We must Revoke China’s Most Favored Nation Status

June 4th, 2024

From 1980 – 1999, China was granted Most Favored Nation status through presidential proclamation on an annual basis because the Trade Act of 1974 stated that “MFN status may not be conferred on a country with a nonmarket economy if that country maintains restrictive emigration policies” China was, and still is, a nonmarket economy and restricted emigration, but the Act allowed the president to “waive this prohibition on an annual basis if he certified that granting MFN status would promote freedom of emigration in that country.”

After the Tiananmen Square massacre in 1989, there was enough opposition to granting MFN status to China that the “House passed joint resolutions disapproving MFN for China in both 1991 and 1992,” but the Senate didn’t pass the joint resolution. Congress passed legislation in 1991 and 1992 that would have placed further conditions on China’s MFN status, but President Bush vetoed the legislation.

Prior to being elected, President Clinton announced he would link China’s MFN status to human rights progress beginning in 1994, but he reneged on his campaign promise and reversed himself:  “On June 2, 1995, President Clinton transmitted to Congress his intention to waive the emigration prohibition and extend MFN status to the People’s Republic of China for an additional year, beginning July 3, 1995.”

The annual granting of MFN status to China by a presidential waiver continued through 1998. Note that “On July 22, 1998, legislation was enacted which replaced the term “most-favored-nation” in certain U.S. statutes with the term “normal trade relations.”  This made it easier for Congress to make the fateful decision to extend “permanent normal trade relations,” or PNTR, to China when the Senate voted to give China permanent most-favored-nation status on September 19, 2000. This vote paved the way for China’s accession to the World Trade Organization.

This change in U.S. trade policy that eliminated potential tariff increases on Chinese imports resulted in American industries that were vulnerable to competing against lower Chinese prices experiencing greater employment loss, increased imports from China, and expanded share of the U.S. market by U.S. importers and Chinese exporters.

My three books and the hundreds of articles I’ve written since 2009 have described what has happened to U.S. manufacturing since 2001. Besides the loss of 5.8 million manufacturing jobs and the closure of an estimated 70,000 American manufacturers, American manufacturing shifted toward more high-tech, less labor-intensive production. However, as China upgraded their technology in the past few years, we started losing our high-tech manufacturing also.

Our trade deficits increased every year from $381 Billion in the year 2000 to $945 Billion in 2022 as shown by the below chart.

During the 116th Congress (2019-2020), Senator Tom Cotton (R-Arkansas) introduced S. 4609, China Trade Relations Act, on September 17, 2020, that “would strip China of its permanent most-favored-nation status—also known as Permanent Normal Trade Relations…It would reinstate “extending most-favored-nation status to China an annual decision for Congress and the president.” Unfortunately, this bill didn’t get out of Committee for a vote.

In his press release, Senator Cotton said, “Twenty years ago this week, the Senate gave a gift to the Chinese Communist Party by granting it permanent most-favored-nation status. That disastrous decision made the Party richer, but cost millions of American jobs. It’s time to protect American workers and take back our leverage over Beijing by withdrawing China’s permanent trade status…Congress could override the president’s extension of MFN by passing a joint resolution of disapproval.”

In the 117th Congress (2021-2022), Senator Cotton reintroduced this bill on March 17, 2021 as S.785, the China Trade Relations Act of 2021, with Jim Inhofe (R-Oklahoma), and Rick Scott (R-Florida) as co-sponsors, but again, it never made it out of Committee for a vote.

This bill would have withdrawn “normal trade relations treatment from China and expands the bases of ineligibility for this treatment to include specified violations of human rights by China.

Specifically, during any period in which China engages in specified activities (e.g., using slave labor, performing forced abortion or sterilization, or hindering the free exercise of religion) (1) products from China shall not be eligible to receive nondiscriminatory treatment (normal trade relations), (2) China may not participate in any U.S. program that extends credits or credit guarantees or investment guarantees, and (3) the President may not conclude any commercial agreement with China.”

Jon Toomey, Senior Vice President, Government Relations for the Coalition for a Prosperous America, recently informed me that during the 118th Congress, “several bills have been introduced to revoke or modify China’s Most Favored Nation (MFN) status, also known as Permanent Normal Trade Relations (PNTR). Here are the key pieces of legislation:

S.125, China Trade Relations Act was introduced by Senators Tom Cotton (R-AR), Ted Budd (R-NC), Rick Scott (R-FL), and J.D. Vance (R-OH) on January 26, 2023. This bill would revoke China’s PNTR status and revert to the pre-2001 system where China’s MFN status must be renewed annually by the President. It also expands the Jackson-Vanik Amendment to include disqualifying factors such as human rights abuses and economic espionage.

S. 906, Ending Normal Trade Relations with China Act introduced by Senator Josh Hawley (R-MO).
This bill aims to withdraw China’s MFN status within two years of its enactment, allowing the President to impose tariffs on Chinese goods. It is designed to protect American workers and address issues related to China’s economic practices and human rights abuses.

H.R. 638, China Trade Relations Act of 2023 introduced by Representative Chris Smith (R-NJ). (House Companion bill to S.125 above) This bill mirrors the Senate’s China Trade Relations Act, aiming to revoke China’s PNTR status and impose similar human rights and trade-related conditions for MFN status renewal.

Jon said, “These legislative efforts reflect a significant shift in U.S. policy towards China, focusing on addressing concerns related to human rights violations, economic espionage, and the impact of China’s trade practices on American jobs and industries.”

In a press release, Senators Cotton, Budd, and Scott made the following comments:

Senator Cotton:  China never deserved this privilege in the first place, and China certainly does not deserve it today. It’s time to protect American jobs and hold the Chinese Communist Party accountable for their forced labor camps and egregious human rights violations.” 

Senator Scott: “There is no reason why the United States should be helping a communist government’s trade operation through preferential treatment and ‘most-favored-nation’ status. That is absolutely absurd when they are working against us. It is time to put American interests first, not the CCP, and reverse this antiquated law.” 

Senator Budd: “The Chinese Communist Party is not America’s friend, and it is not a force for good in the world. From human rights abuses to the theft of U.S. jobs and intellectual property, the CCP must be held accountable.”

What would be the effect on tariffs from revoking China’s MFN/PNTR status?  In the article titled, “Repealing China’s Most Favored Nation Status: A Guide,” Charles Benoit, Trade Counsel for the Coalition for a Prosperous America  explained “Merchandise made in a country the U.S. awards MFN/NTR status is eligible for America’s extremely low, almost negligible ‘base’ tariffs. These are set out in Column 1 of the Harmonized Tariff Schedule of the United States (HTSUS)… The tariff rates in Column 1 match the tariff rates in the U.S. Schedule of Concessions to the WTO… Schedules of Concessions promise maximum tariff rates to every other WTO Member, with individual maximum rates fixed to a list of around 6,000 product categories, covering everything imaginable. So, what we promise to every WTO country, we implement in Column 1 of the HTSUS…Most U.S. MFN tariffs are set at 0%, and if you average the tariffs we do have, they come out at 3.4%, the lowest of any WTO Member.

Without PNTR status, all products from China would by default be subject to the higher tariff. This would reduce off-shoring by discouraging American investors and corporations from doing business in China. It would increase reshoring, and the diminishing demand for Chinese goods would bolster the sales of American manufactured products.

China’s strategic goal is to dominate the sectors of economic growth that historically have held the key to world power:  transportation energy, information, and manufacturing. Their “Made in China 2025” plan is designed to dominate key technology sectors such as artificial intelligence, quantum computing, hypersonic missiles, and 5G. They also plan to become the dominant power in space by 2049.

Passing either of the Senate bills and the companion House bill would only be the first step to restoring our supply chains and ending critical economic dependencies on China.” It’s time for us to stop treating China as a friend and recognize China as the enemy to our national sovereignty that it is.

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New Patent Reform Legislation Would Protect Inventors’ Rights

May 21st, 2024

Two new bills have been introduced in Congress that would restore our broken patent system. These bills aim to address longstanding issues with the patent system and ensure fair treatment for inventors and small businesses.

Ever since the America Invents Act of 2011 was passed by Congress, our patent system was changed from being the best in the world to one that has nearly destroyed inventors’ rights.

Today, inventors suffer massive predatory infringement by large multinational corporations, including Chinese controlled multinationals, have their patents declared ineligible for patent protection because of being considered an “abstract idea,” and are denied their day in court to sue patent infringers.  This is stifling the innovation engine of the United States.

 During the 116th (2019-2020) and 117th Congress (2021-2022), several bills were introduced with the purported purpose of restoring inventors’ rights and fixing some of the problems generated by the America Invents Act of 2011. None of these bills made it out of committee for a vote by the House or Senate.

Two bills were introduced last year into the current Congress (118th 2023-2024):

  • S. 2140: Patent Eligibility Restoration Act of 2023 (PERA) was introduced by Senators Thomas Tillis (R-NC) and Christopher Coons (D-DE) on 6/22/2023
  • S.2220 – PREVAIL Act introduced by Senator Chris Coons (D-DE) on 7/10/2023

Neither of these bills have made it out of committee as yet for a vote by Congress, but that is good news as neither bill sufficiently restores inventors’ rights.

The two new bills are HR 8134, the Restoring America’s Leadership in Innovation Act (RALIA), introduced by Rep. Thomas Massie (R-KY) and Rep. Marcy Kaptur (D-OH) on 4/16/2024 and HR8132,  the Balancing Incentives Act (BIA) introduced by rep. Marcy Kaptur (D-OH) and Rep. Thomas Massie (R-KY) also on 4/16/2024.

RALIA seeks to revitalize patent protection by restoring injunctive relief, eliminating confusing judicially created eligibility tests, and abolishing the Patent Trial and Appeal Board (PTAB). By strengthening patent rights and encouraging innovation across critical technology fields, RALIA will help restore America’s leadership in innovation.

RALIA Reverses the effects of several Supreme Court decisions and of the America Invents Act, largely repairing most of the erosion of US patent rights accumulated over the last several decades. Full details below.

I participated in the weekly conference call with US Inventors members on May 8, 2024 when founder Paul Morinville highlighted some of the key things RALIA would do:

  • “Repeal ‘first to file’ and restore ‘first to invent’ as the criterion for granting a patent
  • Abolish the Patent Trial and Review Board (PTAB)
  • Restore the means of defending a patented invention against infringers: in court.
  • Restores injunctive relief to stop infringers from making and marketing the product being infringed
  • Declares that patents are private property
  • Abolishes inter partes review and post-grant validity proceedings
  • Prohibits publishing patents until issued
  • Eliminates fee diversion from the U.S. Patent Office to the General Fund
  • Fixes the problems with abstract ideas, medical diagnostics, and gene therapy”

He also said that The Balancing Incentives Act (BIA) aims to restore balance to our patent system and promote innovation. “BIA addresses issues with the PTAB, ensuring inventors receive fair treatment and protection of their intellectual property rights. BIA requires the patent owner’s consent for a PTAB review. By adding this fundamental right, the Bill aims to realign the PTAB with its original purpose as an alternative to federal court proceedings and a fair venue for all parties involved, rather than a mechanism incentivized for patent invalidation.”

Congresswoman Kaptur posted a paper, titled “At-A-Glance: Balancing Incentives Act & Restoring America’s Leadership in Innovation Act” that goes into more detail of why these bills are needed and what they would do.

The paper states:

“American innovation is falling behind the rest of the world. In 2018 patents filed per capita fell behind China for the first time since data was first collected in 1980. Much of that is because protections for American inventors is slipping. The time, money, and energy invested in creating an invention that can be marketed and sold or used to create and sell a new product is not worth it if the invention can be easily taken away. Originally, patents were tried in court. In 2011 the Patent Trial and Appeal Board was formed, and cases that challenge patents have since been deferred to that board. In FY23, PTAB completely invalidated 28% (see slide 11) of patents put before them; another 38% settled, were partly invalidated, came to mixed outcomes, or ended in a request for adverse judgement. Only 27% of cases were denied or dismissed, and only 7% determined to be all patentable. For solely those cases in which a written decision was reached, only 17.1% of patent claims were fully upheld – an 82.9% full or partial invalidation rate. (Fully invalidated: 67.5%, partly invalidated 15.4%.”

The paper also describes what a few specific provisions of the bill would do:

  • “Remedy eBay v. MercExchange:
  • Reverse the US Supreme Court’s ruling in Oil States v. Greene’s Energy Group:
  • Restore the pre-America Invents Act one-year grace period.
  • Limit the consideration of information disclosed to the PTO as ‘prior art.’
  • Restore the requirement of naming the best mode or preferred embodiment in a patent application.
  • Remedy adverse effects from Bilski v. Kappos, Association for Molecular Pathology v. Myriad Genetics, Mayo Collaborative Services v. Prometheus Laboratories, and Alice Corp. v. CLS Bank:
  • Restore and clarify patentability of certain scientific discoveries and software inventions.
  • Ensure judicial review and the right to de novo judicial review for patent validity determinations.
  • Remedy Impression Products v. Lexmark International:
  • Clarify property rights in the transferability of patents, including by licensing.
  • Strengthen the presumption that an issued patent is valid and protect patents against claims of invalidity, rather than the other way around”

The paper describes what the Balancing Incentives Act (BIA) would do:

“BIA would not abolish the PTAB as the Restoring America’s Leadership in Innovation Act (“RALIA,” below) would, but instead effectively give patent owners the option to have their patents challenged either in court or at the PTAB. (Relevant USC is amended: “The owner of the patent consents to the filing of the petition.” – Referring to a petition to have a case heard at the PTAB rather than in court.) This will naturally encourage PTAB to demonstrate its legitimacy without micromanaging USPTO or the PTAB. Patent owners will choose to continue to work with PTAB so long as they view it as fair and legitimate. This bill is compatible with RALIA (for which we also advocate sign-on) in that it presents a method to balance the PTAB’s authority with court authority while leaving all other provisions in RALIA untouched.”

On March 12,2024, James Edwards, Executive Director of Conservatives for Property Rights wrote a letter to Rep. Thomas Massie and rep. Marcy Kaptur expressing their support for HR 8134 (RALIA) because of the following:

“The Restoring America’s Leadership in Innovation Act would strengthen private property rights in one’s inventions and discoveries. The bill would broadly reverse the antipatent onslaught of recent years. RALIA would counter the ongoing assault by courts, Congress, the Administrative State, and patent-infringer special interests. The harm done to our patent system is reflected in the fact that global venture capital (VC) invested in the United States has fallen. The U.S. share of VC dropped from 82% in 2004 to 49% in 2021 as the Supreme Court’s eBay ruling spares patent infringers from injunction, the Alice-Mayo framework causes patent-eligible unpredictability, and enactment of the America Invents Act’s (AIA) led to infringers’ greater ability to cancel issued patents, game the litigation system, and disrupt commercialization of inventions. Also, patent licensing royalty rates have dropped over the same period.

In short, our patent system desperately needs the restoration of its traditional strengths…”

This letter was cosigned by the leaders of U.S. business & Industry Council, Tradition, Family, Property Inc., Les Government, Let Freedom Ring, AMAC Action, American for Limited Government, Taxpayers Protection Alliance, 60 Plus Association, Family PAC Federal, Tea Party Patriots Action, The Committee for Justice.

We need your help to enact critical patent reform legislation that will protect inventors’ rights and promote American innovation. As a member of US Inventor and Secretary of the board of the San Diego Inventors Forum, I understand the importance of safeguarding intellectual property and fostering an environment where inventors can thrive. We are calling on you to take action today by contacting your Congressional Representative and asking them to sign on as a co-sponsor and support both HR 8134, the Restoring America’s Leadership in Innovation Act (RALIA), and HR8132, the Balancing Incentives Act (BIA).

If you don’t how who your Congressional Representative is, you can find who he/she is using your zip code at this link. Then, you can call the U.S. House switchboard at (202) 224-3121 to get connected to the office of your Representative.  

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Why Manufacturing is Important to the U.S. Economy

April 9th, 2024

The recent opinion article by Kenneth A. Reinert titled “Time to end America’s obsession with manufacturing” posted on Microsoft Start presents several reasons why our “obsession with manufacturing is misplaced” in his opinion  This article will focus on why manufacturing is important to the U.S. economy and why we need to be obsessed by manufacturing.

His first reason is that “for the high-income countries of the world, the share of manufacturing as a percent of gross domestic product (GDP) is currently approximately 13 percent. In the U.S., it is approximately 11 percent, very close to the average of high-income countries.” In comparison, Germany’s manufacturing industry was

22.2 %, China was 28.4 %, and Japan was 20.6 % with the world average being 17.5 % in 2021, which was more like the percentage the U.S. previously had prior to so much manufacturing being offshored to Asia.

His second reason is that “in high-income countries, the share of the labor force in manufacturing …the share is approximately 13 percent. In the United States, it is approximately 8 percent. This reflects the increased labor productivity in American manufacturing.”

Even at this low percentage, manufacturing still “drives 20 percent of capital investment, 30 percent of productivity growth, 60 percent of exports, and 70 percent of business R&D.”

Manufacturing employment was relatively constant from 1960 through 1990, but began declining in the late 1990s.  However, manufacturing employment was at an all-time peak of 19.6 million in June 1979, representing 22 percent of the labor force. The biggest drop in employment occurred from 2000 – 2010 after China was granted Most Favored Nation status, and American manufacturers started offshoring manufacturing overseas to China. One-third of U.S. manufacturing workers (5.8 million people) lost their jobs as shown by the chart below:

Thirdly, Reinert says that ”services, or more precisely producer services, are at the heart of the increase in manufacturing productivity. Economists and business analysts have noted the increased “servitization” of manufacturing; it is now very difficult to disentangle manufacturing from producer services given their symbiotic relationship.”  The problem with this reasoning is that the less manufacturing that is done in the U.S., the fewer producer services you have to offer domestically and for export.  Services are even easier to offshore than manufacturing, so it is no surprise that many technical services in IT, customer service and communication have been offshored to India in particular.

His fourth reason is “manufacturing can no longer be envisioned as a single stage. Rather, it is spread out over multiple stages and countries in complicated global value chains (GVCs), held together by, you guessed it, producer services: transport, logistics, information and communication technologies, insurance and many others. Rather than a single stage, manufacturing is now a network.” 

The global value chains are exactly what caused the supply chain disruptions and shortages during the COVID pandemic.  Manufacturers learned that they can’t be dependent on components and parts being shipped from overseas to the U.S. to be assembled into their products. This is one of the main reasons more manufacturers are reshoring manufacturing to the U.S. Moreover, as a country, we can’t be dependent on another country, particularly China, for the components and parts that go into products for our defense and national security industries as well as our pharmaceutical and medical supply industries.

His fifth reason is that “what really matters for economic success is high value added… high value added tends to be found at the beginning and end of GVCs, in research and development, branding, design, distribution, marketing and after-sales services. The actual assembly stage of GVCs is often where the least value added is to be found.” The error of this reasoning is that R & D, distribution, and after-sales services have also been offshored to other countries so that our exports of advanced technology products has also been reduced.  In fact, “the trade deficit in advanced technology products is accelerating, growing from $128 billion in 2019, to $195 billion in 2021, to $244 billion in 2022.”

Reinert opines that “U.S. is currently involved in a bipartisan experiment to throw “an extraordinary amount of subsidies at particular manufacturing sectors, including semiconductors and green energy. Estimates of the total subsidies reach as high as $1 trillion. Manufacturing subsidies area way of being seen to be “doing something” in the economic realm and signal “standing up to China.” 

His conclusion is that “We need to end our obsession with manufacturing and focus on high value added wherever it is found. We also need to limit manufacturing subsides and allow them to be subject to WTO disciplines that the U.S. has developed and utilized intensively. Otherwise, long-run growth and prosperity will be diminished.”

The only correct opinion in his article is that “national security requires producer services along with manufacturing. There is a saying among military analysts that “amateurs talk strategy, but experts talk logistics.” These “logistics” are producer services. In the words of one researcher, these include “the construction, maintenance and operation of military bases; equipment maintenance; food service; transportation; communications and IT support; and supply chain management.” This is exactly why we need to strengthen our domestic manufacturing supply chain of goods and materials needed by our military and our defense industry and not a reason to end our obsession with manufacturing.

Last week, I discussed this article with a friend who is a fellow member of the Coalition for a Prosperous America, Dr. John R. Hansen. He is a retired economist who worked with the World Bank for over 30 years. We agreed with Reinert that using subsidies to drive manufacturing growth with can be expensive and wasteful, but believe he is wrong to dismiss the importance of manufacturing to America and wrong to assume that massive subsidies would be required for a renaissance in American manufacturing. I asked him to email me a few comments on Reinert’s article that I could include in my article.  He wrote:

“The importance of manufacturing for America lies in the following: We need to be able to produce and export internationally tradeable goods to pay for the goods we import. For the past two years, our trade deficit in goods has exceeded 1.0 trillion USD. Yes, we could continue borrowing and printing money to cover our trade deficits, but this is a dead-end strategy. The only sustainable strategy is to develop our ability to produce a surplus of internationally tradeable goods.

Producing more services is not the answer. They tend to be very labor intensive, and we cannot compete against countries like India where well-educated people receive very low wages compared to the average American. Furthermore, most services require physical presence.

The services highlighted by Reinhart suffer the same problems. They are very hard to export, especially if you don’t produce enough tradeable exports like manufactured goods into which the services can be embedded.

Our only real hope of paying for the imports we need is to first increase the production of tradeable manufactured and agricultural goods before we can stimulate the production of services that can be embedded in these goods. Both are highly tradeable, and we have a basic comparative advantage in both. We have abundant agricultural land, much of which is supplied with high technology that helps offset our higher labor costs. We also have one of the most advanced manufacturing sectors in the world.

The main reason we cannot reduce our imports and increase our exports of manufactured goods is that other countries producing such goods have currencies that are seriously undervalued compared to the US dollar. For example, the currencies of  China and Japan, two of our biggest competitors and sources of trade deficits, have currencies that are undervalued by 40% and 60% against the US dollar. This makes the prices of the goods that these countries produce 40-60% lower than if the foreign currencies were valued at exchange rates that would balance trade.”

John and I agree that the only real solution to this problem is the Market Access Charge that John has proposed and I have written about in several previous articles.  The MAC would do this by imposing a small charge that would be collected on all foreign-source money entering America’s financial market (averaging USD 90 trillion every year)  For more details, read my article , “Why a Market Access Charge is Urgently Needed,” from this past January. 

We need to stop the destruction of American industry and innovation, the loss of high-paying manufacturing jobs, and the collapse of communities.  We need to rebuild American manufacturing to create prosperity for our children and grandchildren.  

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Manufacturing USA is Working to Rebuild American Manufacturing

March 5th, 2024

The manufacturing sector has an unrivaled ability to boost the nation’s global economic competitiveness. If the United States wants to remain a world leader and super power, it needs a cutting-edge manufacturing sector that is a step ahead of the competition.  This is why the National Network for Manufacturing Innovation was formally established in 2014, now called Manufacturing USA®.

The website states, “Manufacturing USA® is a national network created to secure U.S. global leadership in advanced manufacturing through large-scale public-private collaboration on technology, supply chain and education and workforce development. The network comprises the U.S. Departments of Commerce, Energy and Defense, their sponsored manufacturing innovation institutes, and six additional federal agency partners, creating a whole-of-government, national effort to drive innovation in manufacturing.”

   The following 17 institutes are now part of the Manufacturing USA network:

“While each institute is established by a sponsoring federal agency and has a unique advanced manufacturing technology focus and identity, they also seek to advance the bigger Manufacturing USA network mission to improve American manufacturing’s global competitiveness….Each institute includes members from industry, academia, and state and federal governments with a shared interest in advancing manufacturing [and]…collectively worked with over 2,500 member organizations to collaborate on more than 670 major technology and workforce applied research and development projects and engaged over 106,000 in advanced manufacturing training. “

The website describes the background of why and how it was formed.  “In June 2011, the President’s Council of Advisors on Science and Technology recommended the formation of the “Advanced Manufacturing Partnership” (AMP) (report). The partnership was led by Dow Chemical Company President, Chairman, and CEO Andrew Liveris, and MIT President Susan Hockfield. The Advanced Manufacturing Partnership was charged with identifying collaborative opportunities between industry, academia and government that would catalyze development and investment in emerging technologies, policies and partnerships with the potential to transform and reinvigorate advanced manufacturing in the United States. In 2012 it issued its first set of recommendations, “Report to the President on Capturing Domestic Competitive Advantage in Advanced Manufacturing.”

After a nationwide outreach and engagement effort, “The National Network for Manufacturing Innovation: A Preliminary Design,” was issued in January 2013.

In September 2013, an AMP 2.0 final report focused on a renewed, cross-sector, national effort to secure U.S. leadership in the emerging technologies that will create high-quality manufacturing jobs and enhance the United States’ global competitiveness. The steering committee, whose members are among the nation’s leaders in industry, academia, and labor, was a working group of the President’s Council of Advisors on Science and Technology.

In December, 2014, Congress passed the Revitalize American Manufacturing and Innovation Act (RAMI Act) into law, which gave Congressional authorization to the Advanced Manufacturing National Program Office and authorized the Department of Commerce to hold “open-topic” competitions for manufacturing innovation institutes where those topics of highest importance to industry could be proposed.”

The key initiatives of Manufacturing USA® are:

Advanced Manufacturing Technology Leadership – The institutes “convene private sector companies, academic institutions, government entities, and other stakeholders to pursue collaborative research and development, test applications, and train workers.”

COVID-19 Manufacturing Recovery – It “helped facilitate the production of Personal Protective Equipment (PPE) and helped empower U.S. manufacturers to reinvent the domestic PPE supply chain.”

Future Manufacturing Supply Chains – “It is engaging in projects that make domestic manufacturing processes more innovative and efficient to strengthen the competitiveness and resilience of U.S.-based manufacturing.”

Manufacturing Workforce Development – It is “helping to define the skills and training needed to satisfy manufacturers’ future requirements…retraining and upskilling the current workforce, and developing STEM talent for the future.”

Clean Energy Manufacturing – “It is fostering the development of energy efficient and clean energy technologies that will lead to major reductions in manufacturing energy costs and increases in innovative new green products in emerging clean-energy industries.”

Manufacturing USA® has developed a national education and workforce development roadmap to revitalize the manufacturing workforce by bringing together the public and private sectors to create opportunities for existing and prospective workers to find their pathways into the advanced manufacturing workforce. The roadmap is bu8ild upon three key priorities:  equip with skills, broaden access, and spark interest.

The February 2024 edition of SME’s Smart Manufacturing magazine featured an article titled “Manufacturing USA, Stronger than Ever” outlining some the of the recent accomplishments of a few of its network institutes.  It also mentioned the Modern Makers campaign that was “launched in 2023 to showcase individuals whose sense of purpose embody the Manufacturing USA mission to secure the future of U.S. manufacturing through innovation, education and collaboration.”

The article reported that “two institutes received significant funding from the Department of Commerce’s Economic Development Agency (EDA) Build Back Better (BBB) initiative, three institutes recently received EDA grants associated with the CHIPS and Science Act, and another institute’s parent organization got a grant from the Department of Defense’s (DoD) funding from the CHIPS and Science Act.”

For example, the Advanced Regenerative Manufacturing Institute (ARMI) received a “BBB grant to create a Robotics Manufacturing Hub and support four innovation accelerators in an 11-county region of Pennsylvania.”

The article reported that “America Makes is a partner in the new Sustainable Polymers Tech Hub, which is led by the Greater Akron (Ohio) Chamber of Commerce… the Akron area has the largest concentration of plastics and rubber manufacturing plants, machines and materials in North America and is positioned to establish global leadership in sustainable technology in those areas.”

In addition, CyManII led the Secure Manufacturing in South Texas Strategy Development Consortium of 13 organizations in San Antonio, Texas and “was awarded a Strategy Development Grant to develop a regional coalition and innovation roadmap to mature cybersecurity and secure manufacturing technologies…CyManII’s efforts are in advancing research through development and testing…[the consortium] will develop an innovation roadmap for cybersecurity and secure manufacturing technologies.”

Also, “PowerAmerica’s home institution, North Carolina State University, received a $39.4 million DoD grant to build the Commercial Leap Ahead for WideBandgap Semiconductors (CLAWS) semiconductor research hub, which will create a semiconductor research foundry to advance next generation chips and fabrication technology. CLAWS is one of eight federal research hubs around the U.S. created from the CHIPS and Science Act.”

The Manufacturing USA institutes are creating a better climate for manufacturers to help them adopt the innovative applications of Industry 4.0 technologies that will strengthen and grow their businesses. The economic development activities of the institutes are designed to strengthen the supply chain and improve the competitive position of U.S. manufacturing companies. In turn, this will provide pathways for Americans seeking rewarding, higher-paying jobs and contribute to stronger local, regional and national communities. Be sure to check out which institute is focused on your industry.

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How High Interest Rates Affect the Manufacturing Industry

February 20th, 2024

Rising interest rates have been making frequent headlines since they started rising in 2022 when inflation reached the historic level of 8% for a sustained period of time.  When inflation rates rise substantially, the Federal Reserve raises interest rates as part of their aggressive monetary policy to bring it down.

The effect on manufacturing is serious because manufacturing is an asset-driven industry sector, and assets are expensive. It is necessary for manufacturing companies to finance the cost of new machinery, equipment, vehicles, and infrastructure.  As interest rates rise, the cost of financing grows higher, which means manufacturers end up paying significantly more to expand operations.

This creates a dilemma for manufacturers: They must either spend more to borrow or spend more to maintain assets beyond their original life expectancy. This is an added expense for the industry when they are already facing significant increases in material prices. It also comes at a time when manufacturers are being pressured by the market to implement Industry 4.0 technologies, such as sensors, automation, robotics, new ERP software, and AI, all of which require capital expenditures.

The inflation of the past couple of years was mainly caused by supply chain shortages and disruptions due to the COVID pandemic shutdowns.  Once the supply chain recovered, the supply of goods would have increased, reducing inflation.  Instead, the Fed raised interest rates, causing business contraction and less consumer spending.

I’ve never been able to understand the rationale for raising interest rate to reduce inflation. Raising interest rates only adds to the cost of doing business, reduces capital expenditures and investment by companies, and reduces consumer spending.  Reducing industrial and consumer spending causes businesses to contract, which leads to layoffs. Layoffs cause less consumer spending leading to more business contraction.  It becomes a vicious cycle.

Confirming my opinion about the negative effect of high interest rates, the August 28, 2023 article by Matthew Fox in Business Insider titled “’Interest rates are killing our industry’: Here’s what businesses are saying about the Fed’s impact on the economy” states:

“’High interest rates are affecting industrial production like never before… interest rates have placed an inverted incentive to grow due to a major slowdown in capital equipment expenditures. This is the time to stop raising interest rates,’ one survey respondent in the computer and electronic product manufacturing industry said.”

“For the first time in a long time, we are seeing customers reduce or cancel orders due to softening end-use demand. We expect this trend to continue over the next few months” and “Customer orders came to a sudden halt. The overall volume dropped 51% year-over-year.”

“A respondent from that sector [machinery manufacturing industry] said, “The phone is not ringing. Our sales team is working harder with less results. Projects are being postponed and, perhaps even more telling, payments are increasingly protracted.”

The latest press release from The Association For Manufacturing Technology (AMT) reported:  “Orders in 2023 totaled $4.94 billion, 11.2% behind the $5.56 billion recorded in 2022… Contract machine shops decreased their 2023 orders just over 21% compared to 2022… aerospace sector’s 2023 orders decreased nearly 9% from 2022.”

My sales agency, ElectroFab Sales represents small American manufacturers that perform fabrication services for Original Equipment Manufacturers in a variety of industries in southern California, and I can confirm that business started contracting significantly in the third quarter of last year and hasn’t rebounded so far this year.

We’ve also had significant layoffs in the past two years. The February 12, 2024 article in TechCrunch reports “The final total of layoffs for 2023 ended up being 262,735, according to Layoffs.fyi. Tech layoffs conducted in 2023 were 59% higher than 2022’s total, according to the data in the tracker. And 2024 is off to a rough start despite not reaching the peak of last year’s first quarter cutbacks.:

A review of Historical Data

The following chart shows the relationship between Fed rates and recessions (shaded vertical lines show recessions). 

While some of the recessions started after the Fed started to reduce rates from being high, there may be a lag time in the effect of high interest rates and the start of a recession.  When businesses have contracted significantly, it takes a period of time to turn the economy around towards expansion, depending on how significantly the economy has contracted.  I believe there is evidence to indicate that the longer the duration of high Fed rates, the longer the recession lasts.  The following chart shows the duration of the recessions:

People think that the “Roaring 20s” was a period of prosperity and expansion, but there were actually three recessions in the 1920s prior to the crash of the stock market in 1929, leading to the Great Depression that lasted 43 months, followed by a shorter recession of 13 months prior to the beginning of WW II.

The recession that began in the fall of 2008 was the longest lasting recession since the recession that began in 1981. The cause of the brief, two-month recession of 2020 was the shutdowns of non-essential manufacturing during the beginning of the COVID pandemic.   

Judging by the number of recessions since 1913, I don’t think that the monetary policies of the Fed have been successful in preventing “booms and busts.”  However, it has protected the banking industry from widespread bank failures.

We need to understand that contrary to what many people think, the Federal Reserve is not a government-owned national bank. The Federal Reserve was established by Congress in 1913 with the enactment of the Federal Reserve Act. It was established to be the central bank of the U.S. “Its primary purpose is to enhance the stability of the American banking system. The Federal Reserve System is composed of a central, independent governmental agency, the Board of Governors, in Washington, D.C., and 12 regional Federal Reserve Banks located in major cities throughout the U.S…. The Fed introduced Federal Reserve notes, which became the predominant form of U.S. currency and legal tender.”

According to the website USA Facts, “The Fed is an independent body and is not tied to an administration or partisan agenda. The system has three key entities: The Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee (FOMC).

The Fed oversees five key functions. These five key functions laid out by the Fed are “…to conduct the nation’s monetary policy, promote the stability of the financial system, promote the soundness of financial institutions, facilitating US dollar transactions, and promoting consumer protection.

The president appoints the Board of Governors, pending Congressional confirmation. The Board of Governors is tasked with supervising the five functions, overseeing 12 Federal Reserve banks, and creating financial regulations.”

What is the Outlook for the Future?

On January 29, 2024, the article “When Will the Fed Start Cutting Interest Rates?” by Preston Caldwell, on MorningStar, states “We expect the Fed to start cutting rates beginning with the March 2024 meeting. The Fed will pivot to monetary easing as inflation falls back to its 2% target and the need to shore up economic growth becomes a top concern…since July 2023, the Federal Reserve has kept the federal-funds rate at a target range of 5.25% to 5.50%, far above typical levels over the past decade. But we expect the Fed will begin cutting rates in March 2024—bringing the federal-funds rate to 3.75%–4.00% by the end of 2024.”

We can only hope that when the Fed does cut rates, it will not lead to a recession of equal time. The sooner that the Fed reduces its fund rates, the better. 

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Are We Sufficiently Protecting our National Security?

February 6th, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Why a Market Access Charge is Urgently Needed

January 23rd, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

8. Reduce America’s debt service burden.

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

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

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

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

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

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

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

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

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What is the Outlook for American Manufacturing for 2024

January 9th, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

December 12th, 2023

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

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

Gross Domestic Product 1970 – 2023

Labor Force Participation Rate

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

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

Ratio of Unemployed People to Job Openings

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

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

Federal Fund Interest Rates

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

National average wage indexing series, 2001-2022

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

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

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

U.S. Private Sector Job Quality Index

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

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

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

US ISM Manufacturing PMI

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

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

U.S. Manufacturing Technology Orders  

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

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

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

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

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Black Inventors Honored at Black Inventors Hall of Fame

November 28th, 2023

When I attended the US Inventor first annual conference last month, I had the pleasure of meeting James Howard, Executive Director of the Black Inventor’s Hall of Fame (BIHOF).  He had a display panel at his table that showed a collage of pictures of Black inventors.  Because the breaks between sessions were short, I didn’t have time to talk to him as long as I would have liked, so we caught up on Zoom last week.

I told James that I had browsed every page of the Black Inventors Hall of Fame website as well as his LinkedIn profile and was impressed with his background and experience.  We share a few things in common —we were both born in Chicago, are entrepreneurs, and have taught entrepreneurism. Of course, James taught as a professor at the County College of Morris while I only taught teens how to start their business in an after-school and summer camp program for a non-profit called Millennial Entrepreneurs in the early 2000s.

Besides being an inventor himself, Mr. Howard also brings over 25 years of experience as a design professor and has authored a course on Design Thinking and Design History that explores the impact of design on society. His latest venture is Entrepreneurial U, Morris County’s first school of Design Thinking.” Mr. Howard said, “I have over 20 patents, so I understand what an inventor has to go through before finally getting their patent and a functioning model. I have had numerous patented products succeed on the market.  Most notably the AlarmLock access control lock, and the Vital Signs NeoNatal pressure relief valve for resuscitating infants at birth.

I asked why he founded BIHOF, and he replied, “I founded BIHOF to immortalize the pioneering genius of African American inventors for the past 400 years.  We needed “to recognize and tell the story of African American greats such as George W. Carver who in 1941 was referred to as “The Black Leonardo” by Time Magazine for his prolific contributions in the field of agriculture. Yet, nearly 80 years later, Carver was all but ignored by Time in its list of top 100 American inventors of all time. It is time that exceptional inventors are immortalized by being inducted into the Black Inventor’s Hall of Fame. The story of African American Inventors is a sad history of being lost or simply overlooked. Far too often, historical accounts forget to mention the incredible achievements of Black inventors. I am honored to have the privilege of bringing a broad and detailed awareness of the important work of African American inventors, artists and innovators who have inspired and forged ahead against tremendous odds and adversity.” 

He added, “Every year we induct extraordinary Black inventors into the Black Inventor’s Hall of Fame to permanently recognize their innovative contributions to society. The website serves as a platform telling the story of talented African American innovators.  We include and highlight notable advancements and projects from academia, manufacturing and agriculture to advancements in medicine and the sciences. Our goal is to identify entrepreneurial leaders who have invented and produced groundbreaking technological advancements that improve the quality of life around the world.”  

Mr. Howard said, “What you invent you have to make before you can finalize your model.  It is the basis for innovation, and if we don’t invent, we don’t have products to be made by manufacturers.  There is a link between inventing and entrepreneurism. That is why I started my school of entrepreneurism to help long term unemployed learn new job skills and a new way to achieve a good life. “

He explained, “In our community, we appreciate the importance of inventing and innovation. Finding new ways to do something or make something is woven into our DNA. However, many African Americans have great ideas but they don’t have the benefit of having a “rich uncle” to finance their venture. They have to try to finance it themselves, and the majority don’t succeed.” 

I said I realize that there are nearly 400 inventors listed in Henry Baker’s list of Black Inventors, but this list was published in 1894, so I wondered if he would highlight a few more recent inventors featured in his Hall of Fame.

He responded, “I would feature Dr. Hadiyah-Nicole Green.  She has developed a revolutionary cancer treatment that uses lasers and nanotechnology to eliminate cancer.” Her bio states, “She is a STEM pioneer, leader, humanitarian, and entrepreneur who is introducing the world to the next generation of cancer treatments, cancer charities, and affordable healthcare. She is one of the nation’s leading medical physicists and one of a short list of African American women to earn a Ph.D. in Physics. Dr. Green developed a revolutionary cancer treatment that uses lasers and nanotechnology to eliminate cancer in mice after only one 10-minute treatment in just 15 days with no observable side effects. To ensure the affordability of this treatment, she founded a 501(c)(3) non-profit organization, the Ora Lee Smith Cancer Research Foundation (OraLee.org), to raise the funding for human clinical trials.”

He said he would also include the late Dr. Patricia Bath, who invented “laserphaco, a new device and technique to remove cataracts. It performed all steps of cataract removal: making the incision, destroying the lens and vacuuming out the fractured pieces. She is recognized as the first Black woman physician to receive a medical patent.”

He also mentioned Lonnie G. Johnson, who is a former Air Force and NASA engineer who invented the #1 top selling water toy of all time, theSuper Soaker®.  Coincidently, my husband and I had just watched an episode of The Toys ThatMade America on the History channel featuring the Super Soaker®.   The show told how it took Mr. Johnson eight years to find a Toy company, Hasbro, willing to make a deal to produce and market this toy, which has generated well over $1 billion in sales over its lifetime. The show mentioned that Mr. Johnson’s longtime research focuses on energy technology, and his toy resulted from his work on an environmentally friendly heat pump. His bio states, “He currently holds over 100 patents and has over 20 more pending on products and processes ranging from toys and consumer products to advanced technology energy. He is president and founder of Johnson Research and Development Co., Inc., a technology development company, and its spin off companies, Excellatron Solid State, LLC; Johnson Electro- Mechanical Systems, LLC; and Johnson Real Estate Investments, LLC.”

I told him that when I browsed the website, I saw that he is planning a museum for BIHOF, and he replied, “Yes, we are raising money to build a museum, which we envision to be a 31,000 sq. ft. facility with state of the art, tuition free STEAM classrooms, theater, Metaverse library, startup incubator, and a Legends Hall featuring the top Black inventors of the Golden Era in this country. The BIHOF Museum and STEAM Learning Center is planned to be located in New Jersey. BIHOF is a 501c3 organization, so donations to help build the museum are tax deductible. “

I encourage everyone reading this article to consider making a donation to BIHOF so that Black inventors will receive the recognition they deserve and future inventors will be helped to succeed in the business incubator.

I told James that I was a managing member of a business incubator in the late 1990s and actually wrote my first book on business incubators in 1997 after visiting and researching incubators around the country for five years.  I think the idea of having an incubator for businesses started by Black inventors is a great idea because incubators and the new Makerspaces are very helpful in accelerating successful businesses. 

We both agreed that it is hard enough for any inventor to get a patent, raise the money to make and market a product, or get a licensing deal, but current broken patent system makes it even harder to be successful for both white and Black Americans.  We urgently need the patent reform recommended by US Inventors.  

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