Is India a Better Place for Manufacturing than China?

June 4th, 2013

You would think that because India was formerly part of the British Empire and became an independent democracy, there would be less pollution and better working conditions than in China. Well, you would be wrong.

You wouldn’t find it any healthier to live in many of the industrial cities of India than the industrial cities in China. India is developing more slowly, but its growth is already taking a toll on the health of its people. India’s population has more than tripled since independence in 1947, from 350 million people to 1.2 billion, severely straining the country’s environment, infrastructure, and natural resources.

In my last article, I mentioned that four cities in India were listed in the Blacksmith Institute’s “Dirty 30” of the 2007 report, “The World’s Worst Polluted Places.” Consider Vapi, at the southern end of India’s “Golden Corridor,” a 400 km belt of industrial estates in the state of Gujarat. There are more than 50 industrial estates in the region, containing over 1,000 industries and extending over more than 1,000 acres. Many estates are chemical manufacturing centers, producing petrochemicals, pesticides, pharmaceuticals, textiles, dyes, fertilizers, leather products, paint, and chlor-alkali. Waste products discharged from these industries contain heavy metals (copper, chromium, cadmium, zinc, nickel, lead, and iron), cyanides, pesticides, aromatic compounds like PCBs (polychlorinated biphenyls), and other toxins.

The Indian Medical Association reports that most local drinking water is contaminated because of the absence of a proper system for disposing of industrial waste. Industrial waste instead drains directly into the Damaganga and Kolak rivers. Vapi’s groundwater has levels of mercury 96 times higher than World Health Organization standards. Approximately 71,000 people have no choice but to drink contaminated well water, as clean water sources are more than a mile away. The water is so discolored by contaminants it looks like a bottle of orange soda. Local produce contains heavy metals up to 60 times the safe standard. There is a high incidence of respiratory diseases, chemical dermatitis, and skin, lung, and throat cancers. Women in the area report high incidences of spontaneous abortions, abnormal fetuses, and infertility. Children’s ailments include respiratory and skin diseases and retarded growth.

It isn’t any better in Sukinda, in the state of Orissa, where 97 percent of India’s chromite ore deposits are located. Twelve mines operate without any environmental management plans, and more than 30 million tons of waste rock is spread over the surrounding area and the banks of the Brahmani River. The mines discharge untreated water directly into the river. Approximately 70 percent of the surface water, and 60 percent of the drinking water, contains hexavalent chromium at more than double national and international standards. The polluted Brahmani River is the only water source for 2,600,000 people. Health problems include gastrointestinal bleeding, tuberculosis, asthma, infertility, birth defects, and stillbirths.

The Indian economy is growing rapidly, but pollution is quickly spiraling out of control and rivers are dying by the dozens. Fully 80 percent of urban waste, including industrial waste, winds up in the country’s rivers. Much of this comes from untreated sewage. The Ganges River has levels of fecal coliform, a dangerous bacterium that comes from untreated sewage, 3,000 percent higher than what is considered safe for bathing. More than three billion liters of waste are pumped into Delhi’s Yamuna River each day. “The river is dead, it just has not been officially cremated,” said Sunita Narain, director of the New Delhi-based Centre for Science and Environment, one of India’s top environmental watchdog groups, to Spiegel-Online.com in reference to the Yamuna.

Air pollution is also a growing problem. There are four main sources: vehicles, power plants, industry, and refineries. India’s air pollution is exacerbated by its heavy reliance on coal for power generation. Coal supplies more than half the country’s energy needs and nearly three-quarters of its electricity. Reliance on coal has led to a 900 percent increase in carbon emissions over the past 40 years. India’s coal plants are old and not outfitted with modern pollution controls. Also, Indian coal has a high ash content, which creates smog. Vehicle emissions are responsible for 70 percent of the country’s air pollution. Exhaust from vehicles has increased 800 percent, and industrial pollution 400 percent, in the past 20 years.

Although the Constitution of India guarantees free and compulsory education to children between the age of 6 to 14 and prohibits employment of children younger than 14 in any hazardous environment, child labour is rampant. According to an article, “The Hidden Factory: Child Labour in India,” in The South Asian, May 7, 2005, many consumer goods  are “the products of a hidden factory of countless children, many as young as five years old, toiling for tireless hours, under harsh, hazardous, exploitative, often life threatening conditions for extremely low wages.” The article states “India has the largest number of working children in the world.” Credible estimates range from 12 to 15 million child laborers. What is even more horrible is that a large percentage of these children are de facto slaves, bonded to their jobs, with no means of escape or freedom until they can repay their parents’ loans. The major industries using child labor are:

Carpets – An estimated 50,000 to 1,050,000 children, as young as six, are often chained to carpet looms in confined, dimly lit workshops, making the thousands of tiny wool knots that become expensive hand-knotted carpets for export. Recruiters or organized gangs pay landless peasants cash advances to “bond” their children to their jobs. The children suffer from spinal deformities, retarded growth, respiratory illnesses, and poor eyesight.

Brassware – An estimated 40,000 to 45,000 children, as young as six, are involved in brassware production, including jobs like removing molten metal from molds and furnaces, electroplating, polishing, and applying chemicals. If they survive being injured from molten metal and exposure to furnaces operating as high as 2,000 degrees Fahrenheit, they often suffer from tuberculosis and other respiratory diseases due to inhalation of fumes from the furnaces and metal dust.

Leather – As many as 25,000 children, from 10 to 15, are involved in the manufacture of shoes. They suffer from respiratory problems, lung diseases, and skin infections from continuous skin contact with industrial adhesives and breathing the vapors from glues.

Gemstones – Children are commonly engaged as “apprentices” in the gem polishing industry. The learning process takes five to seven years and they work an average of 10 hours a day. Major health issues include tuberculosis and respiratory diseases.

Glass – This industry employs an estimated 8,000 to 50,000 children as young as eight. They work in an inferno due to the intense heat of glass furnaces (1,400-1,600o C) and suffer from skin burns, tuberculosis, respiratory diseases, mental retardation, and genetic cell damage.

Silk – An estimated 5,000 children, mostly girls from five to 16, are employed in silk manufacturing, which includes sericulture, dyeing, and weaving the silk. Chemicals and boiling water in the dyeing process are common health hazards; skin burns from the boiling water and respiratory diseases from the chemicals often result.

Agriculture –Parents pledge children as young as six to landlords as bonded laborers. The number of bonded laborers is not categorized by adults and children, but the total is estimated to range from 2.6 to 15 million. Children are involved in all types of agriculture and are completely controlled by their masters, receiving a bare minimum of food and lodging. More than 90 percent of bonded laborers in India, many of whom became bonded as children, never had the opportunity to go to school.

Mining – A 2006 report, “Our Mining Children,” prepared by a team of non-profit organizations, described the condition of hundreds of thousands of migrant workers in the mining industry.

Karnataka, for example, is a state with vast mineral resources, of which the Bellary district has the most extensive range. Minerals mined include iron ore, manganese, quartz, gold, copper, granite, and decorative stones. India is the fourth-largest iron-ore producer in the world. As a result of new government economic policies, a shift to privatization, an open market economy, and wide-open markets in China, South Korea, and Australia, mining companies have bought up thousands of acres of land in the district since 2000.

All of the mines visited by government teams had child laborers, some as young as five. It is estimated that as many as 200,000, or 50 percent, of the workers are children. The mining economy is only profitable because of large-scale child labor and the flouting of social and environmental laws. The mine owners say they only employ the adults, but as the families live at the mine site, the children join in the work. The parents force their children to work because they say they cannot survive otherwise.

As you can see, India is not any better than China for products to be made ? the pollution is just as bad, working conditions are as bad or worse, and child labor is rampant. Make the better choice ? Made in USA!

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Does it Matter Where Products are Made?

May 28th, 2013

We now live in a globalized economy, and many people say it doesn’t matter where something is made. They say that the industrialization of third world countries is good because it has provided jobs for millions of people and raised their standard of living. American consumers have benefitted from cheaper prices for the products they need and want. However, where products are made should matter to people who are concerned about the environment and the health and well-being of people around the world.

Manufacturing in America developed over a period of more than 200 years. It developed gradually, so there was the opportunity to learn about the hazards of industrialization on a smaller scale than has been possible with the rapid industrialization of developing countries. Pollution caused by specific industries affected small geographic areas, like West Virginia’s coal mining and Pennsylvania’s steel regions.

The Bill of Rights provided freedom of speech, freedom of the press, and the right to assemble, enabling affected communities and workers to address unsafe working conditions and pollution. Residents spoke out against pollution’s health effects in their communities. Workers formed unions to fight for better working conditions and higher wages, especially in hazardous occupations. Newspapers, and later radio and TV, made the public aware of what was happening in factories and mines. After sufficient pressure was put on elected officials at the local, state, and federal levels, laws were passed that improved working conditions, protected worker safety, and reduced pollution.

As a result, great strides on these issues were made in the U.S. in the 20th century. These efforts culminated in the establishment of the Environmental Protection Agency in December 1970, consolidating 15 components from five agencies for the purpose of grouping all environmental regulatory activities in a single agency.

Since then, the U.S. has developed a comprehensive body of law to protect the environment and prevent pollution. The EPA enforces more than 15 statutes or laws, including the Clean Air Act; the Clean Water Act; the Federal Food, Drug, and Cosmetics Act; the Endangered Species Act; the Pollution Prevention Act; and the Insecticide, Fungicide, and Rodenticides Act. In turn, each of the 50 states has its own body of law to comply with federal laws and regulations.

Cleaning up the nation’s air, water, and land hasn’t come cheap. Since passing these laws, the U.S. government has spent trillions of dollars to clean up and prevent pollution. Individuals, small businesses, and corporations paid the taxes that funded these programs. But businesses were hit with a double whammy. They not only had to pay taxes for the government to carry out its end of these programs, they had to pay cleanup costs for their own sites and buy the equipment to prevent future pollution. In addition, they had to hire and train personnel to implement and maintain mandated pollution prevention systems and procedures.

According to a Census Bureau report “Pollution Abatement Costs and Expenditures,” as a result of a survey of 20,000 plants last conducted in 2005, U.S. manufacturers spent $5.9 billion on pollution equipment, and another $20.7 billion on pollution prevention.

The EPA has achieved some major successes:

  • New cars are 98 percent cleaner than in 1970 in terms of smog-forming pollutants.
  • Dangerous air pollutants that cause smog, acid rain, lead poisoning have been reduced by 60 percent.
  • Levels of lead in children’s blood have declined 75 percent.
  • 60 percent of the nation’s waterways are safe for fishing and swimming.
  • 92 percent of Americans receive water that meets health standards.
  • 67 percent of contaminated Superfund sites nationwide have been cleaned up.

As a result, we now have cleaner air in our cities and cleaner and safer water in our streams, rivers, lakes, bays, and harbors than at any time since the Industrial Revolution began. These vast environmental improvements made in the last 40 years have benefitted every single American.

In contrast, India and China have been getting more polluted in the last 30 years as they have industrialized. Since 2006, Blacksmith Institute’s yearly reports have been instrumental in increasing public understanding of the health impacts posed by toxic pollution, and in some cases, have compelled cleanup work at pollution hotspots. Blacksmith Institute reports have been issued jointly with Green Cross Switzerland since 2007.

Six cities in China and four cities in India were listed in the Blacksmith Institute’s “Dirty 30” of the 2007 report, “The World’s Worst Polluted Places.” This list was based on scoring criteria devised by an international panel including researchers from Johns Hopkins, Harvard, and Mt. Sinai Hospital, along with specialists from Green Cross Switzerland who participated in assessing more than 400 polluted sites.

It’s hard to describe the horrors of pollution in Chinese cities. Imagine living in Xiditou (pronounced shee-dee-tow), about 60 miles east of Beijing, where the Feng Chan River that runs through the town is now black as ink and clotted with debris. The local economy has doubled in just four years, but at a terrible cost. More than 100 factories occupy what were once fields of rice and cotton. These include dozens of local chemical plants, makers of toxins including sulfuric acid, and these factories disgorge wastewater directly into the river. Industrial poisons have leached into groundwater, contaminating drinking supplies. The air has a distinctively sour odor. The rate of cancer is now more than 18 times the national average.

According to the USA Today article, “Pollution Poisons China’s Progress,” of July 4, 2005, “People regard their drinking water as little better than liquid poison, but unable to afford bottled water for all their daily needs, most adults continue to drink it. They buy mineral water only for their children.”

Another horrible location is Tianying, in Anhui province, which is one of the largest lead production centers in China, with an output of half of the country’s total. Low-level technologies, illegal operations, and a lack of air-pollution control measures have caused severe lead poisoning. Lead concentrations in the air and soil are 8.5 to 10 times national standards. Local crops and wheat at farmers’ homes are also contaminated by lead dust, at 24 times the national standard.

The ironic note to these statistics is that China actually has more stringent restrictions on lead than the U.S. The difference is that neither the local nor the national government is enforcing the laws. Residents, particularly children, suffer from lead poisoning, which causes encephalopathy, lower IQs, short attention spans, learning disabilities, hyperactivity, hearing and vision problems, stomachaches, kidney malfunction, anemia, and premature births.

Perhaps you would like to live in Wanshan, China, termed the mercury capital of China because more than 60 percent of the country’s mercury deposits were discovered there. Mercury contamination extends throughout the city’s air, surface water, and soils. Concentrations in the soil range from 24 to 348 mg/kg, 16 to 232 times the national standard. 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. Health hazards include kidney and gastrointestinal damage, neurological damage, and birth defects. Chronic exposure is fatal.

China is now the largest source of CO2 and SO2 emissions in the world (SO2 causes acid rain). Japan, South Korea, and the northwest region of the U.S. suffer from acid rain produced by China’s coal-fired power plants and higher CO2.readings from easterly trade winds.

The horrific effects of pollution in China and its staggering cost in human life, are a graphic example of why Chinese companies can outcompete American companies – not only because of their disparity in wages, but also because their government does not enforce the same environmental and social standards. As Americans, who place a high value on human life and protecting our environment, we wouldn’t have it any other way. But American manufacturing industries do pay a penalty competing against China.

During China’s rapid industrialization of the last 30 years, the U.S. has spent billions on technologies and equipment to clean up and prevent pollution. China had a golden opportunity to benefit from all the hard lessons learned by developed countries during their own industrialization. If China had purchased the pollution abatement equipment developed in the U.S., their industrialization would not have caused such horrendous pollution. Millions of lives would have been saved!

In the U.S., our landfills wouldn’t be filling up with discarded products from China that are so cheap that it is easier to throw them away than repair them. Wouldn’t it be worth paying more for “Made in USA” products that are higher quality and last longer?

Thus, if you are concerned about global pollution and want to save lives in both China and the U. S., you should choose to buy “Made in USA” products that have been produced in the most non-polluting manner that is technically feasible at present. My next article will take a look at India’s environment.

 

 

 

 

Posted in Cleantech, Manufacturing, Outsourcing | 1 Comment »

Why our Economy Struggles to Create Jobs

May 14th, 2013

There have been many opinions expounded via TV news shows, radio talk shows, newspapers, and magazines over the last four years as to why our economy has struggled to create jobs after the recession of 2007-2009 more than any other recession since WWII.

The economic collapse of the real estate and financial markets in 2008 had more impact on job losses than the recession of 2000-2001 caused by the dot.com bust because jobs related to real estate and construction represented a much higher component of employment than software/dot.com did at the time. During the recession of December 2007-June 2009, construction employment fell from 7,490,000 to 6,008,000, representing a loss of 1.5 million jobs or 19.8 percent of the construction workforce. It has remained less than 6 million as of April 2013 (Source:  Bureau of Labor Statistics).

When consumer demand dropped sharply because of so many people losing their jobs and homes, this eliminated the last thing keeping the domestic market floating on a bubble.

Since then, our economy has limped along at monthly average of a 1.5 to 2 percent growth rate in our Gross Domestic Product (GDP), which is not enough to create the amount of jobs we need. The main reasons why our economy is struggling to create jobs are:

Decline of U. S. Manufacturing

We lost 57,000 manufacturing firms and 5.7 million manufacturing jobs since the year 2000. According to the Bureau of Labor Statistics, we recouped about 500,000 jobs (489,000 or 4 percent) since the low in January 2010.

As I have discussed in both editions of my book and numerous blog articles, this loss of manufacturing firms and jobs was mainly the result of “predatory mercantilism”; i.e., unfair competition/product dumping by China and other Asian nations and the fact that a large number of multinational and American companies outsourced manufacturing offshore and/or set up plants in China and other parts of Asia. These companies literally outsourced American jobs in an attempt to compete with the “China price,” take advantage of less stringent environmental regulations, reduce taxes, and thereby maximize profits.

Transition to Service Economy

In addition to the many reasons previously discussed by myself and others, a key factor was revealed by the in-depth analysis of national and state data presented in the report, “Goods, Services, and the Pace of Economic Recovery” by Martha L. Olney and Aaron Pacitti, Berkeley Economic History Laboratory (BEHL), University of California, Berkeley March 2013.

Their hypothesis was:  Do service-based economies experience slower economic recoveries than goods-based economies? They argue that they do. They conclude that “service-dependent economies experience longer recoveries because they cannot respond to anticipated demand.” Thus, in a service-based economy, the recovery from a recession will take about one year longer than in a goods-based economy.

Why is this? They state, “An economy recovers from a downturn when businesses increase production. Both goods and services can be produced in response to actual demand. But only goods—and not services—can be produced in response to anticipated increases in demand, allowing optimistic forward-looking producers to inventory goods until anticipated buyers appear. Services cannot be inventoried. The more services an economy produces relative to goods, the more production is dependent upon only actual increases in demand, and the slower the recovery.”

Services have to be delivered in real-time by doctors, dentists, lawyers, accountants, web designers, graphic artists, etc. Even in the industrial realm, services such as engineering design, product testing, shipping, and delivery services are performed as needed. These services cannot be produced ahead of the need and “stored.”

The authors argue that there is a connection between the steady rise of services in the U.S. economy over the last half century and the slower pace of recovery from economic downturns. They state, “…as services become a larger share of output in an economy, more production is dependent on just actual and not also anticipated demand, slowing the pace of recovery from an economic downturn.”

The increase in the services share over the past 60 years has been striking. “In 1950, 40 percent of expenditures for U.S. GDP were for services and service-producing jobs were 48 percent of employment. By 2010, services constituted over 65 percent of expenditures for GDP and service-producing jobs were nearly 70 percent of employment.” The rise in services in the U.S. has led to longer recoveries, causing the current recovery to last about one year longer than it would have a half century ago.

End of NASA’s Manned Flight Program

The official retirement of the Space Shuttle program in 2011 resulted in a 19 percent drop in employment from 2007 to 2010 according to the Commerce Department’s Bureau of Industry and Security (BIS) industrial base assessment of the 536 companies in NASA’s manned space flight supply chain. If this steep a drop in employment occurred before the retirement of the Space Shuttle, it will be far worse by the time of the next assessment now that the program has ended.

Of the 536 companies, 50 percent of them are manufacturing companies, of which 21 percent are based in California, and 9 percent based in Florida. The report said that companies that supplied the Space Shuttle and Constellation launch program are facing “large-scale layoffs and facility closures across both industry and government.”

Near the Kennedy Space Center, more than 7,400 people in Brevard County, Florida alone lost their jobs when the shuttle program ended. The mainly contractor positions cut by NASA accounted for just under 5% of the county’s private sectors jobs. Thousands of formerly well-paid engineers and other workers around the country are still struggling to find jobs to replace the careers that flourished during the space shuttle program.

The machinery and tools used to support a manned space program are in danger of being discarded. In a separate assessment of the space flight industry, BIS found that 52 companies that were major suppliers (Tier I) had 48,623 pieces of tools and machinery, 91 percent of which had been paid for by the government. This classifies them as “Government-Furnished Property” so that the General Services Administration can process them by being transferred, sold, scrapped, or donated.

The danger is that the U. S. government may never be able to re-establish a manned space flight program to support ongoing missions to the International Space Station once the supplier base of the manned space flight program has been decimated. At the present, the U. S. has no way of sending astronauts to space in its own vehicles, and NASA is relying on the Soviet-made Soyuz capsules to send U.S. astronauts to space station. Thus, the United States may never again be a leader of space exploration.

Wind Down of War on Terrorism

The end of the Cold war with the Soviet Union resulted in a major downsizing of the military-industrial complex in the early 1990s, causing the recession of 1991-1992 and hundreds of thousands of lost jobs. Likewise, the withdrawal of troops from Iraq and the ramp down of troops in Afghanistan are having a similar effect on the defense/military industry, with a resulting loss of funding for new programs, cutbacks in existing programs, and job loss.

Sequestration

The additional cuts in the Defense Department’s procurement are taking a toll on some critical industries such as ship repair. In February, the Navy canceled all FY 2013 ship repair contracts that had been awarded to San Diego ship repair companies but not yet started. How many companies can survive having all their new contracts canceled?

What can we do?

It is interesting to note that one of the policy recommendations of the authors of the Berkeley report on goods vs. service’ corroborate some that I have presented previously:

“Therefore we believe that industrial policy aimed at restoring the country’s manufacturing sector could be beneficial. For example, tax policy that provides large re-shoring tax credits for goods-producing firms and levies large tax penalties on firms that offshore goods production could increase the share of goods in total output.”

Additional recommendations the authors make are:

  • Targeted investment in public goods and infrastructure would accomplish the same end.
  • Full employment policies and direct job creation programs could be enacted.
  • Targeted and aggressive fiscal spending and an employer of last resort program that guarantees full employment.

The authors conclude, “Longer and slower recoveries place a greater strain on state and federal budgets by decreasing tax revenue and increasing expenditures on automatic stabilizers. States will be forced to cut spending since all states with the exception of Vermont are required by law to run a balanced budget.” We have certainly seen this conclusion take effect as one state after another faces a staggering budget deficit, and our federal deficit has skyrocketed since 2009.

In the past two years, the general public and more economists and policymakers have begun to recognize the importance of U. S. manufacturing. Manufacturing is the foundation of our economy and is crucial to providing the quantity and quality of higher paying jobs we need.

It is high time for Congress and the Obama administration to develop a comprehensive national manufacturing strategy for the United States. Until we make a national manufacturing strategy a top priority, our economy will continue to struggle to create jobs.

 

Posted in Economy, Jobs, Manufacturing | 1 Comment »

Is Reshoring a Myth or Reality?

May 7th, 2013

When I first started talking about saving America manufacturing and returning manufacturing to America four years ago after the first edition of my book, Can American Manufacturing be Saved? Why we should and how we can, came out, I was met with a great deal of skepticism. Some typical comments were:  “I don’t think we can.” “It’s too late.” “I wish we could.” “We need to.” Very few thought we actually could return manufacturing to America.

A lot has changed in four years. At last week’s Del Mar Design and Electronics Show (DMEDS) in San Diego, CA, a very successful fellow manufacturers’ sales rep, stopped me in the parking lot and said, “I used to think you were nuts, but you were right. Manufacturing is returning to America.” While this manufacturers’ representative sales agency is headquartered in southern California, it has affiliate companies in Mexico, Malaysia, China (Beijing, Shanghai, and Shenzhen) and Taiwan (Taipei and Hsinchu) so I did not take this admission lightly.

The theme of this year’s DMEDS was “The Re-Birth of American Manufacturing, and it featured a full-day Reshoring track. This track began with my presentation on “Reshoring: Bringing Manufacturing Back to America Using Total Cost Analysis and ended with “Reshoring:  What is a Fit and How Can it Save Your Company Money?” This track also featured “Lean Manufacturing is the Path to Operational Excellence,” “3D Printing:  What it is, Isn’t, Will Be and Won’t Be,” and “Save Your Factory with Robotic Automation.”

While there were offshore companies exhibiting at DMEDS, it was dominated by U. S. manufacturers, regional contract manufacturers, and local sales reps and distributors. The buzz at the show was that manufacturing is returning to America, and every contract manufacturer I spoke to at the show had experienced a “reshoring” event.

In the past year, there have been numerous articles debating whether “reshoring” is a myth or really happening. For example, the cover article of the April 22, 2013 issue of Time magazine was “Made in USA – Manufacturing is Back ? But Where are the Jobs? The first page of the article is full of pictures of products that have returned from offshore, representing an unbelievable cross section of consumer goods, ranging from toys such as the Frisbee. Slinky and Crayola crayons to electric mixers, barbecues, saws, hammers, and many more.

The reason the article poses the questions about how many jobs are being created by the return of manufacturing to America is that the manufacturing plants of the present and future have more machines and fewer workers than in the past. Robotics, automation, and lean manufacturing are helping companies do more with fewer people, and the rapidly improving technology of additive manufacturing is changing the way parts are being made.

The article featured a glimpse of manufacturing’s future in the stories of two companies:

  • ExOne, near Pittsburgh, PA, providing Digital Part Materialization (DPM) that transforms engineering design files directly into fully functional objects using 3D printing machines
  • GE’s highly automated battery factory in Schenectady, NY.

ExOne needs only two workers and a design engineer per shift to support its 12 metal-printing machines. The GE plant produces Durathon sodium batteries that are large and powerful enough to power cell phone towers. Because of being highly automated, the plant only employs 370 high-tech workers in a 200,000 sq. ft. facility.

What was most encouraging to me was that the article reported that Ashley Furniture is building a new plant south of Winston-Salem, NC that will employ 500 people. This is an industry that even I doubted would ever come back to the U.S.

Key statistics pointed out in the article were that China’s average hourly wage was only $0.50 in 2000 but is projected to be $4.50 by 2015. This is probably a conservative estimate because China’s wages rose by 15-20% over the last five years but are expected to increase by another 60% in 2013 alone. Another factor noted is that the cost to ship a 40-ft. container from China to the West Coast rose from $1,184 in 2009 to $2,302 this year. These facts corroborate the Boston Consulting Group’s 2011 report that there will be a convergence in the total costs between China and the U. S. by 2015.

 

This quote from GE CEO Jeff Immelt concluded the article:  “Will U.S. manufacturing go from 9% to 30% of all jobs? That’s unlikely. But could you see a steady increase in jobs over the next quarters and year? I think that will happen.” I agree and so does Harry Moser, founder of the Reshoring Initiative and developer of the Total Cost of OwnershipTM spreadsheet.

 

Mr. Moser’s organization promotes and tracks cases of reshoring across the U.S. He estimates that between 2010 and 2012, about 50,000 jobs were created in the U.S. because of the trend—which equates to 10% of the 500,000 manufacturing jobs created in the past three years.

 

On the myth side of the debate, the 2012 Hackett Group’s report, “Reshoring Global Manufacturing:  Myths and Realities” by Michel Janssen, Erik Dorr and David P. Sievers

states, “By next year, China’s cost advantage over manufacturers in industrialized nations and competing low-cost destinations will evaporate.” However, they conclude that “few of the low-skill Chinese manufacturing jobs will ever return to advanced economies; most will simply move to other low-cost countries.

 

Using hard data from their 2012 Supply Chain Optimization study, they analyzed the trend in “reshoring” of manufacturing capacity, and their findings debunk the myth that manufacturing capacity is returning in a big way to Western countries as a result of rising costs in China. The report states, “The reality is that the net amount of capacity coming back barely offsets the amount that continues to be sent offshore.”

The report also offers recommendations on how companies should plot their manufacturing sourcing strategies. Interestingly, their recommendations incorporate some of the factors that Mr. Moser and I include as part of a Total Cost of Ownership analysis, such as “integrate the views of manufacturing, procurement, finance and business-unit leadership,” “Establish a game plan to deal with risk: Geopolitical, supply base, environmental and commodity risks are a given,” “Establish a proactive approach to anticipate risks, creating mitigation plans with clear triggers for implementation,” and “Broaden the decision making approach beyond total landed cost.”

The Hackett Group’s definition of “Total landed cost” is not as broad and encompassing as the definition of Total Cost of Ownership I provide in the 2009 edition of my book and that Mr. Moser uses in the TCO spreadsheet he developed in 2010. Their definition is “Total landed cost is the set of end-to end supply chain costs to transform raw materials and components into a finished good ready for sale. Key components include: raw material and component costs, manufacturing costs (fixed and variable), transportation and logistics, inventory carrying cost, and taxes and duties.

My definition of TCO includes the “hidden costs of doing business offshore,” such as Intellectual Property theft, danger of counterfeit parts, the risk factors of political instability, natural disasters, riots, strikes, technological depth and reserve capacity of suppliers, currency fluctuation. Mr. Moser’s TCO spreadsheet includes calculations for factors such as Intellectual Property risk, political instability risk, effect on innovation, product liability risk, annual wage inflation, and currency appreciation.

While the number of companies bringing products lines back to America is increasing, I have to admit that as manufacturers’ sales reps for all American companies; we are still losing business to China for individual parts our principals are quoting. Just recently, we lost several rubber parts that our rubber molder has made for a customer in our territory for 15 years. Our customer had been purchased by a multinational awhile back that has a subsidiary in China, so the new management decided to tool up these parts in China and discontinue ordering them from our molder. I am sure that the decision was made based on the lower piece price without doing a TCO analysis.

You can help your company get the most value for its dollars and help return manufacturing to America by doing the following:

  • Use the TCO spreadsheet available for free at www.reshorenow.org
  • Use the archived webinars to inform staff and customers
  • Work with groups being trained on TCO – Manufacturing Extension Program (MEPs) sites around the country
  • Prepare your workforce for reshoring
  • Submit cases of reshoring for publication and posting using the Reshoring Initiative’s  template
  • Sponsor the Reshoring Initiative

I strongly believe that if more companies would learn to understand and utilize the TCO estimator spreadsheet of the “Reshoring Initiative,” they would realize that the best value for their company is to source their parts, assemblies, and products in America. Doing this would help return manufacturing to America to create a far higher percentage of jobs than the 10% that have been brought back to America thus far and help maintain more manufacturing in U. S.

 

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Why the Trans Pacific Partnership Would Hurt American Manufacturers

April 30th, 2013

The Obama Administration has continued negotiations on the Trans-Pacific Partnership agreement behind doors closed to the media and without the Congressional involvement that was requested by Congress. Besides being a threat to our national sovereignty as I discussed in a previous blog, it is time to shine the light on another egregious provision that would hurt American manufacturers.

The Buy American Act was passed by Congress in 1933 and required the U.S. government to give preferential treatment to American producers in awarding of federal contracts. The Act restricted the purchase of supplies that are not domestic end products. For manufactured products, the Buy American Act used a two-part test:  first, the article must be manufactured in the U.S., and second, the cost of domestic components must exceed 50 percent of the cost of all its components. Other federal legislation passed since extended similar requirements to third-party purchases that utilize federal funds, such as highway and transit programs.

“Buy American” provisions do not help all U.S. firms equally. Corporations headquartered in the U.S. that offshore most of their manufacturing operations do not benefit from the system designed to promote domestic production in the way that companies with actual U.S. manufacturing operations do. However, strengthening the “Buy American” provisions in our federal procurement system is one of the recommendations I made in my book to benefit American manufacturers and help save American manufacturing.

If a domestic producer offers the government a more expensive bid than a foreign producer, it can still be awarded the contract under certain circumstances, but more recent free trade agreements have granted other nations the same negotiating status as domestic firms.

In certain government procurements, the requirements may be waived if purchasing the material/parts domestically would burden the government with an unreasonable cost, as when the price differential between the domestic product and a identical foreign-sourced product exceeds a certain percentage, or the product is not available domestically in sufficient quantity or quality, or if doing so is not in the public interest. In recent years, the requirements have been increasingly waived to the point that we have lost domestic sources for some defense components and products.

In addition, the President has authority to waive the Act in response to the provision of reciprocal treatment to U.S. producers. Under the 1979 GATT Agreement on Government Procurement, the U.S.-Israel Free Trade Agreement, the U.S.-Canada Free Trade Agreement, the North American Free Trade Agreement, the Central American Free Trade Agreement, and the Korea Free Trade Agreement, access to government procurement by certain U.S. agencies of goods for the other parties to these agreements is granted. Every one of these trade agreements have increased the trade deficit that the U.S. has with the parties to these agreements.

The Obama administration is currently pushing to grant the several nations involved in the Trans-Pacific agreement the same privileged status. What this means is that the TPP’s procurement chapter would require that all companies operating in any country signing the agreement be provided access equal to domestic firms to U.S. government procurement contracts over a certain dollar threshold. To meet this requirement, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries.
Supporters of TPP argue that it would be good for America because these rules would apply to all the countries signing the agreement, so U.S. firms would be able to bid on procurements contracts in other countries on a national treatment basis. The question is whether this new access for some U.S. companies to bid on contracts in the TPP countries is a good trade-off for waiving Buy America preferences on U.S. procurement?

Lori Wallach of Public Citizen has written several articles warning about the dangers of the Trans-Pacific Partnership. In an article titled, TPP Government Procurement Negotiations:

Buy American Policy Banned, a Net Loss for the U.S., she points out that the total U.S. procurement market is more than seven times the size of the combined procurement market of the current TPP negotiating parties: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. But the United States already has trade deals with procurement provisions with six of these countries: Australia, Canada, Chile, Mexico, Peru and Singapore. Removing these countries would mean that the U.S. procurement market is 24 times the size of the total “new” TPP procurement market.

She concludes “the size of the new procurement markets that the TPP may open for the United States is in the order of $53 billion (national) to $72 billion (total), which is a terrible trade for giving up the U.S procurement market of $556 billion (federal) to $1.7 trillion (total).”

In addition, she notes that the TPP procurement rules would constrain how our national and state governments may use our tax dollars in local construction projects and purchase of goods and limit what specifications Governments can require for goods and services, as well as the qualifications for bidding companies.

She warns that if we do not conform our domestic policies to the TPP terms, the U.S. government would be subject to lawsuits before foreign tribunals empowered to authorize trade sanctions against the U.S. until our policies changed. “Also, any “investor” that happens to be incorporated in one of these countries would be empowered to launch its own extra-judicial attack on our domestic laws in World Bank and UN arbitral tribunals with respect to changes to procurement contracts with the U.S. federal government.”

A letter from Rep. Donna Edwards (D-Md.) and 68 other Congressional Reps to President Obama on May 3, 2012 states in part, “We are concerned about proposals we understand are under consideration in the Trans-Pacific Partnership (TPP) agreement negotiations that could significantly limit Buy American provisions and as a result adversely impact American jobs, workers, and manufacturers…We do not believe this approach is in the best interest of U.S. manufacturers and U.S. workers. Of special concern is the prospect that firms established in TPP countries, such as the many Chinese firms in Vietnam, could obtain waivers from Buy American policies. This could result in larger sums of U.S. tax dollars being invested to strengthen other countries’ manufacturing sectors, rather than our own.”

On November 30, 2012, 24 Senators sent a letter to President Obama outlining guidelines for the TPP and calling for Congressional consultation for the TPP. The letter urged that the TPP:

“Maintain “Buy American” government procurement requirements. The American people, through their elected officials, should not be prohibited from establishing government procurement policies that prioritize job creation in the United States. We hope that you will direct USTR negotiators to ensure that any TPP not restrict “Buyer American” and ”Buy Local” government procurement policies at the Federal or sub-federal level.

Require strong Rules of Origin. The Rules of Origin in the TPP should ensure that only signatories to the TPP will benefit from its increased market access and other provisions so that employment opportunities in the U.S. may be expanded. Non-TPP members must not be allowed to use weak rules of origin as a backdoor way to enter the U.S. market and further depress U.S. job prospects.

Ensure that State-Owned and State-Supported Commercial Enterprises (SOEs) operate on a level playing field.  Given that SOEs are more common in the other TPP countries than in the U.S., the TPP should require that SOEs competing with private U.S. enterprises operate and make decisions on a commercial basis.  The agreement should also incorporate a reporting requirement so that countries have to provide information on the operation of their SOEs in other TPP countries on a regular basis.”

Country of Original labeling is another one of the recommendations I’ve written about in previous blog articles and is the main recommendation of Alan Uke in his book Buying Back America. This would help American consumers make choices when they purchase consumer goods and allow professional procurement specialists in industry and government to choose to support American manufacturers through “Buying American.”

The TPP treaty would exacerbate our trade deficit problem and make it even harder for American manufacturers to compete in the global marketplace. Instead of weakening “Buy American” requirements through additional trade agreements such as TPP, we need to strengthen the requirements.

This drastic curtailment of “Buy American” procurement provisions is another reason why we must make sure Congress rejects any fast-track authority the Obama administration seeks to invoke when it comes time to get final congressional approval for the Trans-Pacific Partnership agreement.
Please join me in opposing granting fast-track authority by signing the petition at the American Jobs Alliance website and contacting your representatives directly at http://act.americanjobsalliance.com/5516/tell-obama-no/

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Posted in Manufacturing, Trade Policy | 1 Comment »

Making Manufacturing “Cool” for our Youth

April 23rd, 2013

If we want to attract today’s youth to manufacturing careers, We need to make manufacturing “cool,” so they will choose to be part of the modern advanced manufacturing. We need to show them what great career opportunities exist in the industry and expose them to the variety of career opportunities in manufacturing.

Most outsiders have no idea of the variety of management jobs available at manufacturing companies. Besides the usual executive jobs, other management jobs available at medium and large manufacturers are in these areas: operations, plant and facilities, manufacturing and production, purchasing and procurement, sales and marketing, quality, supply chain, lean manufacturing and continuous improvement, human resources, R&D and product development, and safety and regulatory compliance.

In an article in July 2, 2008 issue of Industry Week magazine, John Madigan, a consultant with Madigan Associates, observed, “Jobs paying $20 per hour that historically enabled wage earners to support a middle-class standard of living are leaving the U.S. Public sector aside; only 16 percent of today’s workers earn the $20-per-hour baseline wage, down 60 percent since 1979.

We need to help our youth realize that manufacturing careers, and particularly the advanced manufacturing that now dominates the U.S. industrial sector, creates more wealth than any other industry. Moreover, manufacturing pays higher wages and provides greater benefits, on average, than other industries. For example, in 2010, the average U.S. manufacturing worker earned $77,186 annually, including pay and benefits. The average non-manufacturing worker earned $56,436.

The Society of Manufacturing Engineers Education Foundation (SME) is working to change the image of manufacturing and make it “cool” by sponsoring the ”Manufacturing is Cool” award winning, interactive website, which challenges and engages students in basic engineering and science principles and provides interesting and useful educational resources for teachers. This fun and information rich website was recently “re-engineered” (updated) and marketed around the country. SME has received positive feedback from teachers, parents, and students about its usefulness.

“The explosion of technology and advanced manufacturing processes are evolving faster than it can be learned and applied,” says Bart A. Aslin, CEO, SME Education Foundation. “We designed the Manufacturing is Cool website to inspire, prepare and support young people for careers in advanced manufacturing without patronizing them. We’re giving them access to real-world – people, jobs and technologies, all critical to them finding their place in a global economy.”

The site engages students in basic engineering and science principles and provides interesting and useful educational resources for parents and teachers. Today’s tech-savvy K-12 audience can explore the exciting world of advanced manufacturing engineering 24/7 to learn about the careers it offers and how its advanced technologies affect their daily lives.

In 2011, the SME Education Foundation initiated PRIME® (Partnership Response in Manufacturing Education) as a major national initiative to take a community-based approach to advanced manufacturing education and create strong partnerships between exemplary schools, businesses and organizations. Through its advanced manufacturing education program, SME is re-tooling and building the pipeline with technically skilled workers as business, industry and academia form partnerships and accelerate their collaborative efforts to provide funding, equipment, mentoring, teacher training and co-op programs for high school students to begin manufacturing products in the classroom. The manufacturing sector is on the upswing and public perception of manufacturing as a career is more positive as students see first-hand the kinds of things they are capable of making.
Since 2011, the following schools have been designated as PRIME® schools:

ALABAMA:  Calera High School provides an enrollment of approximately 900 students, grades 9-12, provides a pre-engineering program offers opportunities for student scholastic achievement with science, technology, engineering and math (STEM) curriculum.

CALIFORNIA:

Hawthorne High School, Los Angeles, CA – the School of Engineering and Manufacturing has 347 students and has a rigorous educational program built on the Project Lead the Way (PLTW) curriculum

Esperanza High School, Anaheim, California – a comprehensive four-year public high school serving an enrollment of 1808 students in the northeast part of Orange County.

Petaluma High School, Petaluma, CA – a public high school in which students can self-select a pathway leading to certification at graduation, leading to post-secondary opportunities, credit enhancement, or directly to the workforce.

ILLINOIS:   Wheeling High School, Wheeling, Il – is a public, culturally diverse, four-year comprehensive high school with a STEM providing college credit bearing courses and entry level career certifications including information technology, engineering, architecture and advanced manufacturing. It has a newly equipped fabrication, prototyping lab rivaling local manufacturing companies and a team of engineering students who are quickly becoming advanced manufacturing savvy. The lab includes a 3D printer for rapid prototyping, HAAS CNC lathes and mill, CNC Plasma Cutter, CNC training stations, robotic workstation, surface grinder and more.

“Our students graduate with more than a diploma in hand,” says Dr. Lazaro J. Lopez, principal, Wheeling High School. “Students have an opportunity to leave here with 14 college credits and be on their way to securing an associate degree in manufacturing technology as well as NIMS certification in two or three areas, plus all four MSSC safety certifications. Students who want to work after graduation will be able to meet the expectations of the hiring manufacturer.”

INDIANA: McKenzie Center for Innovation and Technology, Indianapolis, IN. The McKenzie Center for Innovation and Technology houses state-of-the art equipment, materials and curriculum. A high concentration of student population is involved with PLTW courses in pre-engineering and biomedical science. Students receive dual college credit and national certifications in their fields of study.

Walker Career Center, Indianapolis, IN offers 24 career and technical education programs equipped with state-of the-art technology. Each program offers excellent instruction and most programs lead to an industry certification or college dual credit which in most cases, is free to their students.

The Walker Center also provides Computer Integrated Manufacturing (CIM) using Chris and Jim’s CIM, a web resource that makes it possible for students, teachers and even industry pros to find solutions to problems they might encounter with this technology. This resource site, created by CIM educators Jim Hanson of Walker Career Center and Chris Hurd of Cazenovia High School in New York, started as a tool to help their students continue to learn outside of the classroom but developed into a knowledge, research and exploration instrument used by many industry professionals. Chris and Jim’s CIM is another way to help educate and train a new generation of engineers to deal with state-of-the-art technology in designing, manufacturing, maintaining, selecting, and procuring manufacturing engineering systems.

IOWA: Cedar Falls High School provides courses that satisfy elective requirements for World Studies, Personal Economics, Health, Practical Arts, and General Administrative. Because of a partnership with Hawkeye Community College, students may enroll in college-level courses taught during the regular school day. Upon successful completion of the course, students will earn both high school and college credit.

MASSACHUSETTS: Westfield Vocational Technical High School recognizes career and technical education as an integral part of the public school system. Westfield students are prepared for careers which are common in modern industry and offer an abundance of job opportunities upon graduation.

MICHIGAN: The Jackson Area Career Center provides its students with career and technical educational classes, industry certifications, and free college credit, and guidance counseling services. More than 38,000 students have experienced Career Center CTE opportunities and possibilities through hands-on and applied learning.

MISSOURI:  Summit Technology Academy, Kansas City – located on the campus of the Summit Technology Center in Lee’s Summit. It is an off-campus pre-professional learning opportunity for high school students seriously interested in the course technology-based courses of study. Professional IT certifications and dual college credit is offered through Metropolitan Community College, University of Central Missouri, Missouri University of Science and Technology, and the University of Missouri-Kansas City.

OHIO:

Centerville High School in Dayton provides a curriculum that includes vocational courses in the Performing Arts, Music, Preparatory College-Career, and the School of Possibilities offering an alternative educational pathway. It also offers 25 Advanced Placement tests in 18 courses in science, mathematics, history, government, language, economics, and psychology.

Kettering Fairmont High School is a public four-year comprehensive high school with a STEM (Science, Technology, Engineering and Math) based education. A majority of students move on to higher education or specialized training. Kettering is an industrial first-ring suburb of Dayton, Ohio that has a local manufacturing base and is in close proximity to Wright-Patterson Air Force Base. The curriculum supports these industries with PLTW manufacturing curriculum.

OKLAHOMA:   Francis Tuttle Technology Center in Oklahoma City encompasses six public school districts serving 11,780 students who may attend Francis Tuttle tuition-free while in high school. The Center works closely with business and education partners with specific focus on workforce needs of the marketplace with the delivery of on time, just-in-time, customized training.

WISCONSIN:  Lynde & Harry Bradley Technology and Trade School is the premier technology and trade school of Milwaukee and offers a broad range of scholastic options, including clear pathways for students into four-year universities, tech/trade education, and apprenticeships.

During the previous recession, the National Association of Manufacturers heard from its members that they were still having trouble attracting employees with the right mix of skills in certain job functions despite layoffs. To learn more, NAM and Deloitte & Touche conducted extensive quantitative and qualitative research across the U.S. They found that an estimated 80 percent of manufacturers reported a moderate-to-serious shortage of qualified job applicants during the recent recession, a problem growing increasingly urgent with the increase in global competition and retirement of Baby Boomers.

 

They also found that manufacturing has an outdated image, filled with stereotypes of assembly line jobs, that has kept young people from pursuing careers in it. The “Dream It. Do ItTM” campaign was created because these perceptions are out-of-step with manufacturing’s broad range of interesting and financially rewarding careers. Examples include an electrical engineer for a private jet manufacturer, a product developer for a candy manufacturing plant, or a designer at an MP3 manufacturing company.

NAM’s Manufacturing Institute/Center for Workforce Success received almost $500,000 in November 2004 from Elaine Chao, Secretary of Labor, for this campaign. Over a period of 36 months, the campaign created, tested, and disseminated a growing set of creative materials. These include radio advertising spots, billboard designs, newspaper and magazine ads, student and parent brochures, and a style-branding guide. The materials are ready to use and provide the national brand to local users.

The campaign has formed strong and committed coalitions with local civic, political, education, and business entities; launched a focused advertising campaign; created a world-class website on the array of highly paid manufacturing jobs; and formed local partnerships with community colleges, technical schools and universities for students pursuing manufacturing careers.

NAM’s “Dream It. Do It TM” Manufacturing Careers Campaign is currently operating in the following regions:

Phoenix, Arizona
Connecticut
Florida 

Will County, Illinois
Indiana
Southeast Indiana 

Kentucky
Western Michigan
West Central Minnesota
Kansas City, Missouri
Mississippi
Nevada
 

Chautauqua County, NY

Northeast Ohio
Pennsylvania Upstate South Carolina
The Tennessee Valley
North  and South Central Texas
Virginia
Southwest Virginia
Washington State 

Wisconsin

The SME and NAM programs described above will help expose our youth to the modern manufacturing environment and change the image of manufacturing to one that is “cool” and full of exciting career opportunities for our youth.

 

Posted in Education, Manufacturing | 2 Comments »

Innovative Programs Provide Career and Technical Education in High Schools

April 16th, 2013

According to a 2012 Pew Research Center analysis of census data, for the first time, a third of American 25- to 29-year-olds have earned at least a bachelor’s degree. That share has been slowly edging up from fewer than one-fifth of young adults in the early 1970s to 33 percent this year. What happens to the other two-thirds of young adults? In Germany, they typically hold an occupational certification by the age of 20, but in the United States, non-college grads are often left without marketable skills or qualifications.

In his State of the Union address, President Obama said, “Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy. And we’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering and math — the skills today’s employers are looking for to fill the jobs that are there right now and will be there in the future.”

There are already a number of innovative high schools across the country that are pioneering a model for career and technical education that has little to do with the narrow vocational classes of yesteryear, like wood shop and auto shop. Instead, at Linked Learning schools in California, at the MET schools in Rhode Island, and at Tech Valley High outside Albany, high school students complete internships in real workplaces, exploring fields as diverse as baking, engineering, and biotechnology. Students have the opportunity to check out more than one profession so they can see how adults use their education in the workplace. This helps students stay motivated to earn a degree and introduces them to the behaviors and practices specific to the working world.

California is one of the states that put vocational training back into the curriculum at high schools and community colleges. During his terms as California’s governor from 2003-2010, Arnold Schwarzenegger identified workforce skills, referred to as Career Technical Education (CTE), as a priority for California. The State plan specifies learning goals in 58 career pathways organized around 15 industry sectors. The CTE is delivered primarily through K-12/adult education programs and community college programs and includes the following:

K-12/Adult Programs:

  • Elementary school awareness and middle school introductory CTE programs
  • High school CTE, offered through 1,165 high schools in single courses, in course sequences or through over 300 integrated “learning communities”
  • ROCPs offering career pathways and programs through 74 ROCPs
  • Adult education offered through 361 adult schools and over 1,000 sites
  • Apprenticeship offered through over 200 apprenticeship program and adult schools

Community College

  • Occupational programs offered at all 109 colleges, leading to certificates, associate degrees, and transfer to four-year universities
  • Noncredit instruction for short-term CTE programs offered by 58 colleges
  • Apprenticeship offering over 160 apprenticeship programs at 39 colleges
  • Middle College High Schools (13) and Early College High Schools (19)
  • Tech Prep programs delivered through 80 Tech Prep “consortia,” comprising 109 colleges and their feeder high schools

As a result, California developed “Linked Learning,” which is an approach that is transforming education for California students by integrating rigorous academics with career-based learning and real world workplace experiences. Linked Learning ignites high school students’ passions by creating meaningful learning experiences through career-oriented pathways in fields such as engineering, health care, performing arts, law, and more.

The Linked Learning pathway is defined as:  A multiyear, comprehensive high school program of integrated academic and career technical study that is organized around a broad theme, interest area, or industry sector. Pathways connect learning with students’ interests and career aspirations, preparing them for the full range of post-graduation options including two- and four-year colleges and universities, apprenticeships, formal employment training, and military service.

In 2012, sixty three districts and county offices of education in California committed to making Linked Learning a district-wide improvement strategy and participate in the state Linked Learning Pilot Program, authorized by Assembly Bill 790. The scale of the state Linked Learning Pilot Program will give many more students in more regions around the state access to Linked Learning. When the pilot is fully implemented, Linked Learning will be available to more than one third of the state’s high school students – that’s approximately 700,000 students.

Linked Learning can be implemented through various models such as the California Linked Learning District initiative, which includes nine districts that have already implemented the Linked Learning approach:

  • Antioch USD
  • Long Beach USD
  • Los Angeles USD, Local District 4
  • Montebello USD
  • Oakland USD
  • Pasadena USD
  • Porterville USD
  • Sacramento City USD
  • West Contra Costa USD

Additional models include California Partnership Academies, career academies, National Academy Foundation academies, charter schools, and small-themed schools to name just a few. Today in California, 500 California Partnership Academies are organized around one of the state’s California’s 15 major industry sectors, and another approximately 300 career academies are in operation. Regional Occupational Centers and Programs (ROCPs) play an important part in many of these academies. In many other high schools, ROCPs are experimenting with innovative approaches to integrate academic and technical education.

While my hometown of San Diego hasn’t implemented the Linked Learning approach, Clairemont High School has an Academy of Business & Technology (AOBT), which is a “school within a school” that focuses on business, computer, and communication skills. The three-year program provides college-prep core classes and business career-technical electives to provide students the technological, financial, and communicative skills necessary to succeed in a college and career environment.

The academy program is committed to providing students with an array of unique educational activities and opportunities that are not typically incorporated into general education courses such as: • Internships in the business field • Mentorships with community partners • Entrepreneurship training • Instruction in finance and economics • Online business simulations • Field trips to businesses and colleges • Guest speakers on various careers • Job interview & resume guidance • Computer skills in Microsoft applications • Public speaking preparation  • Project-based group assignment • Team-building and leadership exercises • Problem-based learning projects • Group simulations.

On a nationwide basis, the non-profit organization Project Lead The Way® (PLTW) has been working since 1997 to promote pre-engineering courses for middle and high school students. PLTW forms partnerships with public schools, higher education institutions, and the private sector to increase the quantity and quality of engineers and engineering technologists graduating from our educational system. The PLTW curriculum was first introduced to 12 New York State high schools in the 1997-98 school years. A year later, PLTW field-tested its four unit Middle School Program in three middle schools. Today, there are over 400,000 students enrolled in programs in all 50 states and the District of Columbia.

PLTW has developed innovative and mutually beneficial partnerships with more than 100 prestigious colleges and universities, called University Affiliates, to facilitate the delivery of the PLTW programs. They provide and coordinate activities such as professional development, college-level recognition, program quality initiatives, and statewide/regional support and communication.

PLTW has nearly 100 leading corporate sponsors, including 3M, BAE Systems, Boeing, Caterpillar, Chevron, Intel, Lockheed Martin, Northrop Grumman, Qualcomm, Rockwell Automation, Solar Turbines, and Sprint. Some of non-profit sponsors are the Kauffman Foundation and the Society of Manufacturing Engineers Education Foundation. Corporations and philanthropic organizations generously provide PLTW with:

  • capital resources which it allocates to schools so that they may deliver leading-edge STEM curriculum, technology, materials and equipment to students;
  • access to experienced and talented employees who assist teachers in PLTW classrooms.

Another PLTW program sponsored by the Society of Manufacturing Engineers Education Foundation and other organizations is the Gateway Academy, a one- or two-week day camp for 6th – 8th graders that is a project based, hands-on curriculum designed by PLTW to introduce middle school students to the fundamentals of science, technology, engineering and math (STEM) learning. The camp typically includes team-building exercises, individual and team projects, and utilizes the latest technology to solve problems. The camp is hosted by high schools or middle schools offering PLTW programs, such as Gateway To Technology (GTT) or Pathway To Engineering (PTE).

Campers work together in a fun, exciting environment using leading-edge technologies to sample such disciplines as robotics, aeronautics and eco-design. They brainstorm ideas, solve problems and build bridges, race cars and other working models.

Participation in a Gateway Academy prepares students for the middle school Gateway to Technology pre-engineering curriculum. The PLTW Middle School program is called Gateway To Technology, consisting of nine-week, stand-alone units, which can be implemented in grades six through eight, as determined by each school. The curriculum exposes students to a broad overview of the field of technology. The units are:

•           Design and Modeling

•           The Magic of Electrons

•           The Science of Technology

•           Automation and Robotics

•           Flight and Space

If all 50 states would establish career technical education in their high schools based on the successful PLTW curriculum, we could eliminate the skills shortage of manufacturing workers within the next five to six years and prepare the next generation of manufacturing and biotech workers to ensure that we have enough skilled workers for manufacturers to employ as more and more companies return manufacturing to America from outsourcing offshore and replace the “baby boomers” as they retire over the next 20 years.

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How we can Solve the Skills Shortage and Attract the Next Generation of Manufacturing Workers

April 2nd, 2013

We lost 5.7 million manufacturing jobs between the year 2000 and 2010, and over 57,000 manufacturing companies went out of business. We have only gained about 500,000 manufacturing jobs since January 2010, so some ask why we have nearly 600,00 jobs going unfilled when the unemployment rate for the manufacturing industry jumped is still ranging from 6.4 percent in November 2012 to 7.2 percent in February 2013. The main reasons are:

  • Unemployed workers are mainly from industries that have been decimated by trade deficits with China and American manufacturers choosing to outsource manufacturing offshore.
  • Fewer young people choosing manufacturing as a career choice because of poor image
  • Attrition from retirement that is getting worse as baby boomers started to retire

First, a large percentage of the people who lost their jobs came out of industries that were decimated by Chinese product dumping and the offshoring of manufacturing – textiles, furniture, tires, sporting goods, and the garment industry, to name just a few.

Most of these industries were dominated by large manufacturers employing hundreds to thousands of workers in plants located in the northeast, Midwest, and south. These workers either worked on assembly lines or utilized specific skills suited to their industries. In some cases, a textile plant, furniture plant, or automotive plant was the only large employer in a town. When the plant closed, workers either had to take whatever other job they could find or relocate to another area. In most cases, these workers didn’t have the specific skills needed in high-tech manufacturing industries.

An added blow was the decimation of the automobile and auto parts industry during the Great Recession when North American auto production dropped from a high of 17 million vehicles per year down to below 10 million vehicles in 2008 before climbing back up to about 13 million in 2012.

Second, manufacturing’s tarnished image has led young people entering the workforce to choose other career paths. In an article titled, “What the shortage in skilled manufacturing workers means to a hungry industry” of the e-newsletter Smart Business, Kika Young, human resources director at Forest City Gear Co. Inc. of Rockford, IL, said “Most people in Gen Y out of high school don’t think of manufacturing as a career or as a good option. They don’t think of it as glamorous; they think of it as dark and dingy and dirty and aren’t interested in going into that.”

Emily Stover DeRocco, president of The Manufacturing Institute of Washington, D.C., said, “It’s absolutely true that the image and the definition of manufacturing in this country has not kept up with the industry.” She added, “Companies need to invest more in employee training and make workforce skills a top strategic priority. Our education system must also do a better job aligning education and training to the needs of employers and job seekers. In the face of a global recession and intense international competition, American manufacturers must differentiate themselves through innovation and a highly skilled workforce.”

Third, the attrition of skilled workers through retirement, death, and disability year after year is compounding the problem. Harry Moser, retired president of GF AgieCharmilles and founder of the Reshoring Initiative, estimates that “about 8 percent of the manufacturing workforce is lost each year due to retirement, promotion, career changes, disability, and mortality.” In the machining industry, this means a loss of “about 20,000 to 25,000 skilled machinists per year…In contrast, only about 8,000 per year receive sufficient machining training in high school, community college and apprentice programs to be considered good recruits.”

In 2011, the U.S. Bureau of Labor statistics estimated that 2.8 million, nearly a quarter of all U.S. manufacturing workers, are 55 or older. While manufacturing has led the United States out of the recession, the improvement has been a mixed blessing because as more skilled workers are needed, the supply is limited because baby boomers are retiring or getting close to retirement. What makes the situation worse is that there are not enough new ones to replace them because the subsequent generations were smaller and fewer chose manufacturing as a career.

The convergence of all of these factors has resulted in an insufficient number of workers trained for advanced manufacturing jobs. It is more of a skills gap in the specific skills needed by today’s manufacturers than a shortage of skilled workers. In the past 15 years, the manufacturing industry has evolved from needing low-skilled production-type assembly workers to being highly technology-infused.

The 2012 ManpowerGroup annual Talent Shortage Survey revealed that 49 percent of U.S. employers are experiencing difficulty filling mission-critical positions within their organizations despite continued high unemployment. According to the more than 1,300 U.S. employers surveyed, the positions that

are most difficult to fill include Skilled Trades, Engineers and IT Staff, all of which have appeared on the U.S. list multiple times since the survey began in 2006.

Jonas Prising, ManpowerGroup president of the Americas, said, “This skills mismatch has major ramifications on employment and business success in the U.S and around the globe. Wise corporate leaders are doing something about it, and we increasingly see that they’re developing workforce strategies and partnerships with local educational institutions to train their next generation of workers.”

Training to Address Skills Shortage:

According to a 2011 U.S. Government Accountability Office study of fiscal year 2009, the federal government had 47 programs run by nine different agencies. The GAO noted that more information is needed to measure the true effectiveness of the programs. “Almost all of the 47 programs tracked multiple outcome measures related to employment and training, and the most frequently tracked outcome measure was ‘entered employment,’ “the agency stated. “ However, little is known about the effectiveness of employment and training programs because, since 2004, only five reported conducting an impact study, and about half of all the remaining programs have not had a performance review of any kind.”

Obviously, we could make government work better and save money in the process by consolidating some of these programs and giving some of the money to the states for programs that work best for their workers. However, it doesn’t necessarily mean programs can be combined. It might not make sense, for example, to combine the “Disabled Veterans’ Outreach Program” with the “Migrant and Seasonal Farmworkers Program,” or the “Native American Employment and Training Program” with the “National Guard Youth Challenge Program.” In addition, the programs are not equal in size or scope. The GAO reported that seven programs accounted for 75 percent of the $18 billion spent on job training, while two programs (“Wagner-Peyser funded Employment Service” and “Workforce Investment Act Adult”) served about 77 percent of all participants.

However, we don’t need to rely solely on government-funded training for manufacturing jobs. A great deal has already been done industry, trade and professional organizations, colleges, and universities to train and retrain today’s workers and prepare the next generation of manufacturing workers.

For example, the National Institute for Metalworking Skills (NIMS) was formed in 1995 by the metalworking trade associations to develop and maintain a globally competitive American workforce. NIMS sets skills standards for the industry, certifies individual skills against the standards, and accredits training programs that meet NIMS quality requirements. NIMS operates under rigorous and highly disciplined processes as the only developer of American National Standards for the nation’s metalworking industry accredited by the American National Standards Institute (ANSI).

NIMS has a stakeholder base of over 6,000 metalworking companies and major trade associations in the industry. The Association for Manufacturing Technology, the American Machine Tool Distributors’ Association, the National Tooling & Machining Association, the Precision Machine Products Association, the Precision Metalforming Association, and the Tooling and Manufacturing Association have invested over $7.5 million in private funds for the development of the NIMS standards and its credentials.  The associations also contribute annually to sustain NIMS operations and are committed to the upgrading and maintenance of the standards.

NIMS has developed skills standards in 24 operational areas covering the breadth of metalworking operations, and there are 52 distinct NIMS skill certifications. The Standards range from entry to a master level. All NIMS standards are industry-written and industry-validated, and are subject to regular, periodic reviews under the procedures accredited and audited by ANSI. NIMS certifies individual skills against the national standards and requires that the candidate meets both performance and theory requirements that are industry-designed and industry-piloted.
NIMS accredits training programs that meet its quality requirements. The NIMS accreditation requirements include an on-site audit and evaluation by a NIMS industry team that reviews and conducts on-site inspections of all aspects of the training programs, including administrative support, curriculum, plant, equipment and tooling, student and trainee progress, industry involvement, instructor qualifications and safety. Officials governing NIMS accredited programs report annually on progress and are subject to re-accreditation on a five-year cycle.

The Society of Manufacturing Engineers (SME), the world’s leading professional society advancing manufacturing knowledge, also provides the following professional certifications:  Manufacturing Technologist, Manufacturing Engineering, Engineering Manager, Lean Certification (Bronze, Silver, and Gold), and Six Sigma. SME’s Certified Manufacturing Technologist program is utilized as an outcome assessment by numerous colleges and universities with Manufacturing, Manufacturing Engineering or Engineering Technology programs.

In 2010, the Society of Manufacturing acquired Tooling University LLC (Tooling U) based in Cleveland, Ohio to provide online, onsite, and webinar training for manufacturing companies and educational institutions. With more than 400 unique titles, Tooling U offers a full range of content to train machine operators, welders, assemblers, inspectors, and maintenance professionals. These classes are delivered through a custom learning management system (LMS), which provides extensive tracking and reporting capabilities. The competencies tie the online curriculum to matching hands-on tasks that put the theory to practice.

The Fabricators and Manufacturers Association, International (FMA) champions the success of the metal processing, forming, and fabricating industry.  FMA educates the industry through the following programs:

FabCast – FMA’s webinar platform utilizes Internet connection and telephone to deliver live, interactive technical education programs directly to manufacturers on such topics as laser cutting, roll forming, metal stamping, etc. Companies can train their whole team at once, even from multiple locations. Companies can break up full days of instruction into modules and spread out over a period of time (i.e. two hours four days a week, four hours once a week for a month, etc.).

FMA also offers on-site, live training conducted at companies on their equipment as well as on-line training (e-Fab) that allows a company to get the training that they need, when they need it. E-Fab courses combine a full day’s worth of instruction by FMA’s leading subject matter experts with the flexibility of online delivery, available 24/7, 365 days a year.

FMA provides a Precision Sheet Metal Operator (PSMO) Certification – the metal fabricating industry’s only comprehensive exam designed to assess a candidate’s knowledge of fundamental precision sheet metal operations. Fabrication processes covered in the exam include shearing, sawing, press brake, turret punch press, laser cutting, and mechanical finishing.

Attracting the Next Generation of Manufacturing Workers:

If we want to attract today’s youth to manufacturing careers, we need to change their perceptions about what the manufacturing industry is like and show them what great career opportunities exist in the industry. We need to expose them to the variety of career opportunities in manufacturing and help them realize that manufacturing careers pay 25-50 percent higher than non-manufacturing jobs, so they will choose to be part of modern manufacturing.

We need to reacquaint youth with the process of designing and building products from an early age and provide them with the opportunities to learn in both traditional and non-traditional ways. Here are some suggestions:

Conduct manufacturing summer camps – In 2011, the Fabricators and Manufacturers Association, International (FMA) Nuts, Bolts and Thingamajigs Foundation (NBT) and the National Association for Community College Entrepreneurship (NACCE) partnered to launch a unique summer camp program called Gadget Camp, where teenagers learn how to build things from concept to creation. Attendees are required to design a product through computer-aided design (CAD) technology and oversee the design to completion. The initial summer camp will eventually develop into a national program with as many as 300 locations across the United States.

Restore shop classes to our high schools – The elimination of these courses from our school systems has inevitably had a negative impact on the way we view making a living with our hands. Project Lead The Way® (PLTW) has been working since 1997 to promote pre-engineering courses for middle and high school students. PLTW forms partnerships with public schools, higher education institutions, and the private sector to increase the quantity and quality of engineers and engineering technologists graduating from our educational system. The PLTW curriculum was first introduced to 12 New York State high schools in the 1997-98 school years, and today, the programs are offered in over 1,300 schools in 45 states and the District of Columbia.

Improve the image of manufacturing careers – The National Tooling and Machining Association (NTMA) is another trade association that has a program to encourage youth to consider manufacturing as a career. NTMA is the Founding Sponsor of an exciting educational program that provides unlimited career awareness experiences in advanced manufacturing technology for students from middle school through college age. The approach has three components: a robotics curriculum based on national standards, teacher training workshops, and competitive events where students showcase their custom-built machines and compete for top honors. NTMA has six active regional leagues in their National Robotics League, a competition of battling robots that generates huge excitement among high school students.

Establish Apprenticeship Programs – In 2011, NIMS launched a new Competency-based Apprenticeship System for the nation’s metalworking industry. Employers are able to customize training to meet their own needs while maintaining the national integrity of apprenticeship training. Developed in partnership with the United States Department of Labor, the new system is the result of two years of work. Over 300 companies participated in the deliberations and design. The new National Guideline Standards for NIMS Competency-based Apprenticeship have been approved by the Department of Labor. NIMS has trained Department of Labor apprenticeship staff at the national and state level in the new system.

Portray manufacturing careers as fun and exciting – the convergence of cloud computing, mobile apps, and gamification within the manufacturing sector is in its infancy. Gamification is the use of game thinking and game mechanics in a non-game context to capitalize on youth’s obsession with video games. The best example is Plantville, a new online gaming platform that simulates the experience of being a plant manager, introduced by Siemens Industry, Inc. in March 2011. Players are faced with the challenge of maintaining the operation of their plant while trying to improve the productivity, efficiency, sustainability and overall health of their facility.

The existing programs described and recommendations outlined in this article are a good start to ensure that we have enough skilled workers for manufacturers to employ as more and more companies return manufacturing to America from outsourcing offshore and replace the “baby boomers” as they retire over the next 20 years.

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How we could Create Jobs while Reducing the Trade Deficit and National Debt

March 26th, 2013

There are numerous ideas and recommendations on how we could create jobs but most job creation programs proposed involve either increased government spending or reductions in income or employment taxes at a time of soaring budget deficits and decreased government revenue. Other recommendations would require legislation to change policies on taxation, regulation, or trade that may be difficult to accomplish. The recommendations in this article focus on what could be done the fastest and most economically to create the most jobs while reducing our trade deficit and national debt.

Manufacturing is the foundation of the U. S. economy and the engine of economic growth. It has a higher multiplier effect than service jobs. Each manufacturing job creates an average of three to four other supporting jobs. So, if we focus on creating manufacturing jobs, we would be able to reduce the trade deficit and national debt at the same time.

The combined effects of an increasing trade deficit with China and other countries, as well as American manufacturers choosing to “offshore” manufacturing, has resulted in the loss of 5.7 million manufacturing jobs since the year 2000. If we calculate the multiplier effect, we have actually lost upwards of 17 to 22 million jobs, meaning that we have fewer taxpayers and more consumers of tax revenue in the form of unemployment benefits, food stamps, and Medicaid.

In 2012, the U.S. trade deficit with China reached a new record of $315 billion. According to a recent study by the Economic Policy Institute (EPI), the trade deficit with China cost 2.7 million U.S. jobs from 2001-2011. The Department of Commerce estimates that each $1 billion in trade deficit translates to about 13,000 lost jobs, so the $738 billion trade deficit in goods for 2012 cost upwards of 9,599,200 jobs.

What Congress Could Do

First, Congress should enact legislation that addresses China’s currency manipulation. Most economists believe that China’s currency is undervalued by 30-40% so their products may be cheaper than American products on that basis alone. To address China’s currency manipulation and provide a means for American companies to petition for countervailing duties, the Senate passed S. 1619 in 2011, but GOP leadership prevented the corresponding bill in the House, H. R. 639, from being brought up for a vote, even though it had bi-partisan support with 231 co-sponsors. On March 20, 2013, Sander Levin (D-MI), Tim Murphy (R-PA), Tim Ryan (D-OH), and Mo Brooks (R-AL) introduced the Currency Reform for Fair Trade Act in the House and a corresponding bill will be introduced in the Senate.

Second, Congress should strengthen and tighten procurement regulations to enforce “buying American” for all government agencies and not just the Department of Defense. All federal spending should have “buy America” provisions giving American workers and businesses the first opportunity at procurement contracts. New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction. No federal, state, or local government dollars should be spent buying materials, equipment, supplies, and workers from China.

My other recommendations for creating jobs are based on improving the competitiveness of American companies by improving the business climate of the United States so that there is less incentive for American manufacturing companies to outsource manufacturing offshore or build plants in foreign countries. The following proposed legislation would also prevent corporations from avoiding paying corporate income taxes:

  • Reduce corporate taxes to 25 percent
  • Make capital gains tax of 15 percent permanent
  • Increase and make permanent the R&D tax credit
  • Eliminate the estate tax (also called the Death Tax)
  • Improve intellectual property rights protection and increase criminal prosecution
  • Prevent sale of strategic U.S.-owned companies to foreign-owned companies
  • Enact legislation to prevent corporations from avoiding the U.S. income tax by reincorporating in a foreign country

It is also critical that we not approve any new Free Trade Agreements, such as the Trans-Pacific Partnership and Trans-Atlantic Partnership that are currently proposed. The U.S. has a trade deficit with every one of its trading partners from NAFTA forward, so Free Trade Agreements have hurt more than helped the U.S. economy.

What States and Regions Could Do

State and local government can work in partnership with economic development agencies, universities, trade associations, and non-profit organizations to facilitate the growth and success of startup manufacturing companies in a variety of means:

Improve the Business Climate – Each state should take an honest look at the business climate they provide businesses, but especially manufacturers since they provide more jobs than any other economic sector. The goal should be to facilitate the startup and success of manufacturers to create more jobs. I recommend the following actions:

  • Reduce corporate and individual taxes to as low a rate as possible
  • Increase R&D tax credit generosity and make the R&D tax credit permanent
  • Institute an investment tax credit on purchases of new capital equipment and software
  • Eliminate burdensome or onerous statutory and environmental regulations

Establish or Support Existing Business Incubation Programs, such as those provided by the members of the National Business Incubation Alliance. Business incubators provide a positive sharing-type environment for creative entrepreneurship, often offering counseling and peer review services, as well as shared office or laboratory facilities, and a generally strong bias toward growth and innovation.

Facilitate Returning Manufacturing to America – The Reshoring Initiative,  founded by Harry Moser in 2010, has a  mission to bring good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess their total cost of offshoring, and shift collective thinking from “offshoring is cheaper” to “local reduces the total cost of ownership.” The top reasons for U. S. to reshore are:

  • Brings jobs back to the U.S.
  • Helps balance U.S., state and local budgets
  • Motivates recruits to enter the skilled manufacturing workforce
  • Strengthens the defense industrial base

According to Mr. Moser, the Initiative has documented case studies of companies reshoring showing that “about 220 to 250 organizations have brought manufacturing back to the U.S….with the heaviest migration from China. This represents about 50,000 jobs, which is 10% of job growth in manufacturing since January 2010.”

State and/or local government could facilitate “reshoring” for manufacturers in their region by conducting Reshoring Initiative conferences to teach participants the concept of Total Cost of Ownership, how to use Mr. Moser’s free Total Cost of Ownership Estimator™, and help them connect with local suppliers.

Establish Enterprise Zones and/or Free Trade Zones: Enterprise Zones provide special advantages or benefits to companies in these zones, such as:

  • Hiring Credits – Firms can earn state tax credits for each qualified employee hired (California’s is $37,440)
  • Up to 100% Net Operating Loss (NOL) carry-forward for up to 15 years under most circumstances.
  • Sales tax credits on purchases of up to $20 million per year of qualified machinery and machinery parts;
  • Up-front expensing of certain depreciable property
  • Apply unused tax credits to future tax years
  • Companies can earn preference points on state contracts.

States located on international borders could also establish Foreign Trade Zones (FTZs), which are sites in or near a U.S. Customs port of entry where foreign and domestic goods are considered to be in international trade. Goods can be brought into the zones without formal Customs entry or without incurring Customs duties/excise taxes until they are imported into the U. S. FTZs are intended to promote U.S. participation in trade and commerce by eliminating or reducing the unintended costs associated with U.S. trade laws

What Individuals Could Do

There are many things we could do as individuals to create jobs and reduce our trade deficits and national debt. You may feel that there is nothing you can do as an individual, but it’s not true! 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.”

If you are an inventor ready to get a patent or license agreement for your product, select American companies to make parts and assemblies for your product as much as possible. There are some electronic components that are no longer made in the U. S., so it may not be possible to source all of the component parts with American companies. There are many hidden costs to doing business offshore, so in the long run, you may not save as much money as you expect by sourcing your product offshore. The cost savings is not worth the danger of having your Intellectual Property stolen by a foreign company that will use it to make a copycat or counterfeit product sold at a lower price.

If you are an entrepreneur starting a company, find a niche product for which customers will be willing to pay more for a “Made in USA” product. Plan to sell your product on the basis of its “distinct competitive advantage” rather than on the basis of lowest price. Select your suppliers from American companies as this will create jobs for other Americans.

If you are the owner of an existing manufacturing company, then conduct a Total Cost of Ownership analysis for your bill of materials to see if you could “reshore” some or all of the items to be made in the United States. You can use the free TCO worksheet estimator to conduct your analysis available from the Reshoring Initiative at www.reshorenow.org. Also, you could choose to keep R&D in the United States or bring it back to the United States if you have sourced it offshore.

If enough manufacturing is “reshored” from China, we would drastically reduce our over $700 billion trade deficit in goods. We could create as many as three million manufacturing jobs, which would, in turn, create 9 – 12 million total jobs, bringing our unemployment down to 4 percent.

You may not realize it, but you have tremendous power as a consumer. Even large corporations pay attention to trends in consumer buying, and there is beginning to be a trend to buy ‘Made in USA” products. As a result, on January 15, 2013, Walmart and Sam’s Club announced they will buy an additional $50 billion in U.S. products over the next 10 years.

U.S. voters supported Buy America policies by a 12-to-1 margin according to a survey of 1,200 likely general election voters conducted between June 28 and July 2, 2012 by the Mellman Group and North Star Opinion Research. The overwhelming support has grown since prior iterations of the same poll – Buy America received an 11-to-1 margin of support in 2011 and a 5-to-1 margin in 2010. A survey by Perception Services International of 1400 consumers in July 2012, found that 76% were more likely to buy a U.S. product and 57% were less likely to buy a Chinese product.

As a consumer, you should pay attention to the country of origin labels when they shop and buy “Made in USA” products whenever possible. Be willing to step out of your comfort zone and ask the store owner or manager to carry more “Made in USA” products. If you buy products online, there are now a plethora of online sources dedicated to selling only “Made in USA” products. Each time you choose to buy an American-made product, you help save or create an American job.

In his book, Buying America Back:  A Real-Deal Blueprint for Restoring American Prosperity, Alan Uke, recommends Country of Origin labeling for all manufactured products that “puts control in the hands of American consumers to make powerful buying choices to boost our economy and create jobs,” as well as reduce our trade deficit. The labels would be similar to the labels on autos, listing the percent of content by country of all of the major components of the product. This Country of Origin labeling would enable American consumers to make the decision to buy products that have most of their content “made in USA.”

If every American would make the decision to buy American products and avoid imports as much as possible, we could make a real difference in our nation’s economy. For example, if 200 million Americans bought $20 worth of American products instead of Chinese, it would reduce our trade imbalance with China by four billion dollars. During the ABC World News series called “Made in America,” Diane Sawyer has repeatedly 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.”

In conclusion, if we want to create more jobs, reduce our trade deficit and national debt, we must support our manufacturing industry so that it could once again be the economic engine for economic growth. Following the suggestions in this article could make the “Great American Job Engine” roar once again.

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How to Fix America’s Economy

March 19th, 2013

 

Last week, I participated in the “Fly-in” for the Coalition for a Prosperous America (CPA) in Washington, D. C.  I was part of several teams that held 105 meetings with legislative assistants for Congressional Representatives and Senators.

We presented informational flyers on the following topics that would help fix America’s economy:

Trade Deficits – In 2012, the U. S. trade deficit was $735 billion, and our trade deficit with China hit an all time high of over $300 billion. This means that we currently consume more than we produce, and we need to reverse this dynamic and produce more of what we consume.  The goal for successful trade is balanced trade, not more trade.  We aren’t going to solve this problem with just doubling exports while we continue to increase our imports at a faster rate.  Trade deficits are our biggest jobs, growth and fiscal problem.  Congress should establish a national goal for balancing trade by the year 2020. Persistent trade deficits are not “free trade, but are “dumb trade.”

Foreign Currency Cheating – currency manipulation is trade cheating because it is both an illegal tariff and a subsidy.  China, South Korea, Japan, Taiwan, and Singapore have manipulated their currency values.  However, China’s currency is estimated to be at least 35% undervalued so our exports to China cost 35% more than they should to the Chinese.  In the past two Congresses, one bill addressing the problem passed the House, and one bill passed the Senate, but we need a similar bill to pass both Houses and be signed into law.  Senator Levin is introducing a new bill this week.

The ENFORCE Act – we need to stop the evasion of countervailing and antidumping duty orders by such means as “transshipment” where goods covered by an Order are shipped to a third country before import to the U.S., with falsified U.S. customs documentation claiming the product to be origin of that third country. Other goods covered by an Order are shipped directly with fraudulent paperwork claiming that they were produced in a country that is not covered by the Order or have incorrect import classification codes or inaccurate descriptions that falsely identify the imports as goods that are not subject to an Order.

The ENFORCE Act would establish a formal process and reasonable deadlines for action when the Customs and Border Protection is presented with an allegation of evasion, require CBP to report on its enforcement activities, and order the retroactive collection of duties on entries that illegally evaded duties.

Country of Origin Labeling (COOL) – On March 8, 2013, te USDA announced it is proposing a new COOL rule that will comply with the WTO request to provide more information to consumers and/or reduce the burden on imported product.  The    proposed rule would require labels for muscle cuts of meat to identify the country where each of the three production steps – birthing, raising, and slaughtering – occurred.

Foreign Border Taxes (aka Value Added Tax – VAT) Over 150 countries have at VAT, but the U. S. is one of the few countries that doesn’t.  VATs are “border adjustable” and range from 13% to 24% (average is 17%).  This means that our exports are taxed with a VAT when our goods cross that country’s border. Thus, when we negotiate a trade agreement that lowers or eliminates tariffs, a VAT can be added by our trading partners that is a “tariff by another name.”  Trade agreements do not address VATs when tariffs are lowered, and the WTO allows VATs.  Other countries use the VATs to reduce their corporate taxes to help their manufacturers be more competitive in the global marketplace. VATs are rebated to manufacturers in foreign countries for products that are exported, and the result is a $500 billion hole in U. S. Trade.  We need reject trade agreements that do not neutralize the VAT tariff and subsidy and consider implementing a U. S. consumption tax system to erase this foreign advantage and reduce domestic taxes on income and jobs.

Trans-Pacific Partnership – We need “Smart Trade” not “Dumb Trade” so a summary of CPA’s “Principles for a 21st Century Trade Agreement” was presented that would fix past mistakes in trade agreements. CPA recommends that new trade agreements must include the following principles to benefit America:

  • Balanced Trade
  • National Trade, Economic and Security Strategy
  • Reciprocity
  • Address State Owned Commercial Enterprises
  • Currency Manipulation
  • Rules of Origin
  • Enforcement
  • Border Adjustable Taxes
  • Perishable and Cyclical Products
  • Food and Product Safety and Quality
  • Domestic Procurement
  • Temporary vs. Permanent via renewal or sunset clauses

In the past, Congress has used Trade Promotion Authority to give the executive Branch directives on which countries to negotiate with and what terms to seek in the negotiations. “Fast Track” provisions that prevent Congress from amending any agreement and requiring an accelerated timeline for the vote have also been included. However, the Executive Branch ignored most of the provisions of the 2002 TPA and Congress had no role in the negotiations. Thus, CPA recommends that “Fast Track” provisions not be included because Congress should retain its trade power.

I also took the opportunity to provide copies of my blog article on the dangers to our national sovereignty that the current draft of the Trans-Pacific Partnership Agreement includes. I enjoyed meeting other businessmen and women from other parts of the country that have similar concerns about the direction of our country and are working to fix our country’s economy.

It was a pleasure to take advantage of my rights as a citizen to express my opinions and those of an organization of which I am a member to our elected representatives in government. If more American businessmen and women would take the time to do the same, we would be more successful in our efforts to fix our trade and national deficit problems and create jobs for more Americans.

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