward requiring more disclosures for nonfinancial metrics. Manufacturers are progressing toward their ESG commitments by making operational changes across their value chains.”

Deloitte’s recommendations are important for American manufacturers to adopt and implement into their company’s strategic action plans in order to take advantage of the “vibrant opportunities” of the future. They illustrate that achieving the vision of Industry Reimagined 2030 will require a sea-change in the national narrative of the U.S. manufacturing industry to transform from a prevailing worldview of ‘inevitable decline’ to one of ‘vibrant opportunity.’ The vision of Industry Reimagined 2030 is for U. S. manufacturing to be revitalized, globally competitive and advancing societal interests by 2030. The following goals will demonstrate achieving this vision through unprecedented collaboration and scaling:

50,000 world-class domestic manufacturers (10x increase)
Additional 2+ million to the manufacturing-related, middle-income workforce (30%)
Reduce the environmental footprint to supply U.S. goods by 30%
Consumer purchases of US made goods increased by $500 million

To explore how your company needs to adapt to the disruptive trends that are taking shape, you may wish to participate in our Reimagine Dialogues. They are structured conversations to consider what the world will be like in 2030 and beyond. The purpose is to stimulate business owners and executives to reimagine their business and its environment in 2030. Why? Looking back on the past 10 years, there have been significant changes and disruptions which impacted business. Many companies were caught off guard and unprepared. Going forward, there will be further disruptions for businesses. Vibrant opportunities await those companies acting with foresight and preparedness. Distress awaits those companies caught reacting. There is no charge for participation and this it is not a free preview of another executive roundtable. Here is the link for further information and to register. https://www.industryreimagined2030.org/

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