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U. S. Lost 1.9 Million Manufacturing Jobs due to Trade Deficit with China

Tuesday, September 27th, 2011

According to a study released on September 20, 2011 by the Economic Policy Institute, the U.S.-China trade deficit has eliminated or displaced nearly 2.8 million jobs, of which 1.9 million or 70 percent were in manufacturing.

The study, “Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010” by Robert Scott, EPI’s director of trade and manufacturing policy research, writes, “Since China entered the World Trade Organization in 2001, the extraordinary growth of U. S. trade has had a dramatic effect on U.S. workers and the domestic economy.”

The trade deficit with China grew from $84 billion in 2001, when China entered the WTO, to $278 billion in 2010.  It eliminated or displaced 2,790,100 jobs, or about 2 percent of total U.S. employment over that period. All 50 states, the District of Columbia and Puerto Rico suffered jobs lost or displaced as a result of the growing U.S.-China trade deficit.  The 10 states that suffered the biggest net losses were California (454,600 jobs), Texas (232,800), New York (161,400), Illinois (118,200), Florida (114,400), North Carolina (107,800), Pennsylvania (106,900), Ohio (103,500), Massachusetts (88,600) and Georgia (87,700). ).  These losses comprise more than 2.2 percent of total employment.

A total of 453,100 jobs were lost or displaced from 2008 to 2010 alone—even though imports from China and the rest of world collapsed in 2009 during the height of the global financial crisis.  In fact, the report notes the U.S. trade deficit with China increased $8 billion during the great recession, despite a collapse in world trade at that time.

The largest share of manufacturing jobs lost or displaced were in computer and electronic parts, accounting for more than 44 percent of the $194 billion increase in the U. S. trade deficit with China between 2001 and 2010.  In 2010, the total U.S. trade deficit with China was $278.3 billion, of which $124.3 billion was in computer and electronics parts.  This growth of the trade deficit resulted in the loss of 909,400 jobs in these industries.

Apparel and accessories lost 178, 700 jobs, textile fabrics and products lost 92,300 jobs, fabricated metal products lost 123,900 jobs, plastic and rubber products lost 62,000 jobs, motor vehicles and parts lost 49,300 jobs, and miscellaneous manufactured goods lost 119,700 jobs.   The job displacement estimates in the report are conservative and represent only the direct and indirect jobs displaced by trade and exclude jobs in domestic wholesale and retail trade and advertising.

“Global trade in advanced technology products—often discussed as a source of comparative advantage for the United States—is instead dominated by China,” the report concludes.  The U.S. had a new record $94.2 billion trade deficit in Advanced Technology Products (ATP) with China in 2010 compared to a $40.7 billion trade deficit in 2007, an increase of 45.5 percent in three years.  In contrast, the United States had a $13.3 billion surplus in ATP with the rest of the world in 2010.

The impact of the trade deficit with China extends beyond U.S. jobs lost or displaced, according to the Alliance for American Manufacturing (AAM). Competition with China and countries like it has resulted in lower wages and less bargaining power for U.S. workers in manufacturing and for all workers with less than a four-year college degree.

Cheap labor may well be the main reason for China’s manufacturing advantage, but the report cites illegal currency manipulation as a major cause of the rapidly growing U.S. trade deficit with China.  Unlike other currencies, the Chinese yuan does not fluctuate freely against the dollar, but is artificially pegged in order to boost China’s exports.  While the cost of labor affected China’s exports, the currency manipulation, which happened despite China joining the World Trade Organization in 2001, distorted its imports.

American policymakers have long assumed that as China’s huge middle class grew, U.S. companies’ sales to these new consumers would also grow.  But it did not work out that way, the EPI reports: “as a result of China’s currency manipulation and other trade distorting practices, including extensive subsidies, legal and illegal barriers to imports, dumping and suppression of wages and labor rights, the envisioned flow of U.S. exports to China did not occur.”  Added to its labor cost advantage, this currency manipulation has been devastating to many U.S. companies.

China’s currency manipulation, state-owned enterprises, heavy industrial subsidies, intellectual property theft and piracy, indigenous innovation policies, rare earth mineral export restrictions and other trade-distorting practices have caused China’s share of the total U.S. non-oil goods trade deficit to soar from 69.6 percent in 2008 to 78.3 percent in 2010.

“Unless China raises the real value of the yuan by at least 28.5 percent and eliminates other trade distortions,” the report concludes, “the U.S. trade deficit and job losses will continue to grow rapidly.”

“This report offers conclusive evidence that immediate action by the Administration is needed to curb China’s currency manipulation, which, along with China’s blatant trade violations, are having the same devastating impact on high-tech production that they’ve already had on the nation’s longstanding industrial base,” said Scott Paul, executive director of the Alliance for American Manufacturing (AAM), a partnership of America’s leading manufacturers and the United Steelworkers union.

“We urgently need a national strategy for restoring America’s global leadership in manufacturing,” he added. “Challenging China’s currency manipulation would be an important first step toward developing such a strategy.  It would not only cut unemployment, it would result in a much-needed increase in federal revenue.”

According to a blog notice by the Coalition for a Prosperous America today, Majority Leader Reid has filed for cloture on the Senate currency bill that was filed last week.  This bill is the Brown-Schumer-Graham-Snowe-Stabenow-Sessions-Casey-Burr Currency Exchange Rate Oversight Act of 2011 (S. 1619), which is the consensus bill negotiated among Senators to deal with Treasury’s oversight role as well as the Commerce Department’s role in countervailing duty investigations.  Reid’s announcement means that there will be vote on the cloture on Monday, October 3, 2011, followed by debate on the currency bill and a vote on the bill.  A similar bill, H.R.639, was introduced recently in the House and had 206 co-sponsors as of last week.

The EPI report cites Foreign Direct Investment (FDI) as another key factor in the job loss.  FDI is money invested in China by other countries, such as the United States.  It can take the form of American companies buying or building plants in China to move manufacturing operations to China.  When outsourcing to China first occurred in the mid 1990s, American companies just outsourced parts and assemblies to Chinese companies.   Then, it became the trend to outsource whole product lines to Chinese companies.  The next step was for American companies to buy or build new plants set up as subsidiaries in China to manufacture their products.  The report states that “China is the largest recipient of FDI of all developing countries and is the third largest recipient of FDI over the past three decades, trailing only the United Stated and the United Kingdom.  Foreign-invested enterprises (both joint ventures and wholly owned subsidiaries) were responsible for 55 percent of China’s exports and 68 percent of its trade surplus in 2010.  Outsourcing ? through foreign direct investment in factories that make goods for export to the United States ? has played a key role in the shift of manufacturing production and jobs from the Unites States to China since it entered the WTO in 2001.”

The EPI research does not make a forecast of how many more American jobs may be lost in the future due to China’s manufacturing cost advantages and questionable trade policies.  The damage, of course, did not suddenly end in 2010, and is almost certainly ongoing.  And, of course, “the U.S. is piling up foreign debt, losing export capacity, and faces a fragile macroeconomic environment.”

The report concludes that “the U. S. trade relationship needs a fundamental change.  Addressing the exchange rate policies and labor standards issue in the Chinese economy are important first steps.”

I think it’s high time that these issues are addressed by Congress.  I’ve watched one company after another outsource manufacturing to China in my sales territory in Southern California as a manufacturers’ sales rep for American companies.  I’ve personally witnessed my customers who are engineers and purchasing agents at these companies lose their jobs and have increasing difficulty finding replacement jobs. My career in manufacturing includes the major recessions we have experienced since 1980, and I have never known so many people out of work for so long.  The joblessness problem in the U.S. is so serious that any added erosion of employment opportunities from our trade deficits with China will make a recovery of the American economy all the more difficult.

According to a study released on September 20, 2011 by the Economic Policy Institute, the U.S.-China trade deficit has eliminated or displaced nearly 2.8 million jobs, of which 1.9 million or 70 percent were in manufacturing.

The study, “Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010” by Robert Scott, EPI’s director of trade and manufacturing policy research, writes, “Since China entered the World Trade Organization in 2001, the extraordinary growth of U. S. trade has had a dramatic effect on U.S. workers and the domestic economy.”

The trade deficit with China grew from $84 billion in 2001, when China entered the WTO, to $278 billion in 2010.  It eliminated or displaced 2,790,100 jobs, or about 2 percent of total U.S. employment over that period. All 50 states, the District of Columbia and Puerto Rico suffered jobs lost or displaced as a result of the growing U.S.-China trade deficit.  The 10 states that suffered the biggest net losses were California (454,600 jobs), Texas (232,800), New York (161,400), Illinois (118,200), Florida (114,400), North Carolina (107,800), Pennsylvania (106,900), Ohio (103,500), Massachusetts (88,600) and Georgia (87,700). ).  These losses comprise more than 2.2 percent of total employment.

A total of 453,100 jobs were lost or displaced from 2008 to 2010 alone—even though imports from China and the rest of world collapsed in 2009 during the height of the global financial crisis.  In fact, the report notes the U.S. trade deficit with China increased $8 billion during the great recession, despite a collapse in world trade at that time.

The largest share of manufacturing jobs lost or displaced were in computer and electronic parts, accounting for more than 44 percent of the $194 billion increase in the U. S. trade deficit with China between 2001 and 2010.  In 2010, the total U.S. trade deficit with China was $278.3 billion, of which $124.3 billion was in computer and electronics parts.  This growth of the trade deficit resulted in the loss of 909,400 jobs in these industries.

Apparel and accessories lost 178, 700 jobs, textile fabrics and products lost 92,300 jobs, fabricated metal products lost 123,900 jobs, plastic and rubber products lost 62,000 jobs, motor vehicles and parts lost 49,300 jobs, and miscellaneous manufactured goods lost 119,700 jobs.   The job displacement estimates in the report are conservative and represent only the direct and indirect jobs displaced by trade and exclude jobs in domestic wholesale and retail trade and advertising.

“Global trade in advanced technology products—often discussed as a source of comparative advantage for the United States—is instead dominated by China,” the report concludes.  The U.S. had a new record $94.2 billion trade deficit in Advanced Technology Products (ATP) with China in 2010 compared to a $40.7 billion trade deficit in 2007, an increase of 45.5 percent in three years.  In contrast, the United States had a $13.3 billion surplus in ATP with the rest of the world in 2010.

The impact of the trade deficit with China extends beyond U.S. jobs lost or displaced, according to the Alliance for American Manufacturing (AAM). Competition with China and countries like it has resulted in lower wages and less bargaining power for U.S. workers in manufacturing and for all workers with less than a four-year college degree.

Cheap labor may well be the main reason for China’s manufacturing advantage, but the report cites illegal currency manipulation as a major cause of the rapidly growing U.S. trade deficit with China.  Unlike other currencies, the Chinese yuan does not fluctuate freely against the dollar, but is artificially pegged in order to boost China’s exports.  While the cost of labor affected China’s exports, the currency manipulation, which happened despite China joining the World Trade Organization in 2001, distorted its imports.

American policymakers have long assumed that as China’s huge middle class grew, U.S. companies’ sales to these new consumers would also grow.  But it did not work out that way, the EPI reports: “as a result of China’s currency manipulation and other trade distorting practices, including extensive subsidies, legal and illegal barriers to imports, dumping and suppression of wages and labor rights, the envisioned flow of U.S. exports to China did not occur.”  Added to its labor cost advantage, this currency manipulation has been devastating to many U.S. companies.

China’s currency manipulation, state-owned enterprises, heavy industrial subsidies, intellectual property theft and piracy, indigenous innovation policies, rare earth mineral export restrictions and other trade-distorting practices have caused China’s share of the total U.S. non-oil goods trade deficit to soar from 69.6 percent in 2008 to 78.3 percent in 2010.

“Unless China raises the real value of the yuan by at least 28.5 percent and eliminates other trade distortions,” the report concludes, “the U.S. trade deficit and job losses will continue to grow rapidly.”

“This report offers conclusive evidence that immediate action by the Administration is needed to curb China’s currency manipulation, which, along with China’s blatant trade violations, are having the same devastating impact on high-tech production that they’ve already had on the nation’s longstanding industrial base,” said Scott Paul, executive director of the Alliance for American Manufacturing (AAM), a partnership of America’s leading manufacturers and the United Steelworkers union.

“We urgently need a national strategy for restoring America’s global leadership in manufacturing,” he added. “Challenging China’s currency manipulation would be an important first step toward developing such a strategy.  It would not only cut unemployment, it would result in a much-needed increase in federal revenue.”

According to a blog notice by the Coalition for a Prosperous America today, Majority Leader Reid has filed for cloture on the Senate currency bill that was filed last week.  This bill is the Brown-Schumer-Graham-Snowe-Stabenow-Sessions-Casey-Burr Currency Exchange Rate Oversight Act of 2011 (S. 1619), which is the consensus bill negotiated among Senators to deal with Treasury’s oversight role as well as the Commerce Department’s role in countervailing duty investigations.  Reid’s announcement means that there will be vote on the cloture on Monday, October 3, 2011, followed by debate on the currency bill and a vote on the bill.  A similar bill, H.R.639, was introduced recently in the House and had 206 co-sponsors as of last week.

The EPI report cites Foreign Direct Investment (FDI) as another key factor in the job loss.  FDI is money invested in China by other countries, such as the United States.  It can take the form of American companies buying or building plants in China to move manufacturing operations to China.  When outsourcing to China first occurred in the mid 1990s, American companies just outsourced parts and assemblies to Chinese companies.   Then, it became the trend to outsource whole product lines to Chinese companies.  The next step was for American companies to buy or build new plants set up as subsidiaries in China to manufacture their products.  The report states that “China is the largest recipient of FDI of all developing countries and is the third largest recipient of FDI over the past three decades, trailing only the United Stated and the United Kingdom.  Foreign-invested enterprises (both joint ventures and wholly owned subsidiaries) were responsible for 55 percent of China’s exports and 68 percent of its trade surplus in 2010.  Outsourcing ? through foreign direct investment in factories that make goods for export to the United States ? has played a key role in the shift of manufacturing production and jobs from the Unites States to China since it entered the WTO in 2001.”

The EPI research does not make a forecast of how many more American jobs may be lost in the future due to China’s manufacturing cost advantages and questionable trade policies.  The damage, of course, did not suddenly end in 2010, and is almost certainly ongoing.  And, of course, “the U.S. is piling up foreign debt, losing export capacity, and faces a fragile macroeconomic environment.”

The report concludes that “the U. S. trade relationship needs a fundamental change.  Addressing the exchange rate policies and labor standards issue in the Chinese economy are important first steps.”

I think it’s high time that these issues are addressed by Congress.  I’ve watched one company after another outsource manufacturing to China in my sales territory in Southern California as a manufacturers’ sales rep for American companies.  I’ve personally witnessed my customers who are engineers and purchasing agents at these companies lose their jobs and have increasing difficulty finding replacement jobs. My career in manufacturing includes the major recessions we have experienced since 1980, and I have never known so many people out of work for so long.  The joblessness problem in the U.S. is so serious that any added erosion of employment opportunities from our trade deficits with China will make a recovery of the American economy all the more difficult.

 

 

 

 

 

 

Posted in Outsourcing, Trade Policy | 1 Comment »

How Free Trade Agreements Lead to Job Loss and Wealth Gaps

Tuesday, August 2nd, 2011

Since the year 2000, the United States has lost over 5.5 million manufacturing jobs, nearly 50,000 manufacturing companies, and racked up an annual trade deficit with China of $273 million in 2010, up from $83.8 million in 2000.  These escalating trade deficits with China have far-reaching effects, particularly on American workers.  This article will examine the impact of free trade with China as documented in two of the annual reports submitted to Congress by the bi-partisan, 12 member U. S.-China Economic and Security Review Commission (USCC).

The 2007 report included a case study of the local impact of trade with China on North Carolina.  The USCC report stated “the accelerating decline in North Carolina’s manufacturing employment is due in large measure to increasing competition from imports mostly from China . . . The combination of China’s 2001 admission to the World Trade Organization (WTO), which gave it quota-free access to U.S. markets for its textile and clothing exports, and the subsequent U.S. grant of Most-Favored (Trading) Nation status that lowered most tariffs on Chinese imports, battered North Carolina’s textile and apparel industries, and they never recovered.”

During the period of 2001 -2007, the number and proportion of jobs in the North Carolina services sector increased.  This shift put downward pressure on wages because manufacturing historically paid substantially higher wages than the services sector.  The shift also reduced the number of workers receiving such fringe benefits as retirement and health insurance, in part because some of the displaced workers were able to find only part-time jobs that often do not offer benefits.

Because a greater proportion of North Carolina’s workforce had manufacturing jobs than any other state, North Carolina’s workforce was more vulnerable to competition from imports than the workforces of other states.  North Carolina’s manufacturing economy was made even more vulnerable by its concentration in the import-sensitive sectors of textiles, apparel, and furniture.   According to the National Council of Textile Organizations, the U. S. textile industry dropped from the worlds second in basic manufacturing industries in 1991 with $244 billion in sales, down to third in 2002 with $60 billion in sales.11 North Carolina is one of the southeast states that had a large number of textile companies.

The North Carolina Employment Security Commission’s Labor Market Information Division followed the employment prospects of 4,820 workers laid off from bankrupt Pillowtex in 2003, which was the largest mass layoff in North Carolina history.  “About 40 percent of the laid-off workers had not yet found work, three years after they lost their jobs, and for those who have, take-home pay isn’t as much as they were making at Pillowtex.”  The article reported that North Carolina has been the most impacted state in the nation by layoffs due to trade.  Between 2004 and 2006, almost 39,000 North Carolina workers were certified by the Trade Adjustment Assistance program as having lost jobs to trade, more than 10 percent of the U.S. total of 387,755.”

According to the Social Science Research Institute (SSRI) of Duke University in North Carolina, there
were 2,153 textile and apparel plants in North Carolina employing 233,715 people in 1996.  By 2006, the apparel industry had experienced a 70% decline in jobs and 55% loss of plants.  The textile industry by comparison had only lost 63% of jobs and 32% of plants from 1996 to 2006.

“Trade agreements can profoundly affect state and regional economies and particular industries.  While trade agreements that lower import barriers among America’s trading partners have the potential to benefit American exporters, North Carolina appears to have realized few if any substantial benefits from China’s admission to the WTO, and the net effect of trade with China since its accession appears to be negative overall for North Carolina’s economy.”  It isn’t just people losing jobs and not being able to find other employment that pays as well as their former jobs, “hundreds of small towns throughout North Carolina impacted by plant closures are dying.”

How does the downturn in the textile industry in the South affect other regions of the country?  San Diego is a long way from North Carolina so you wouldn’t expect there would be much impact.  However, the San Diego region has a large number of companies manufacturing sporting vehicles, such as dune buggies, go-karts, mini-motorcycles, etc.  The connection is that the Southeast has traditionally been the largest market for go-karts, and the majority of U.S. textile companies were located in the Southeast.  A San Diego company that has manufactured parts for go-karts for over 40 years revealed that their sales of go-kart parts had dropped significantly in the past ten years in the Southeast.  Go-karting is mainly a hobby of blue-collar workers, such as textile workers.  Many of the thousands of workers who lost their jobs in the textile and apparel industry were not able to find equally well-paying jobs in other manufacturing sectors.  The average weekly salary for a U.S. textile worker was $487 in 2002, 38 percent more than the average salary of $301 for a worker in a retail store, such as Wal-Mart.  When a family’s disposable income drops drastically, money for non-essentials, such as go-karts is cut or goes away altogether.

The loss of these well-paid manufacturing jobs in North Carolina’s textile industry may have resulted in families losing their homes and/or being forced to relocate to other areas of the country to find jobs.  Taking lower paying jobs in their own communities may have resulted in families no longer being in the middle class income range.  And, those who haven’t been able to find any work or only part-time work may have even dropped down to the poverty level.

What about all the jobs that were supposed to be created in the green and clean technology industries?  Is our free trade agreement with China as part of the World Trade Organization having an effect on these industries also? This is of particular concern because the Obama Administration has repeatedly emphasized green technology’s role in job creation and highlighted green technology in its 2010 National Export Initiative, which is intended to double the level of U.S. exports within five years.  According to the U.S. Department of Commerce, the green sector has the potential to fuel economic growth in the immediate future.  More than two dozen states have also identified green technology’s potential to create jobs and to revitalize manufacturing areas that have been damaged by imports, outsourcing, and the loss of export markets abroad.

The USCC’s 2010 Annual Report to Congress discussed China’s green energy policies and efforts to promote alternative energy sectors as part of its analysis of the U.S.-China relationship in several areas.

 

One key development in 2009 was a ban in China on deployment of turbines of less than 1,000 kilowatts for most projects, on the grounds of inefficiencies.  The ban had a discriminatory effect on imported turbines, since most of the smaller models are produced by European and American companies.  Larger wind turbines are more expensive and require substantial new investment to build but require comparatively less maintenance and can be more efficient, because they require fewer installations.  But the larger wind turbines require new investment by manufacturers.  Many foundries in the United States, for example, are reluctant to invest in new, larger molds for the larger turbine casings unless they can be guaranteed a substantial production run.  Chinese state-owned foundries are under no such profit constraints.

“U.S. firms are losing global market share in the green technology sector, mostly to China, with solar panel manufacturing experiencing a particularly severe loss.  As various sources have noted, China became the largest producer of solar panels in the world in 2008, shipping 2,600 megawatts of photovoltaic panels, enough for about one-third of annual world supply.”

U.S. and Chinese firms are both engaged in active research and development for electric vehicles and their fuel cells or batteries.  To spur the entry of electric vehicles into the market, China has created a mandate for increased vehicle emissions standards in the next ten years, with plans to reduce gasoline consumption by vehicles 60 percent by 2020.  This is expected to spur the development of an electric vehicle market.

Recent reports have noted that China is considering a new technology transfer requirement for foreign automakers.  China’s Ministry of Industry and Information Technology is ‘‘preparing a 10-year plan aimed at turning China into ‘the world’s leader’ in developing and producing battery-powered cars and hybrids,’’ according to executives at four foreign car producers familiar with the plan.

In the area of alternative energy, China is following a familiar pattern of choosing an industry sector and showering it with a comprehensive mixture of subsidies and incentives.  In this case, China also intends to establish certain alternative energy industries as ‘‘national champions’’ able to dominate world export markets.  China has already developed the world’s largest manufacturing capacity in solar panels.  Its capacity is far larger than that needed to satisfy domestic demand; 90 percent of the solar panels manufactured in China are exported.  China also has a large number of installed wind turbines and is rapidly developing new technology for a growing global market.  China’s domestic wind turbine industry operates behind a protectionist barrier.  Only the largest wind turbines may be installed in China.  This excludes many U.S. and European turbines, which are typically smaller.

What have been the long term effects of the loss of manufacturing jobs on America’s working class?  On July 25, 2011, the Pew Research Center released a report based on their analysis of new census data, which shows that the wealth gaps between whites and minorities have grown to their widest levels in a quarter-century.  I believe that this is the direct result of the loss of manufacturing jobs in the last decade, exacerbated by the loss of jobs in the construction industry since 2007 with the burst of the real estate bubble.

The numbers are based on the Census Bureau’s Survey of Income and Program Participation, which sampled more than 36,000 households on wealth from September-December 2009.  Census first began publishing wealth data from this survey, broken down by race and ethnicity, in 1984.

Household wealth is the sum of assets (houses, cars, bank accounts, stocks and mutual funds, retirement accounts, etc.) minus the sum of debt (mortgages, auto loans, credit card debt, etc.).  It is different from household income, which measures the annual inflow of wages, interest, profits and other sources of earning.  Wealth gaps between whites, blacks and Hispanics have always been much greater than income gaps.

The median wealth of white U.S. households in 2009 was $113,149, compared with $6,325 for Hispanics and $5,677 for blacks, according to the analysis released Tuesday by the Pew Research Center. Those ratios, roughly 20 to 1 for blacks and 18 to 1 for Hispanics, far exceed the low mark of 7 to 1 for both groups reached in 1995, when the nation’s economic expansion lifted many low-income groups to the middle class.  The white-black wealth gap is also the widest since the census began tracking such data in 1984, when the ratio was roughly 12 to 1.

According to the Pew study, the housing boom of the early to mid-2000s boosted the wealth of Hispanics in particular, who were disproportionately employed in the thriving construction industry.  “After reaching a median wealth of $18,359 in 2005, the wealth of Hispanics …declined by 66 percent by 2009…  Among blacks, who now have the highest unemployment rate at 16.2 percent, their household wealth fell 53 percent from $12,124 to $5,677.”

“Typically in recessions, minorities suffer from being last hired and first fired. They are likely to lose jobs more rapidly at the beginning of the recession, and are far slower to gain jobs as the economy recovers,” said Harrison, who is now a sociologist at Howard University. “One suspects that blacks who lost jobs in the recession, or who have tried to help family members or relatives who did, have now spent whatever savings or other cashable assets they had.”

Asians lost their top ranking to whites in median household wealth, dropping from $168,103 in 2005 to $78,066 in 2009. Like Hispanics, many Asians were concentrated in states like California hit hard by the housing downturn. More recent arrivals of new Asian immigrants, who tend to be poor, also pushed down their median wealth.

In San Diego, the factory floor is comprised primarily of Asians, Vietnamese, Cambodian, Laotian, and Hmong, many of whose families came to the United States as refugees, with little formal education.  The balance of manufacturing workers is mainly Hispanics, with a small percentage of whites and blacks.  In other parts of the country, this mix of factory workers may comprise a higher number of working class whites and blacks who were able to get jobs in manufacturing with only a high school diploma or GED.

For the past 60 years, the manufacturing sector offered the best opportunity for persons with only a high school diploma or GED to have upward mobility — starting at an entry level wage, but having the opportunity to advance to better paying jobs through experience, training, and education.  With millions of manufacturing jobs gone, the opportunity to live the American dream is disappearing.  As a nation, we are in danger of becoming a two-class society of rich and poor, haves and have-nots, with the rapidly disappearing middle class.  We must stop this slide into becoming a third-world country.   It’s time for us to review our unilateral free trade agreement with China that only seems to benefit China at the cost of jobs and even whole industries in the United States.

Posted in Cleantech, Outsourcing, Trade Policy | No Comments »

Does it Matter Where R&D is Done by Manufacturers?

Tuesday, June 7th, 2011

There are some who say it doesn’t matter where R&D is conducted, and in fact, it’s better to have the R&D department or facility located away from where manufacturing is conducted.  This perspective often originates from people in design. There are others who say that it is best situated in manufacturing facilities, and this perspective originates from people in manufacturing

One of my blog readers worked for Baxter for many years and touts the Baxter model as the best solution to this question.  Baxter has nearly all of its engineering R&D located in Round Lake, IL and biological R&D in Morton Grove, IL.  Baxter’s manufacturing plants are all over the world.  He listed three of the reasons Baxter set up this model as follows:

  1. The personnel who are good at R&D work do not fit well in manufacturing.  And conversely, personnel who function well in manufacturing are not good fits in R&D.  The two disciplines are quite different.  In R&D, you want to take the most tolerable risk and have a flexible environment to make the greatest advances.  In manufacturing, you want to minimize risk and have a highly structured system.  People who fit well in manufacturing are typically risk averse.  People who are successful in R&D are bored with stability and thrive on risk.  Great R&D people are a real pain in a manufacturing facility.  Separation of manufacturing and R&D allows both to hire personnel that are best suited for each environment.
  2. R&D runs into many schedule and plan changes due to the nature of working in the unknown.  Throwing these into a manufacturing facility disrupts the manufacturing efficiency and raises manufacturing costs.
  3. Location of R&D is best near technology sources such as universities and technology suppliers.  Manufacturing is best located at low cost labor sites that are usually in remote areas and far away from technology sources.

His solution to the question is to have America sell R&D services to nations like Mexico and China and have countries like Mexico and China sell manufacturing goods to the USA in return.

This was an economic strategy first proposed by John Naisbitt in Megatrends, in which the United States would become the center of innovation and all the dirty, grubby manufacturing would be done in other countries.

Thus far, Mexico has remained a location for outsourcing of manufacturing and not a producer of proprietary end products so they aren’t interested in doing R&D for their products; much less buying the R&D services from American companies.  However, China wasn’t’ satisfied with being the world’s factory floor – they want to do it all.  China is transitioning from an outsourcing location to a producer of proprietary end products, and their companies are either doing reverse engineering of American products to market copies or counterfeits or stealing American intellectual property to produce their own brands of products.   China is graduating 500,000 engineers per year while the Untied States only graduates about 50,000 per year, many of which are foreigners, who return to their own countries when they graduate.

There is an abundance of articles by myself and others discussing the consequences of having China sell manufactured goods to the USA — high trade deficits, the loss of thousands of manufacturers, the loss of millions of manufacturing jobs, and the loss of whole tiers in the supply chain of goods.

There is no question that it is advantageous to have R&D conducted near universities or government and private research centers, which is why San Diego is a hotbed of companies starting up with innovative new products, as a result of the research being conducted at the University of California, San Diego, Scripps Research Institute, Department of Defense facilities such as SPAWAR, and other institutions.

My argument is that American companies need to be conducting their own R&D in the United States and not hiring it to be done by companies in China and India.   It doesn’t matter whether or not R&D is done in the same facility or done in separate facilities of a company.  What does matter is losing the knowledge of how to make a product to be able to innovate the next generation of product or innovate a totally new product.

Baxter’s model as a multinational global company is one that can only be replicated by another multinational global company.  It is not a model that any small to medium sized company would have the financial and technical assets or personnel to utilize.  In fact, in San Diego, very few manufacturing companies are large enough to have a fully staffed engineering department, which includes design engineers, component engineers, mechanical engineers, and manufacturing engineers.  There are only a dozen or so manufacturing companies of over 500 employees, and more than 90% of all manufacturing companies are under 50 people.  Many companies are only able to have one or two of the above categories of engineers, and some don’t have any engineers on staff as full-time employees.

My blog reader is right when he said that most cutting edge or break-through technologies are not generated by established, larger companies.  They come from the creative innovations of entrepreneurs starting up companies.  However, most of these entrepreneurs don’t startup their companies in a vacuum; they are most often started by people who have gained knowledge and experience at existing companies in a technology/product field and leave the company to develop their own innovative new product in that same field.

From my experience working with startup companies for nearly 30 years, the model in San Diego is for a company to start up with a concept for an innovative new product.  The founders of the company may have a concept of the new product they wish to develop and market but don’t have the technical expertise to do the design and development themselves. More often than not, they hire outside consultants to design and develop the product or they may subcontract the design, development, and prototyping to a company specializing in providing these services. There are more than a dozen product development companies and more than a hundred engineering consultants listed in San Diego’s Yellow Pages, and most with which we have dealt are not even listed.

At the extreme end, these companies subcontract everything from start to finish, including engineering design, procurement of the parts and materials, assembly, test, inspection, and shipping of the product to the end customer.  They may handle marketing and customer service, but sometimes they even subcontract out these functions to marketing and customer service firms.

Many of these startup companies never become manufacturers in the traditional meaning because they never set up any manufacturing capability within their own facility.   They are what I call “virtual manufacturers” because they outsource all of their manufacturing and assembly.  The difference between the past and present is that these companies used to outsource various processes of manufacturing to other American companies or have their product assembled at maquiladoras in Baja California, Mexico, and now many of them outsource much or all of their product to Chinese companies.

“Virtual manufacturers” became common for consumer products that had a limited life span sold to a mass market or for entrepreneurs that just wanted to make a quick fortune and were not interested in building a company to last with follow-on products.  Some examples of fad products with a limited manufacturing life are:  the Hula Hoop, Cabbage Patch Kids, and PokeMon.   If a product was designed for ease and simplicity of manufacturing, the location of the vendors who produced the parts and sub-assemblies didn’t matter as much.  However, today such factors as ease of communication, costs of transportation for shipping parts, and quality of the products are playing a more important role in determining where a product is manufactured.

As I’ve mentioned previously, two local organizations recognize the importance and advantages of co-location of R&D and manufacturing by American companies within our country and even within our local region.  One is the San Diego Inventor’s Forum, which meets the second Thursday of the month.  As a member of the steering committee, we help inventors and entrepreneurs do their product development and prototyping locally and help them source their manufacturing within the United States as much as possible.

The other is San Diego’s CONNECT organization, which has recognized the value of the current trend of bringing operations closer to home to reduce costs and become more flexible, responsive and adaptable in the constantly changing marketplace.  CONNECT calls it “nearsourcing” in contrast to “nearshoring,” which Californians understand to mean sourcing in Mexico.  CONNECT launched a new industry cluster in December 2010 for technology manufacturers to help them connect with local and regional sources for products and services.  CONNECT is collaborating with the San Diego East County Economic Development Council to utilize the EDC’s well-established www.connectory.com database of manufacturers to facilitate the connections.  CONNECT put on a program May 3, 2011 on “Nearsourcing vs. Offshore:  What it is and what are the Initial Considerations for Technology Companies.”   A case study on nearsourcing, “How Do we make ‘Made in San Diego’ a Winning Business Model?” will be presented at the CONNECT-sponsored MIT Enterprise Forum on Wednesday, June 15, 2011.

In conclusion, it doesn’t matter whether American companies do their R&D within their own facility or hire it to be done by outside American consultants or product development firms, but it does matter whether the R&D is done within America.  We need to keep innovation within our country if we want to remain at the cutting edge of technology and maintain the critical mass of our manufacturing industry.  Outsourcing R&D to China is like a mayor giving the key to his city to a would be conqueror.   We need to protect the key to our future security as a nation and keep R&D and manufacturing within the United States.

 

 

 

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The Future of American Manufacturing – Part Two What is the future Outlook?

Tuesday, May 10th, 2011

In order to stay competitive in the global economy during the past 20 years, manufacturers have extended manufacturing and supply operations to low-cost sources globally, embraced innovations in automation and cost management, begun transforming themselves into lean enterprises, and served customers in emerging markets.  Now, customer demands are changing.  They want more flexibility, more emphasis on unique, customer-specific products or variations, more rapid delivery/response, proximity to vendors, and consistent high quality.  These changing demands are fostering several major trends that are creating a brighter outlook for American manufacturers.  They include:

Reshoring Initiative

The Reshoring Initiative is a way to return manufacturing jobs to the U. S.  Harry Moser, Chairman Emeritus off Agie Charmilles in 2010, founded initiative.  The Association for Manufacturing Technology, Association for Manufacturing Excellence, National Tooling & Machining Association, Precision Metalforming Association, and the Swiss Machine Tool Society support the Initiative.

In June 2008, a survey by SAP and Industry Week Customer Research published showed that the top objectives of conducting business overseas were:

  • Increase overall market share
  • Increase profitability
  • Reduce Costs
  • Provide a superior customer experience
  • Increase overall revenue

The survey showed that companies with >$1billion revenue met 58-75% of their objectives while companies with <$1 billion revenue only met 37-47% of their objectives

However, a survey of North American manufacturing executives released in early April by Accenture entitled “Manufacturing’s Secret Shift” found:

  • 61% are considering shifting from offshore to closer to centers of demand
  • 59% intend to pursue new supply options
  • 67% proximity to customers markets top factor
  • 57% noted increased cost of logistics & transportation costs

The authors noted that software, electronics and telecom are lagging this trend.  Software doesn’t seem to be rebalancing its supply chain.  India is the most attractive relocation due to large number of highly skilled workers at lower wage rates who speak fluent English.  China is forecast as the hub for the Asian market for the telecom industry.  Electronic equipment will continue to be outsourced to China.  This is compatible with number 5 of the 2011 Top 10 Supply Chain Predictions — “In the context of taking a broader view of total cost, supply chain organizations will gain a new appreciation for shortening lead times through profitable proximity sourcing strategies.”  The reasons are:

  • Improve overall service levels
  • Retain key customers
  • Focus on the “costs” of long lead times
  • More balanced approach to global sourcing

A January 2010 survey by Grant Thornton of Supply Chain Solutions survey showed that sourcing is moving home slowly.  In 2009, 20% of companies brought sourcing closer, of which 59% reshored.

The main reasons for reshoring are:

  • Component/material prices increasing
  • Rising labor rates in China – 15-20% year over year
  • Transportation costs increasing
  • Political instability
  • Exchange rate variables as U. S. dollar continues to drop
  • Disruption from natural disasters

“As energy costs go up, transportation costs rise, and the distance that goods travel begins to matter,” said Paul Bingham, a trade and transportation specialist at Global Insight, a financial analysis firm in Massachusetts.  “For low-value products that take up a lot of space, like furniture, for example, transportation costs can get quite high,” said Bingham. “And if you’re not saving enough money from using low-cost labor, it makes sense to bring your production lines closer to home.”

Thomas Murphy, RSM McGladrey’s executive vice president of manufacturing and distribution said, “Manufacturing will be regionalized and the countries with the raw materials will drive a lot of manufacturing investment. Energy will be a key driver of what is located where.”

While all countries are subject to unexpected natural disasters, the 7.9 magnitude earthquake that struck the Sichuan province of China on May 12, 2008, and the 9.0 earthquake in Japan that occurred on April 7, 2011, generating a devastating tsunami and radiation exposure from damage to the Fukushima nuclear plant have exposed the problem of how vulnerable the global supply chain is to major disruptions.  The Japanese disaster has caused a major disruption in the supply chain, especially for automakers.  “Toyota says its vehicles contain 20,000 to 3,000 parts, coming from about 600 suppliers.  And the chain doesn’t stop there.  The 600 suppliers themselves rely on hundreds of other companies to provide raw materials and components.”

“Inshoring” and “Nearshoring”

“Inshoring” refers to a company from a foreign country setting up a plant in the United States, and “nearshoring” refers to the same type of company setting up a plant in the nearby location of Mexico. For companies from India, the reasons for this “reverse offshoring” trend include the declining exchange rate of the Indian rupee versus the dollar, the decline in H1B visa availability, and the desire to be closer to their U.S. customer base. Other factors are the labor shortage in India for technology professionals and the tremendous upward pressure on wages.

For example, Wipro Technologies, India’s third-largest outsourcing company, set up an “inshore” development center in Atlanta, GA, where it will work with the University of Georgia to educate and train nearly 500 employees. The Bangalore-based firm also established a “nearshore” location in Monterrey, Mexico.33

San Diego’s CONNECT organization has recognized the current trend of bringing operations closer to home to reduce costs and become more flexible, responsive and adaptable in the constantly changing marketplace.  CONNECT calls it “nearsourcing” rather than “nearshoring,”and launched a new industry cluster in December 2010 for technology manufacturers to help them connect with local and regional sources for products and services.  CONNECT is collaborating with the San Diego East County Economic Development Council to utilize the EDC’s well-established www.connectory.com database of manufacturers to facilitate the connections.  CONNECT put on a program May 3, 2011 on “Nearsourcing vs. Offshore:  What it is and What are the Initial Considerations for Technology Companies.”

Lean Manufacturing

The application of lean manufacturing techniques is also helping to bring manufacturing back to the USA.  One is example took place at General Electric’s appliance plant in Kentucky.  While doing a Kaizen event, employees came up with better way to assemble the GeoSpring water heater made in China.  General Electric’s U.S. team changed the design to have a control panel that will swing open like a glove box to connect 17 electric connections instead of having to squeeze fingers through tight spaces behind the control panel as was being done in China.  They also changed the assembly process so that the 20 lb. compressor will be attached while the GeoSpring unit is in horizontal position instead of upright position.  The GeoSpring water heater was brought back to Kentucky plant this year, creating 400 new jobs.

Luke Faulstick, COO of CJO Global, recently told the TechAmerica Operations Roundtable, “Any company on the lean journey should rethink offshoring.  If you are doing the ‘one part pull’ of lean, then you don’t need to offshore.  We have reshored our PCBs to our plant in South Dakota, our textile products to our plant in North Carolina, and our implant parts to our plant in Texas.  We have cut our inventory buffer down from 12 weeks to two weeks.”

A report titled “What’s your plan for 2025?” released by Accenture in October 2010, identified the winning manufacturing attributes for the next 15 years as being:

  • Customized products/services to serve customer’s unique, specific needs and priorities
  • Global locations to balance regional demand with regional supply
  • Supply chain flexibility to support diverse channel and customer needs
  • Agility on shop floor and beyond
  • Negotiate and “partner” for scarce resources

This same report stated that the top challenges for manufacturers would be:

  • Production skills, workforce availability
  • Transportation costs
  • Supply base and supply base access
  • Capital Required
  • Employment related issues
  • Local/government content requirements
  • Government incentives
  • ·         Local taxes

The Accenture report concluded that the following capabilities are needed to rebalance manufacturing within the United States vs. outsourcing offshore:

  • Accurate Total Cost of Ownership analysis of options
  • Comprehensive manufacturing and supply strategy
  • Skills and knowledge of staff
  • Ability to increase supplier capability and capacity
  • Changing internal mindset for longer-term total cost view
  • Improved understanding of local market capabilities

Finally, the future of American manufacturing holds much promise as new technologies provide opportunities.  Just a few of the new technologies to be further developed are:

  • Nanotechnology
  • Biomimicry
  • Bio fuels
  • New processes for PCB industry
  • New trends in rapid prototyping
  • Electro forming

Each month, I see examples of the inventiveness, ingenuity, and entrepreneurial spirit of Americans at the San Diego Inventors Forum.  Our SDIF steering committee is helping these entrepreneurs and inventors find sources for their new products in the United States.  This provides me with the best hope for the revival of American technology-based manufacturing and services for the future.

Posted in General, Outsourcing, Reshoring | No Comments »

The Importance and Promise of American Manufacturing

Tuesday, April 12th, 2011

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Chemicals, including pharmaceuticals and other chemical products

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

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

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

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

 

Posted in General, Outsourcing, Reshoring | No Comments »

Unintended Consequences of U. S. Environmental Protection Laws

Tuesday, March 22nd, 2011

One of the most difficult problems in bringing back manufacturing from offshore to “Reshoring” in the United States is the increasingly stringent environmental regulations being imposed at Federal and State level that adversely affect various sectors of the manufacturing industry.   The following describes some of the more stringent environmental regulations.

Clean Water:  As authorized by the Clean Water Act in 1972, the federal Environmental Protection Agency (EPA) oversees the National Pollutant Discharge Elimination System (NPDES) Regulations for Storm Water Discharges.  In most cases, the NPDES program is administered by authorized states.  Many states, such as California, have set up multiple water quality control regional boards that develop and administer specific regulations for their region.  The San Diego regional board issued 62 pages of new regulations in August 2002, for which compliance has been very onerous and expensive for manufacturers.  For example, rain water falling on a manufacturer’s parking lot must be monitored so that toxic pollutants, oil grease, waxes, chemicals, and visible floating materials are prevented from entering the storm drains on the property connecting to the municipal sewer system.

Hazardous Air Pollutants:  In 2005, the Federal Occupational Safety and Health Administration (OSHA) proposed standards to go in effect January 1st 2006, but Congress didn’t approve the new standards as stringently written.  The proposed standards would have reduced the allowed emissions for hexavalent chromium (a chemical compound used in the chrome plating process) to less than 1/50th of the allowable level (52 mg. of chromium per meter of air down to 1mg.)  The emission standard of 52 mg. that went into effect in 1998 was already a 97 percent reduction in hexavalent chromium emissions.  In May 2006, Congress finally approved slightly less stringent regulation of 5 mg. per cubic meter of air, which went in effect January 2007.

Metal plating, including chrome plating, is important to the electronics, machine equipment, defense, and automotive after-market sectors of manufacturing because every metal part that could corrode is nickel or chrome plated to keep it from corroding.  These new standards required existing chrome plating facilities to purchase new environmental control equipment in order to maintain compliance status.  Many large plating facilities converted to the more expensive, but less toxic trivalent chromium, which is suitable for some applications and certain thicknesses of plating.  The trivalent chromium process requires more careful control than the hexavalent chromium process and is more difficult to do in some applications such as barrel plating.

On June 12, 2008, the EPA issued final national air toxics standard for smaller-emitting sources in the plating and polishing industry applicable to cadmium, nickel, lead, manganese, and chromium.  The final rule affected an estimated 2,900 existing planting and polishing facilities.  These standards seriously affected the chrome plating industry nationwide and have accelerated the offshore outsourcing of products requiring chrome plating.

In San Diego County, six metal processors went out of business between 2007 and 2008, and one company closed down its chrome plating line prior to the stricter regulations going into effect.  Two companies moved their chrome plating across the border to Tijuana, Mexico so that there are now only two metal processors that do chrome plating, which has stretched lead times for locally fabricated metal parts that require chrome plating.  Of course, there is no border control for the flow of air so emissions in Tijuana affect the air quality in San Diego County.

Clean Air:  In September 2006, the federal EPA approved new national air quality standards that reduced the previous daily particulate matter standard by nearly 50 percent.  Particulate matter is fine particles such as soot, dust, and liquid droplets that are too small to see.  A new Maximum Achievable Control Technology (MACT) for hazardous waste combustors (boilers and incinerators) followed in 2008.  EPA will soon announce new draft rules aimed at slashing toxic air pollution emitted by power plants.

Electric utilities and manufacturers have objected to these new air quality regulations, saying that the new rules cost billions of dollars to implement.  William O’Keefe, CEO, George Marshall Institute, wrote “…the utility MACT will impose costs on utilities that far exceed air quality benefits…Forcing the utility industry to install the most expensive emissions reduction technologies will simply drive up the cost of electric power when it can least be afforded…That is not what we need as our economy struggles to recover from the worst recession in decades.”

A report released in 2007 by the National Association of Manufacturers  (NAM) stated “the domestic environment for manufacturers is dominated by concerns about rising external costs that make manufacturing from a U. S. base difficult.  These costs for corporate taxes, health care and pensions, regulation, natural gas, and tort litigation add more than 30 percent to manufacturers’ costs.”

In addition, the NAM report stated that the annual cost of complying with federal regulations is more than $10,000 per employee for manufacturers, while the cost is half that for non-manufacturers.  When companies are spending more money on regulatory compliance, materials, fuel and energy, they have less money for R & D, new product development, and purchase of capital equipment and systems.  This puts U. S. manufacturers at a substantial disadvantage compared to manufacturers in countries that aren’t subject to this degree of regulation.

On October 14, 2010, Joe Barton, Ranking Member of the Committee on Energy and Commerce and Michael Burgess, Ranking Member of the Subcommittee on Oversight and Investigations, wrote a letter to Lisa Jackson, Administrator of the U. S. Environment Protection Agency, expressing their concern over the cumulative impacts of new regulations being proposed by the EPA under the Clean Air Act (CAA).  The letter included a chart (51 pages), which identified approximately 40 proposed or final CAA regulations, including greenhouse gas regulations, revised air quality standards, and other regulator proposals under the CAA, as well as many regulations in the pre-proposal stages.   The letter stated, “At least eight of the proposed or final rules included have compliance costs estimated by EPA to exceed $1 billion each.  It appears that collectively the Administration’s new or proposed CAA regulations could impose billions of dollars of additional new costs annually on U. S. business as the new rules are implemented by your agency.”  A response was requested with regard to the accuracy of the compliance costs estimated included in the chart and if there were any other pending or proposed CAA regulations not included in the chart.

One of the unintended consequences of strict environmental protection laws and regulations in the United States that drives manufacturing offshore is the increased environmental pollution in other countries, such as China and India.  India and China have been getting more polluted in the last 30 years, as more and more U.S. manufacturing companies have outsourced to these countries.  Four cities in India and six cities in China are listed in the “Dirty 30” list of the worst polluted sites in the world, according to a 2007 report by the New York-based Blacksmith Institute.  The Institute’s “Top 10” list now includes four cities in China and two in India.  The Institute’s list is based on scoring criteria devised by an international panel that includes researchers from Johns Hopkins University, Harvard University, and Mt. Sinai Hospital in assessments of more than 400 polluted sites.  “Children are sick and dying in these polluted places, and it’s not rocket science to fix them,” said Richard Fuller, Blacksmith Institute’s founder and director.  The Institute highlights the health threats to children from industrial pollution, such as the stunting effect of lead poisoning on intellectual development.  Some 12 million people are affected in the top ten sites, according to the report.

One of the worst examples is Wanshan, China, termed the “Mercury Capital” of China, because more than the 60 percent of the country’s mercury deposits were discovered there.  Mercury contamination extends through the city’s air, surface water systems, and soils.  Concentrations in the soil range from 16 to 232 times the maximum national standard for mercury contamination. To put this into perspective, the mercury from one fluorescent bulb can pollute 6,000 gallons of water beyond safe levels for drinking, and it only takes one teaspoon of mercury to contaminate a 20-acre lake – forever.  The health hazards of mercury exposure include kidney and gastrointestinal damage, neurological damage, and birth defects.  Chronic exposure is fatal.

On June 19, 2007, the Netherlands Environment Assessment Agency announced that China’s carbon dioxide (CO2) emissions were seven percent higher by volume than the United States in 2006.  Many experts were skeptical, but on June 13, 2008, the same agency announced that a new study found that China’s emissions were 14 percent higher than those of the United States in 2007.  “The Chinese increase accounted for two-thirds of the growth in the year’s global greenhouse gas emissions, the study found.”  In addition, China is now the largest source of SO2 emissions in the world (SO2 causes acid rain), and.  Japan and South Korea suffer from acid rain produced by China’s coal-fired power plants and yellow dust storms that originate in the Gobi desert.

An article titled “Scientists Track Asian Pollution” in the September 4, 2008 issue of The News Tribune of Tacoma, Washington reported that the Journal of Geophysical Research that stated “East Asia pollution aerosols could impose far-reaching environmental impacts at continental, hemispheric and global scales because of long-range transport,” and “a warm conveyer belt lifts the pollutants into the upper troposphere over Asia, where winds can wing it to the United States in a week or less.”

Dan Jaffe, a professor of environment science at the University of Washington and a member of the National Academies of Science panel studying the issue, said,  “This pollution is distributed on average equally from Northern California to British Columbia.”  He added that “up to 30 percent of the mercury deposited in the United States from airborne sources comes from Asia, with the highest concentrations in Alaska and the Western states.”

What good does it do to control the quality of our air and water in the United States so strictly that we drive our manufacturing industry south of the border to Mexico or offshore to Asia where environmental regulations are either lax or nonexistent?  If people want strong environmental protection while retaining American jobs, we are going to have to analyze the cost of the environmental impact on American manufacturers and accept a reasonable compromise that doesn’t go overboard on environmental regulations that drive more and more manufacturing offshore.  Another option would be to assess an environmental impact fee on products imported based on the level of pollution in the country of origin as compared to that of the U. S.  The natural disasters of the past year, such as the Icelandic volcano, and the recent earthquake/tsunami in Japan have shown us that what happens to the environment in one part of the world affects the environment of other parts of the world.  While government takes the time to come to grips with this problem, you can prevent yourself from contributing to the world’s pollution by buying products made in America.  Remember, every product you buy made in China or India contributes to the world’s pollution.

Posted in General, Outsourcing, Taxes/Regulations | 2 Comments »

ABCs ‘Made in America’ Series

Tuesday, March 8th, 2011

On Monday, February 28th, ABC began a series on the World News with Diane Sawyer called “Made in America.” John and Ana Ursy of Dallas, Texas agreed to accept the challenge of working with the ABC team of David Muir and Sharyn Alfonsi to furnish three rooms of their home exclusively with products that are made in America.  When the team examined everything that existed in these three rooms and removed all foreign-made products, the result was a virtually empty house – no beds, no tables, no chairs, no couches, no lamps.  Only the kitchen sink, a vase, a candle, and some pottery remained.

The questions posed by the team were:  Is buying American-made more expensive?  What staples are no longer manufactured in the U.S.?  And what difference would it make if everyone promised to buy more American-made products?

The results were somewhat surprising.  The kitchen was the most difficult because there are only a couple of companies still making major appliances in America:  Viking Products provided the stove, and Sub-Zero and Wolf provided the refrigerator, microwave, and oven.  They couldn’t find any coffee makers made in the U.S.; Bun-a-Matic assembled a coffee maker out of parts made offshore.  There are no TVs made in America and no light bulbs.  General Electric closed the last plant making incandescent light bulbs in the U. S. in July 2010.  The team was able to furnish the bedroom with all American-made furniture, lamps, and bedding for less money:  $1,699 compared to $1,758.   All in all, the team found more than 100 manufacturers still making various consumer goods in America, and viewers submitted names of many more.  You can view the companies on an interactive map of the USA.

When one of the ABC reporters, Sharyn Alfonsi, examined the toy box of her own child, she didn’t find any American-made toys in it, so the interactive website provides the names of some U. S. toy makers, such as Green Toys in San Francisco that makes toys from recycled milk bottles. There are six other California companies shown on the interactive map:  Pure-Rest Organics, making organic bedding in San Diego, Harveys Handbags in Santa Ana, Maglite Flashlights in Ontario, Danmer Custom Shutters in Los Angeles, Glass Darma, making handmade drinking straws in Ft. Bragg, and Sergio Lub Jewelry in Martinez.

Why does it matter if we buy American-made products?   First, our addiction to imports has helped create our high trade deficit, especially with China, where most of the consumer goods we import are manufactured.  In 1960, imported foreign goods made up just 8 percent of Americans’ purchases.  Today, nearly 60 percent of everything we buy is made overseas.  In 2010, our overall trade deficit was $97.8 billion, up from $374.9 billion in 2009 but nearly 30 percent below our highest deficit in 2008 of $698.8 billion.  Our trade deficit with China has grown from $ $83.8 billion in 2000 when China was granted Most Favored Nation status to a record high of $273 billion in 2010.

Second, American-made products create American jobs.  Each time you choose to buy an American-made product, you help save or create an American job.  There is a ripple effect in that every manufacturing job creates three to four other jobs while service jobs create only one to two other jobs.  We’ve lost 5.5 million manufacturing jobs since the year 2000, and the number of manufacturing jobs dropped below 12 million in 2010, down from a high of nearly 20 million in 1979.

You may be thinking, would what I do make a difference? American activist and author, Sonia Johnson said, “We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.”   Eleanor Roosevelt echoed this sentiment saying, “Never doubt that a small group of thoughtful, committed citizens can change world; indeed, it’s the only thing that ever has.”  Remember that our country was founded by a small group of people that did indeed change the world by forming the United States of America.

Here are suggestions of what each one of us can do:  First, look at the country of origin labels of goods when you go shopping.  Most imported goods are required to have these labels.  Many manufacturers have tried to get the Federal Trade Commission (FTC) to relax the rules determining what’s “Made in USA.”  After two years of public hearings, studies, and reports, in December 1997, the FTC reaffirmed:  A product will be considered Made in U.S.A. if “all or virtually all made in the Unites States” only where “all significant parts and processing that go into the product are of U. S. origin.”

Buy the “Made in U.S.A.” even if it costs more than the imported product.  It is a small sacrifice to make to insure the well being of your fellow Americans.  The price difference you pay for “Made in USA” products keeps other Americans working.  If the product you are looking for is no longer made in America, then avoid countries such as China that has the goal of becoming the world’s “super power” in the 21st Century by winning either an economic war or a military war with the U. S.  When you take our trade deficits with China into consideration, it would not be an exaggeration to say that American consumers have paid for the bulk of China’s military buildup.  American service men and women could one day face weapons mostly paid for by American consumers. Instead, patronize impoverished countries such as Bangladesh or Nicaragua, which have no military ambitions.

In addition, you would be reducing your “carbon footprint” by buying a product made in America instead of a product that is made offshore that will use a great deal of fossil fuel just to ship it to the United States.

If you have a “Made in USA” appliance that needs repair and all the new ones are imported, try to get it repaired.  If it can’t be fixed, and it is a small appliance that you can live without, then don’t buy a new one.  We Americans buy many things that we really don’t need just because they are so cheap.  If a product that you are considering purchasing is an import, ask yourself, “Do I really need this?”  If you don’t need it, then don’t buy it.

If you are willing to step out of your comfort zone, ask to speak to the department or store manager of your favorite store.  Tell the person that you have been a regular customer for x amount of time, but if they want to keep you as a customer, they need to start carrying some (or more) “Made in USA.” products.  If you buy products on line or from catalogs, you could contact these companies via email with a similar message.   Your contacting a company does have an effect because there is a rule of thumb in sales and marketing that one reported customer complaint equals 100 unreported complaints.

Buying American has been made even easier by a new guide to buying American – “How Americans Can Buy American:  The Power of Consumer Patriotism” first released in March 2008 and updated in 2010.  Author Roger Simmermaker says, “Supporting American companies leads to a more independent America.  Ownership equals control, and control equals independence.  We cannot claim to be an independent country or control our own destiny if our manufacturing base is under foreign ownership or foreign control.  A nation that cannot supply its own needs is not an independent nation.  If we are to claim independence from the rest of the world and truly be a sovereign nation, we must begin supplying our own needs once again.”

According to Simmermaker, “buying American” is not just about buying “Made in USA.”  “Buying American, in the purest sense of the term, means we would buy an American-made product, made by an American-owned company, with as high a domestic parts content within that product as possible…’American-made’ is good. ‘Buying American’ is much better!”

One of our greatest statesmen, Thomas Jefferson, stated, “I have come to a resolution myself, as I hope every good citizen will, never again to purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may” (pg. 9 of Simmermaker’s book).

Simmermaker has made it easy by listing companies and their nation of ownership and view his list of American owned companies at his website: www.howtobuyamerican.com.    In addition here are some other websites.

www.buyamericanmart.com

www.madeinusa.org

www.americansworking.com

www.shopunionmade.org

www.MadeInUSAForever.com

As American consumers, you now have more American choices so you can live safely and have more peace of mind.  It’s high time to stop sending China our American dollars while they send us all of their tainted, hazardous, and disposable products.  If 200 million Americans refused to buy just $20 each of Chinese goods, that’s would be a four billion dollar trade imbalance resolved in our favor – fast!  In the ABC World News program, Diane Sawyer said, “if every American spent an extra $3.33 on U. S. -made goods, it would create almost 10,000 new jobs in this country.”   The ABC World News series “Made in America” continues with a look at the garment industry the week of March 7th.

Manufacturing jobs are the foundation of our middle class, and we are losing our middle class in state after state.  From December 2000 to December 2010, 22 states have lost a third or more of their manufacturing jobs.  Massachusetts, New York, and Ohio have lost 38 percent of their manufacturing jobs, New Jersey 39 percent, North Carolina 42 percent, Rhode Island 44 percent, and Michigan 48 percent.

We cannot afford to export our wealth by buying imports from China and finance our more than 10 years of deficits by borrowing an average of $1.553 billion every day.  We cannot lose our manufacturing base and be able to remain the world’s “superpower.”  In fact, we may not be able to maintain our freedom as a country because it takes considerable wealth to protect our freedom.

Remember, the company you save or the job you save by your actions may be your own.  More importantly, you can play a role as an individual in saving our country’s sovereignty by following the suggestions in this article.

Posted in Outsourcing, Reshoring, Trade Policy | 3 Comments »

Why Isn’t Economic Upturn Leading to Job Gain?

Tuesday, February 15th, 2011

According to the National Bureau of Economic Research, and independent group of economists, the Great Recession ended in June 2009.  It was the longest and deepest downturn for the U. S. economy since the Great Depression.  Some 20 months later, the average American would be inclined to dispute this opinion based on the lack of job opportunities.  What is the reality?

The January 2011 “Report on Business,” by the Institute for Supply Management stated that the manufacturing sector expanded for the 18th consecutive month.  Norbert J. Orwe, CPSM, chair of the Manufacturing Business Survey Committee said, “The manufacturing sector grew at a faster rate in January as the PMI registered 60.8 percent, which is its highest level since May 2004 when the index registered 61.4 percent…New orders and production continue to be strong, and employment rose above 60 percent for the first time since May 2004.”  This wasn’t just an upturn in a few industries – 14 of the 18 manufacturing industries reported growth in the PMI in January.

The PMI is the Purchasing Management Index, based on data compiled from purchasing and supply executives nationwide.  A PMI reading above 50% indicates that the manufacturing economy is expanding and below 50% indicates that it is declining.  At the very worst of the Great Recession, it was 32.5% in December of 2008.  Lakshman Achuthan, managing director of Economic Cycle Research Institute said, “Gross domestic product has recovered about 70% of its pre-recession level.”

While the national unemployment rate finally dropped to 9.0% in January from 9.4% in December, many experts realize that this is because thousands of men and women dropped off the unemployment rolls when the last of the extensions of up to 99 months ended in December. The U6 unemployment rate that takes into account the people that have lost their unemployment benefits or taken part-time jobs while seeking full-time employment is 16.1%.  This reflects the growing difficulty of increasing jobs of any type in today’s competitive global economy.

Gregory Tassey, Sr. Economist at the National Institute of Standards and Technology commented in a paper titled Rationales and Mechanisms for Revitalizing U. S. Manufacturing R&D Strategies, “For the first seven recessions after World War II, the relatively closed status of the U. S. economy meant that average employment recovery was swift and substantial (about four months to positive employment levels relative to the recession trough).  In the late 1980s, however, the growing global competition began to promote greater investment in addition to accelerated outsourcing.  The result was the 19 months elapsed before a positive employment level was attained.  This significant slowing of the cyclical rebound in employment was dwarfed by the extremely slow recovery in employment from the 2000-2001 recession, which required 30 months to reach a positive employment level relative to the recession trough.”

Why have the last two recessions resulted in “jobless recoveries?”  What is keeping unemployment so high now?  One of the main reasons is the loss of manufacturing jobs.  Too many manufacturers are sourcing all or most of their manufacturing offshore.  An upturn in their business doesn’t mean more manufacturing jobs for Americans if they aren’t producing or buying everything for their products in the United States.  Since 2001, we have lost 63% of the U. S. textile industry and 74% of the U. S. printed circuit board industry.  We have lost 47% of communication equipment jobs and 43% of motor vehicle and parts industry jobs.

Since manufacturing jobs create three to four other jobs, the loss of each manufacturing job causes the loss of three to four other jobs.  Our nationwide loss of jobs in all sectors won’t reverse until we stop the hemorrhaging of manufacturing jobs out of the United States.

In addition, manufacturers are doing more with less for three main reasons.  First, the United States ranks highest in productivity as measured by Gross Domestic Product per employed person at 97.1 compared to China’s rate of 10.2 and India’s rate of 7.5.  James Vitak, a spokesman for specialty chemical maker Ashland Inc. said,  “You can add more capability, but it doesn’t mean you necessarily have to hire hundreds of people.”

Second, an increasing number of manufacturers are adopting “lean manufacturing” based on the principle of continual improvement (Kaizen) of the Toyota Production System.  The “lean manufacturing process was developed to produce smaller batch sizes and just-in-time delivery; that is, producing only necessary units in necessary quantities at precisely the right time.  This results in reducing inventory, increasing productivity, and significantly reducing costs.  It has evolved into a system-wide management process that continually seeks to increase profits by stripping out wasted time, material, and manpower from the manufacturing process.  Thus, fewer people are needed to produce products.  Manufacturers aren’t building up inventory to fill orders – they are ordering materials, components, parts, and assemblies as needed to fill orders as they receive them from their customers.

Third, existing salaried employees have been required to work harder and longer because manufacturers are fearful of hiring new people until they have more confidence that the upturn in business will continue, and we won’t have a double dip recession.  Manufacturers can get away with doing this because for every person employed, there are a hundred people willing to fill the job.

The fear of increased taxes with the expiration of the Bush tax cuts, the cost of changes due to the Health Care Act of 2010, and the possibility of a “cap and trade” bill added to the uncertainty about the economy for all businesses last year.  Passage of the bill that maintained the current tax rates without an increase just before the end of the year reduced fears somewhat, but the other two issues are still causing uncertainty about the future.

The number of manufacturing jobs is a better indicator of what’s really happening in the economy than the stock market.  Many of the companies on the Dow and Standard & Poor indexes of the stock exchange are no longer American-owned companies.  They are multinational globalist companies that don’t care about providing jobs for Americans.  They care about their bottom line of making as big a profit as possible.  These companies may be doing well based on their worldwide business and could post profits and have their stock prices go up without creating jobs for American workers and benefiting the U. S. economy as a whole.

I keep hearing that we won’t create enough jobs to lower the unemployment rate until consumer confidence is restored and consumer spending increases.  I disagree.  Consumer spending doesn’t create American jobs when most of the goods consumers buy are now made in offshore.  We won’t be able to create the jobs we need to lower the unemployment rate until business owners and consumers start “connecting the dots.”  We don’t create American jobs when companies outsource their manufacturing to other countries and consumers buy products made offshore.  To create jobs in America, we need to manufacture in America and then buy products made in America.

Posted in General, Outsourcing | No Comments »

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