Posts Tagged ‘China’

CPA Report Shows Higher China Tariffs Could Increase U.S. Jobs and GDP

Monday, August 19th, 2019

On July 22, 2019, the Coalition for a Prosperous America released an update to their study on the effects of increasing tariffs on all imported Chinese goods to 25% that had originally released in May. The study was conducted by CPA’s Chief Economist Jeff Ferry and Steven L. Byers, Ph.D. The Coalition for a Prosperous America is a non-profit, non-partisan organization working to eliminate the trade deficit with smart trade and tax policies to create jobs and prosperity.

According to the report, “The tariff revenue totals $547 billion over five years. If those funds are reinjected back into the economy each year, this additional stimulus to growth results in a $167 billion boost to GDP and 1.05 million additional jobs in 2024…The results of the Coalition for a Prosperous America (CPA) model show that tariffs will have a sustained, positive impact on the US economy, including jobs, output, and investment.”

The report states:  “The tariff would stimulate the US economy through two channels: first, the relocation of US-bound production from China to other nations would lead to a reduction in the average cost of imports because many alternative production locations ,such as those in Southeast Asia, today have lower costs of production than China; and secondly, because a portion of the production in China relocated to the US, would directly stimulate the US economy.”

In stark contrast, the opinions of professional economists are reflected in an article titled, “Trade Wars Are Not Good, or Easy to Win” in The Atlantic on August 5, 2019, staff writer Derek Thompson, wrote, ” President Donald Trump has stubbornly insisted on Chinese tariffs over the objections of his economic advisers—not to mention the near-universal outcry of the professional economic community. In a University of Chicago poll of several dozen international economists, zero disagreed with the statement that “the incidence of the latest round of US import tariffs is likely to fall primarily on American households.”

Why do the conclusions of the CPA research directors differ so greatly from the opinions of the economic community? The authors explained, “Our results differ remarkedly from other economic modeling efforts regarding tariffs…The differences result primarily from different assumptions about how businesses and consumers react to tariffs. Other models reflect a pro-free-trade bias and assume that (a) no production returns to the US as a result of tariffs (b )prices of US imports always rise when imports move from China to third countries and (c) US consumers react very negatively to higher prices, leading to educed sales and output in the US economy. A close study of the available empirical evidence shows these assumptions are unwarranted.”

The report states:  “Our model consisted of two parts:  a partial equilibrium model, which looked at how production in China for export to the US responded to the presence of a permanent across-the-board tariff, and a general-equilibrium model, based on the widely-used REMI  economic model to explore the effects of production shifts on the US economy over a five-year forecast period.”

The report takes into consideration China’s retaliation against the tariffs and China’s moving manufacturing to the U.S. or other countries. It shows that the tariffs will encourage production relocation out of Asia and generate significant reshoring of manufacturing to the US by American manufacturers who had established plants in China. This opinion concurs with the data collected by the Reshoring Initiative for several year showing that “the location decision for manufacturers is not just about cost: reliable supply, closeness to customers, political stability, and building customer/consumer brand awareness all matter!”

The original May report went into more detail about the benefit of reshoring, stating, “The US job gains from PATB-25-induced reshoring are disproportionately concentrated in the manufacturing sector, with 192,416 additional manufacturing jobs (27 percent of total jobs created by the tariff). This is because the vast majority of US imports from China are manufactured goods. By 2024, our model forecasts that $69 billion worth of annual production will have migrated from China to the United States. While US production costs in many industries remain higher than in China, that is not the whole story. Locating production in the US offers other advantages, including lower transportation costs, more logistical flexibility, and closer connectedness to consumer markets, distributors, and senior management. Relocating in the US also insulates companies against the uncertainty of potential future trade tensions. Some industries, such as apparel, have already seen reshoring due to these advantages. A permanent tariff would speed up the process.”

In a webinar to CPA members on August 1st, Ferry cited several examples of American companies reshoring production to the US; namely, Caterpillar, Stanley Black and Decker, Hasbro, Whirlpool, Optec, and West Elm.  The website of the Reshoring Initiative lists  nearly 3,000 companies that have reshored, and the list grows by the week.  

In an interview for The Epoch Times,  Ferry said: “As time goes by, people are accepting it because they’re seeing that tariffs are not provoking huge increases or any increases in consumer prices. They’re not disrupting our supply chains”

He also said “the goal of the U.S. government is to fix these problems and to restore prosperity to the United States, and he thinks tariffs have their role to play. If the trade deficit continues, and if we want to see certain manufacturing industries grow in the United States, I think we need to do more, and tariffs on all Chinese imports is a good solution…It’s a delicate and dangerous game [the Chinese regime is] going to have to play to pivot from being an economy that’s completely dependent on exports to being a more balanced economy, and it’s anybody’s guess whether they can pull it off.”

I’m betting that the conclusions reached by CPA would prove true if President Trump did impose 25% tariffs on all imports from China because of the strong evidence of the benefit of reshoring to the US economy.  According to the Reshoring Initiative, data from the manufacturing employment low of January 20190 through 2018, 749,000 jobs have been brought back to the US from offshore. In addition, manufacturing jobs pay higher than service and retail jobs, so tax revenue will increase from more people having higher paying jobs.  Another benefit would be that as we reduce our imports, our trade deficit would go down. However, the best benefit is that as we resume making the products and systems needed to defend our country in the US, we will protect our national security.

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What Could be done about China’s Theft of Intellectual Property

Sunday, March 13th, 2016

Hardly a week goes by without a report of Chinese “hacking” or Intellectual Property Theft, so it was no surprise that a published analysis by CrowdStrike, a California-based cyber security company, revealed that China violated its cyber agreement with the United States the very next day after CNBC reported that President Obama and China’s President Xi Jinping agreed to not conduct cyber theft of intellectual property on Friday, September 25, 2015. President Obama said. “The United States government does not engage in cyber economic espionage for commercial gain, and today I can announce that our two countries have reached a common understanding on a way forward.” However, the U.S.-China agreement “does not prohibit cyber spying for national security purposes.”

It is interesting to note that the day before the announcement, September 24, 2015, Chet Nagle, a former CIA agent and current Vice President of M-CAM, penned an article in the Daily Caller, stating, “At FBI headquarters in July, the head of FBI counterintelligence, Randall Coleman, said there has been a 53 percent increase in the theft of American trade secrets, thefts that have cost hundreds of billions of dollars in the past year. In an FBI survey of 165 private companies, half of them said they were victims of economic espionage or theft of trade secrets — 95 percent of those cases involved individuals associated with the Chinese government.”

He blamed the corruption of Chinese government officials for the problem and stated that “President Xi Jinping has instituted a strict anti-corruption campaign. Regrettably, the campaign has focused on “tigers” — senior government officials — at the expense of eliminating the rampant corruption by the “flies” — officials at the provincial and local level. In any event, putting a dollar value on direct corruption does not address the totality of the costs. Business confidence and foreign direct investment in China are already falling because of the absence of the rule of law.”

He concluded, “China’s disregard of the rule of law should be the underlying driver for all discussions of commercial topics during the coming visit of China’s president. Lack of the rule of law is the most difficult challenge American enterprises face in China.”

In researching this topic, I found out that three years earlier, May 22, 2013, the bipartisan Commission on the Theft of American Intellectual Property of the U.S. International Trade Commission released a report. Dennis C. Blair, former Director of National Intelligence and Commander in Chief of the U.S. Pacific Command, and Jon M. Huntsman, Jr., former Ambassador to China, Governor of the state of Utah, and Deputy U.S. Trade Representative, were the Co-chairs of the Commission.

The day after the release, Forbes published an article about the report, stating that “China accounts for at least half – and maybe as much as 80 percent – of U.S. intellectual property theft.” The article briefly discussed the problem of China’s Intellectual Property theft and included quotes from the co-chairs, but did not go into any detail about the recommendations of the Commission.

The article did provide the link to the 100-page report, which I have since read. In view of the continuing problem, it is time to reconsider the key findings of the report, titled, “The Impact of International IP Theft on the American Economy”:

  • ”Hundreds of billions of dollars per year. The annual losses are likely to be comparable to the current annual level of U.S. exports to Asia—over $300 billion…”
  • Millions of jobs. If IP were to receive the same protection overseas that it does here, the American economy would add millions of jobs.
  • A drag on U.S. GDP growth. Better protection of IP would encourage significantly more R&D investment and economic growth.
  • The incentive to innovate drives productivity growth and the advancements that improve the quality of life. The threat of IP theft diminishes that incentive.

The report stated, “A core component of China’s successful growth strategy is acquiring science and technology. It does this in part by legal means—imports, foreign domestic investment, licensing, and joint ventures—but also by means that are illegal. National industrial policy goals in China encourage IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice.”

The report stated that existing remedies are not keeping up with the problem because of:

  • Short product life cycles – “the slow pace of legal remedies for IP infringement does not meet the needs of companies whose products have rapid product life and profit cycles.”
  • Inadequate institutional capacity ? a shortage of trained judges in developing countries
  • China’s approach to IPR is evolving too slowly – “improvements over the years have not produced meaningful protection for American IP.”
  • Limitations in trade agreements? there are also significant problems in the WTO process that have made it impossible to obtain effective resolutions. “Bilateral and regional free trade agreements are not a panacea either.”
  • Steps undertaken by Congress and the administration are inadequate.

The Commission recommended short-term, medium-term, and long-term remedies. The short-term measures are immediate actions that are largely regulatory or made effective via executive order and include the following:

  • Designate the national security advisor as the principal policy coordinator for all actions on the protection of American IP.
  • Provide statutory responsibility and authority to the secretary of commerce to serve as the principal official to manage all aspects of IP protection.
  • Strengthen the International Trade Commission’s 337 process to sequester goods containing stolen IP.
  • Empower the secretary of the treasury, on the recommendation of the secretary of commerce, to deny the use of the American banking system to foreign companies that repeatedly use or benefit from the theft of American IP.
  • Increase Department of Justice and Federal Bureau of Investigation resources to investigate and prosecute cases of trade-secret theft, especially those enabled by cyber means.
  • Consider the degree of protection afforded to American companies’ IP a criterion for approving major foreign investments in the United States under the Committee on Foreign Investment in the U.S. (CFIUS) process.
  • Enforce strict supply-chain accountability for the U.S. government.
  • Require the Securities and Exchange Commission to judge whether companies’ use of stolen IP is a material condition that ought to be publicly reported.
  • Enforce strict supply-chain accountability for acquisitions by U.S. government departments and agencies by June 1, 2014, and work to enhance corporate accountability for the IP integrity of the supply chain.

The Commission made the following medium term recommendations to build a more sustainable legal framework to protect American IP that Congress and the administration should take:

  • Amend the Economic Espionage Act (EEA) to provide a federal private right of action for trade-secret theft. If companies or individuals can sue for damages due to the theft of IP, especially trade secrets, this will both punish bad behavior and deter future theft.
  • Make the Court of Appeals for the Federal Circuit (CAFC) the appellate court for all actions under the EEA. The CAFC is the appellate court for all International Trade Commission cases and has accumulated the most expertise of any appellate court on IP issues. It is thus in the best position to serve as the appellate court for all matters under the EEA.
  • Instruct the Federal Trade Commission (FTC) to obtain meaningful sanctions against foreign companies using stolen IP. Having demonstrated that foreign companies have stolen IP, the FTC can take sanctions against those companies.
  • Strengthen American diplomatic priorities in the protection of American IP. American ambassadors ought to be assessed on protecting intellectual property, as they are now assessed on promoting trade and exports. Raising the rank of IP attachés in countries in which theft is the most serious enhances their ability to protect American IP.

The more idealistic long-term recommendations are:

  • Build institutions in priority countries that contribute toward a “rule of law” environment in ways that protect IP.
  • Develop a program that encourages technological innovation to improve the ability to detect counterfeit goods.
  • Ensure that top U.S. officials from all agencies push to move China, in particular, beyond a policy of indigenous innovation toward becoming a self-innovating economy.
  • Develop IP “centers of excellence” on a regional basis within China and other priority countries.
  • Establish in the private, nonprofit sector an assessment or rating system of levels of IP legal protection, beginning in China but extending to other countries as well.

Of particular interest is the mention in the report that an annual survey in late 2012 of member companies of the American Chamber of Commerce in the People’s Republic of China “over 40% of respondents reported that the risk of data breach to their operations in China is increasing, and those who indicated that IP infringement has resulted in “material damage” to China operations or global operations increased from 18% in 2010 to 48% in 2012,” and that “The longer the supply line, the more vulnerable it is to IP theft.”

The risk of Intellectual Property is one of the major reasons many companies are returning manufacturing to America through reshoring. This is also why I urge the inventors that are part of the San Diego Inventors Forum to avoid going to China if at all possible, and if they have to go to China to meet their target Bill of Material cost, they should never source all of the parts of their product with one vendor. Otherwise, they are at risk of being victimized by their Chinese vendor stealing their IP and getting a counterfeit version of their product on the market first.

In conclusion, “The Commission considered three additional ideas for protecting the intellectual property of American companies that it does not recommend at this time.” The following one of the three is particularly interesting to me because of the enormous trade deficits we have with China:

“Recommend that Congress and the administration impose a tariff on all Chinese-origin imports, designed to raise 150% of all U.S. losses from Chinese IP theft in the previous year, as estimated by the secretary of commerce. This tariff would be subject to modification by the president on national security grounds.”

“The Commission is not prepared to make such a recommendation now because of the difficulty of estimating the value of stolen IP, the difficulty of identifying the appropriate imports, and the many legal questions raised by such an action under the United States’ WTO obligations. If major IP theft continues or increases, however, the proposal should be further refined and considered.”

What is outrageous to me is that it is obvious to me that none of the short-term, medium-term or long-term recommendations have been implemented or we would not still have the serious problem of cyber espionage and Intellectual Property Theft three years later.

Supporters of developments in China “essentially argue that when China begins producing its own intellectual property in significant quantities, the country’s own entrepreneurs and inventors will put pressure on political and Communist Party leaders to change the laws and improve IP protections.” Since China has the stated goal of becoming the superpower of the 21st Century and is Intellectual Property Theft is one of their tools to achieve this goal, I do not feel that this will ever happen.

To me, the most important conclusion of the report is “If the United States continues on its current path, with the incentives eroding, innovation will decline and our economy will stagnate. In this fundamental sense, IP theft is now a national security issue.” It will be interesting to see if the next president and the next Congress we elect will have the courage to play hardball with China by implementing some of the recommendations of the Commission.

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Posted in Inellectual Property, Innovation, Manufacturing, National security, Trade Policy | No Comments »

“Death by China” Film Shows where all the Jobs Have Gone

Tuesday, August 27th, 2013

Are you wondering where all the good jobs have gone? Why do we have less tax revenues creating an out-of-control Federal budget deficit? Why are you working harder for less money than you did in the 1990s?

Death by China, based on the book by Peter Navarro and Greg Autry, shows how the world’s most populous nation and soon-to-be largest economy is rapidly turning into the planet’s most efficient assassin through its shoddy and even poisonous products and environmental pollution. China’s perverse form of capitalism combines illegal mercantilist and protectionist weapons to pick off American industries, job by job. Meanwhile, America’s executives, politicians, and even academia remain silent about the looming threat. To read my full review of the book, click here.

Director Peter Navarro is an internationally acclaimed expert on U.S.-China relations, a regular contributor on CNN, CNBC, MSNBC and the Huffington Post, and a professor of economics at the University of California, Irvine. Greg Autry is an entrepreneur, writer, and educator. He has published extensively on business, economics, trade policy, China and space. Greg serves as Senior Economist for the American Jobs Alliance and economist for the Coalition for a Prosperous America. Both Navarro and Autry have testified to the U.S. Congress on China issues.

To Navarro and Autry, the success of the film will be measured by the ability of the public to spur politicians to finally recognize that “the best jobs program for America is trade reform with China – not more empty fiscal and monetary stimulus.”

The film review on “rottentomatoes” states, “Death by China pointedly confronts the most urgent problem facing America today – its increasingly destructive economic trade relationship with a rapidly rising China. Since China began flooding U.S. markets with illegally subsidized products in 2001, over 50,000 American factories have disappeared, more than 25 million Americans can’t find a decent job, and America now owes more than 3 trillion dollars to the world’s largest totalitarian nation. Through compelling interviews with voices across the political spectrum, Death by China exposes that the U.S.-China relationship is broken and must be fixed if the world is going to be a place of peace and prosperity.

The New York Times review states, “The film, based on a book by Peter Navarro and Greg Autry and directed by Mr. Navarro, is blunt as can be in working the premise that the admission of China to the World Trade Organization in 2001 has been catastrophic for the American economy. The influx of Chinese goods has left American manufacturers unable to compete, the film says, and Chinese leaders have been brashly ignoring rules about things like currency manipulation to make sure that their country’s products remain artificially cheap.”

In this review article, Daniel M. Slane of the United States-China Economic and Security Review Commission said, “American companies cannot compete because they’re not competing with Chinese companies, they’re competing with the Chinese government.”

The New York Post review states, “Narrated by Martin Sheen, the film looks at what it calls America’s increasingly destructive trade relationship with China — we owe them $3 trillion — which goes back to the Asian nation’s entry into the World Trade Organization in 2001. We hear claims that instead of helping both lands, as President Clinton promised at the time, the deal has resulted in the loss of millions of American jobs and the influx here of shoddy, even deadly Chinese products. Death by China gives that nation a black eye for currency manipulation, intellectual-property theft, political persecution and serious environmental pollution.”

Paste Magazine’s review states, “With his Harvard pedigree and his acclaimed credentials, Navarro is an authority on the subject of the U.S.-China trade relationship. Death by China features him along with several geopolitical experts and activists spelling out exactly how and why this nation’s corporate-political nexus sold out the American worker and consumer to the tune of thousands of factories, millions of jobs and trillions in debt owed to the Chinese.

And who’re the losers in this scenario? Interviews with out-of-work factory workers, college graduates and with both Democratic and Republican legislators paint a picture of widespread blight as unemployment destroys communities and consumers find themselves without any choice but to buy Chinese-made goods.”

Navarro commented: “My goal in creating the film is to draw attention to the urgent need for trade reform with China, and to ensure that it becomes a top priority for legislators. We hope to give the highest possible visibility to an issue that is all too often ignored by politicians, journalists and consumers alike – the incredibly corrosive loss of America’s once formidable manufacturing base to a cheating China. The fact that our government has turned a blind eye to China’s deceitful policies has had an enormously negative impact on the American economy and the standard of living of millions of Americans.”

Francesca McCaffery of Blackbook Magazine said, “A truly life-changing, mouth-dropping documentary film…Peter Navarro’s ‘Death by China’ grabs you by the throat and never lets go…But watch this movie, and you will, in turn, start glowing with a newfound, hit-on-your-head awareness.”

The Hollywood Report review points out that “Narrator Martin Sheen warns upfront that it’s important to “distinguish clearly between the good and hard-working people of China, and their repressive Communist government victimizing American and Chinese citizens alike.”

Death by China made its theatrical debut in Los Angeles and New York in June of 2012 and played theatrically in over 50 cities across the U.S. including key manufacturing cities such as Akron, Chicago, Dayton, Detroit, Cincinnati, Columbus, Detroit, Milwaukee, Pittsburgh, Toledo, Youngstown and many more.

This was opposite of the typical course of documentary films being shown at festivals first and then in theaters. Navarro and Autry wanted to open the film in theaters throughout the swing states during the 2012 presidential election to draw attention to the issue China’s exploitation of our economy.

After the election, Death by China made a series of festival appearances through the end of June 2013. All total, the film was shown at more than 25 festivals – from Beaufort, South Carolina; Macon, Georgia; and New York City to Green Bay, Wisconsin; Sedona, Arizona; and San Luis Obispo, California.

As part of its festival activity, the film garnered three best documentary awards from festivals in Beverly Hills, Durango, and Studio City. “It was a Best Doc nominee at the Cape Fear Independent Film Festival, was first runner up at the Myrtle Beach festival, and received a Golden Ace award from the Las Vegas Film Festival.”

Don’t miss the following opportunity to see this film. If you are not located in the region, please check the Death by China website for other screenings. If you or your organization would like to sponsor a screening, please contact Peter Navarro.  Of course, you can also order the DVD to watch on your own TV.

The Coalition for a Prosperous America presents:  A Screening of Death by China, A Documentary Film by Peter Navarro and Greg Autry

When: Wednesday, September 18th, 2013, Doors open 6:00 PM, event starts at

6:30 PM.

Where: AMN Healthcare, 12400 High Bluff Drive, San Diego, CA 92130 (exit Carmel Valley Road off Int. 5)

Cost: $10.00 (refreshments served)

Agenda

Introduction: Michele Nash-Hoff, Chair, California chapter of the Coalition for a Prosperous America

Film: “Death by China”, directed by Peter Navarro and produced by Greg Autry, CPA Economist

Discussion/Q and A: Greg Autry, Producer, Death by China, Economist, Coalition for a Prosperous America

Following the film there will be a discussion and Q and A to talk about how the Coalition for a Prosperous America is working to build a smart trade policy that will counter China’s, and other nation’s, trade cheating and move manufacturing back to America.

Register today at the CPA site: prosperousamerica.org

For more information, please contact Sara Haimowitz (sara@prosperousamerica.org,)

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Posted in Economy, Jobs, Manufacturing, Outsourcing, Trade Policy | 1 Comment »

Will the AME, NAM and NACFAM Alliance Revitalize Manufacturing?

Tuesday, March 6th, 2012

The Association for Manufacturing Excellence (AME) is joining with leading organizations, such as the National Association of Manufacturers (NAM), and the National Council For Advanced Manufacturing (NACFAM) to form an alliance to revitalize manufacturing and grow the economy, while improving the standard of living of all citizens in North America.  These organizations are inviting public and private sectors to come together to build on the NAM study, A Manufacturing Renaissance: Four Goals for Economic Growth.

The AME white paper “Challenges Facing the Manufacturing Industry…” states “The strategy calls for putting people, schools, businesses and the government to work; producing literate career-ready citizens capable of joining the workforce; and enabling manufacturers to once again lead the designing, building and exporting of quality products and services around the globe.” The top three priorities are:

  • Build a better educated and trained workforce
  • Promote product and process innovation, as well as research and development
  • Improve global competitiveness for companies

AME advocates that each priority “must be considered in developing public policies that support the revitalization of the manufacturing sector, and policy-makers must consider these elements in shaping future public policy and legislation.”   The goal is to help companies and our education systems transform themselves by using more innovative processes to become more competitive to put people back to work in making things in America.

I  strongly agree with AME’s viewpoint that we need to revitalize American manufacturing because “manufacturing is very critical to economic growth, prosperity and a higher standard of living.”  This is because manufacturing jobs have a multiplier effect-? every manufacturing job creates three to four other jobs.  Manufacturing creates more wealth than any other sector in the economy.  “Manufacturing pays higher wages and provides greater benefits, on average, than other industries. It performs almost two-thirds of private sector research and development, creates the highest number of jobs to support the industry while serving the surrounding communities, and contributes to more than 50 percent of the country’s total exports.”

The White Paper notes that we’ve lost nearly six million manufacturing jobs in the United States since January 2000, for an average of about 54,000 per month, according to the Bureau of Labor Statistics.  We also lost 56,190 manufacturing facilities from 2001 to 2010, or about 15 per day.

AME has issued a call for action to policy-makers, industry professionals and academic leaders to play critical roles in revitalizing the economy through the rebirth of manufacturing jobs.  To do this, we need to ensure the supply of educated citizens, necessary physical infrastructure, and a favorable tax and regulatory framework that fosters increased collaboration between public and private sector partners.

AME has been leading the “Revitalization of Manufacturing” initiative, wherein AME and their allied organizations have been reaching out to policy-makers nationwide, and encouraging them to join or develop efforts focusing on local and state job creation.  AME states that “itt is imperative that policy-makers recognize the importance of an industry that has been the backbone of the North American economy.  To date, AME has received more than 400 signatures of support from state and federal policy-makers, industry trade associations and operations executives representing manufacturers across North America.”

AME advocates “a renewed emphasis on making businesses more competitive by developing the educational and training infrastructure to produce qualified individuals to fill these new opportunities.”   To accomplish these initiatives, AME is joining with leading organizations to adopt the three priorities by:

Reforming public education to produce career ready citizens – Parents, teachers and business leaders need to recognize that other nations are both out-educating us and out-competing us.  Some of the ongoing initiatives by manufacturing organizations to help reform public education are:

  • The Manufacturing Institute’s Roadmap to Education Reform for Manufacturing, a comprehensive blueprint for education reform
  • American Productivity and Quality Center’s (APQC) Education North Star program that helps school districts do more with less by transforming education through process and performance management
  • Career Pathways,  a program that encourages students to consider a career in manufacturing and help prepare them by using the Manufacturing Pathway Map

Last fall, I wrote about a number of programs sponsored by other organizations to interest and prepare youth for careers in manufacturing in the article, “How Can we Attract Youth to Manufacturing Careers?”

Establishing consortiums of like-minded individuals with the same mission to help sustain and grow businesses through sharing technology and innovative ideas.  AME recommends that businesses “grow a culture that achieves results through engaging their people” to “develop pragmatic, working-level leaders who can pull it all together.”  In addition, businesses “need to foster rapid advancement of technology and innovation by establishing regional consortiums to help bring jobs back home.”

“AME Northern Kentucky/Cincinnati Consortium is the first building block of the AME Consortia network, and the organizations plans to deploy at least 10 more in 2012.  AME also has alliance partners, like the Virginia Business Excellence Consortium.”

Reshoring by making better informed business decisions  to keep and bring jobs back home – the Reshoring Initiative was founded by Harry Moser in 2010.  He is collaborating with AME to promote reshoring as part of the “Revitalization of Manufacturing” initiative.  AME recommends that companies use the Total Cost of Ownership (TCO) analysis tool Mr. Moser developed “to effectively compare total cost of local and offshore sources, enabling them to make informed business decisions. ‘We are committed to changing the sourcing paradigm from ‘off-shored is cheaper’ to ‘local reduces the total cost of ownership,’ said Moser.”

Redeploying Training Within Industry (TWI) programs to train or retrain workers to have the skills to work in advanced manufacturing jobs to revitalize manufacturing and re-energize the economy.  First created during WWII to replace workers who left the factories and went off to war, the TWI programs were revived in 2001 by the Central New York Technology Development Organization, a member of the U.S. Manufacturers Extension Partnership (MEP), after which the TWI Institute was formed to oversee the global deployment of the program.

AME’s White Paper only identifies the TWI programs, but I wrote about training programs sponsored by other organizations, such as the Society of Manufacturing Engineers’ Tooling U and The Fabricators and Manufacturers Association, International in my article, ”What’s Being Done to Address the Lack of Skilled Workers?

In order to be more globally competitive, AME recommends that companies use Lean Certification, an internationally recognized certification process developed by the Society of Manufacturing Engineers (SME), AME, Shingo Prize, and the American Society for Quality (ASQ), which establishes the standard for continuous improvement and Lean practices.

The White Paper states that at its 2012 national board meeting, “AME reaffirmed its commitment to helping small-and medium-sized businesses create more manufacturing jobs, and the organization’s strategic plans address the challenges facing manufacturing by formulating counter-measurements to address them with its public and private alliance partners.”

In conclusion, the White Paper states, …the public and private sectors must come together to build an integrated plan supportive of these initiatives, especially NAM’s Manufacturing Strategy for Jobs and Competitiveness and Roadmap to Education Reform for Manufacturing; the LEARN Act; and the Reshoring Initiative.  These will ultimately revitalize the industry and grow the economy.”

I have repeatedly said in my book and blog articles that it will take the efforts of the public and private sectors, as well as individual Americans, to first save and then revitalize American manufacturing.  I agree that these strategies will be beneficial, but they will not be enough to accomplish this goal.   First of all, I do not agree that the challenges to accomplish this goal are the “four major challenges on which its future depends and has been failing to meet… globalization, the revolution in information technology, the nation’s chronic deficits and its pattern of energy consumption” that are quoted from Thomas L. Friedman and Michael Mandelbaum’s book, That Used to Be Us, How America Fell Behind in the World It Invented and How We Can Come Back.

These are all realities that must be addressed, but they are not the main challenges that face America’s manufacturing industry.  The main challenge can be summed up in one word:  China.  By this I mean China’s predatory mercantilism in the form of currency manipulation, export subsidies, theft of intellectual property, product “dumping,” export restrictions on raw materials, and more recently, technology transfer and rare earth hoarding.

As long as companies that are members of AME, NAM, and NACFAM, such as Westinghouse, General Electric, and Caterpillar, choose to close factories in the United States to offshore manufacturing to China for the illusion of selling to the 1.3 billion Chinese consumers, we will continue to lose manufacturing jobs.

As long as these organizations and their member companies advocate so-called free trade policies and are afraid to stand up to China’s predatory mercantilism and urge our elected officials to demand that China adhere to the terms of its admission into the World Trade Organization, our huge trade deficits will continue to escalate.

These companies must stop being Chinese apologists and appeasers just to add more profit to their bottom line.  They need to realize that complying with China’s demand for technology transfer in order to build or establish a plant in China is destroying the future of their own companies.

Now is the time for action.  The best thing that AME, NAM and NACFAM members could do is to take a pledge to not close any more plants in the U. S. to set up manufacturing in China.  Then, we would really be able to revitalize American Manufacturing.

 

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Posted in Economy, Manufacturing, Outsourcing, Trade Policy, Training | No Comments »

What Could We Do Right Now to Create Jobs?

Tuesday, January 17th, 2012

There are numerous ideas and recommendations on how we could create jobs that range from the cautious to the extreme.  Most job creation programs proposed by commentators, politicians, and economists 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 would be difficult to accomplish. Many of these solutions involve borrowing money or taking money from one group of citizens or a future generation to give to another.  Let’s start with what we as individuals can do from the viewpoint of entrepreneurs, business owners, employees, and consumers.

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 you could do a Total Cost of Ownership analysis for component parts that you are having made offshore to see if you could “reshore” some of all of them to be made in the United States.  Check out www.reshorenow.org for a TCO worksheet estimator to conduct your analysis.  Also, you could choose to keep R&D in the United States or bring it back to the United States if you have “offshored” it.    Every manufacturing job you keep or bring back to the United States will create an average of three to four support jobs for other Americans.  If you are a service company, you could choose to keep your customer service department in the United States or bring it back if it is “offshored.”  If enough manufacturing is “reshored” from China, we would drastically reduce our trade  $600 billion trade deficit .  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.

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.  As I’ve written previously, there are many hidden costs to doing business offshore so that in the long run you may not save as much money as you expect by sourcing your product offshore.  Don’t forget about the danger of having your Intellectual Property stolen by a foreign company that will use it to make a copy-cat or counterfeit product sold at a lower price than your product.

If you are fortunate enough to have a regular, stable job, do everything in your power to contribute to the success of your company.  Do your job to the best of your ability.  Be willing to learn new job skills to increase your value to your employer.  No matter what your job, adopt the marketing mindset where you realize that everyone in a company is part of the marketing team regardless of their job function.  Every interaction that a customer or potential customer has with anyone in a company influences his or her opinion about doing business with that company.  Even though you are being paid by your employer, it’s actually your company’s customers that provide you with a job.

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.  Pay attention to the country of origin labels when you 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.  There is a ripple effect in that every manufacturing job creates three to ten other manufacturing jobs, depending on the industry.  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.”

Now, let’s consider what Congress could do to create jobs.  First, Congress must 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 last fall.  Even though the corresponding bill in the House, H. R. 639, had bi-partisan support with 231 co-sponsors, GOP leadership bottled up the bill in committee and prevented it from being brought up for a vote, so the session ended without action to address this serious issue.  The 112th Congress lasts two years, starting in Jan 2011 and ending December 2012, so there is the opportunity for the bill to be voted on this year.

We  voters need to pressure our elected representatives in the House to pass this bill this year so that American products can compete against Chinese imports.  It’s an obvious fact that if American companies can increase sales of their products, then they will be able to hire more workers.

Second, Congress should pass legislation allowing American corporations to “repatriate” income earned by plants in foreign countries at a reduced tax rate of 5-5.5% if the income is permanently reinvested in the United States.  This would bring nearly 1.2 billion dollars of monies back to the U. S. to be invested in R&D, plants, equipment, and hiring workers.

Third, 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 proposed legislation would also close tax loopholes and prevent corporations from avoiding paying corporate income taxes.  They are:

  • Reduce corporate taxes to 25 percent
  • No negotiation or ratification by Congress of any new Free Trade Agreements
  • 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
  • Change the tax code to a “partial exemption system” to eliminate incentives for companies to move offshore by taxing all corporate income at a reasonable rate once

In this election year, it is unlikely that legislation proposing any of these recommendations would have a chance of being passed by Congress.  The problem is that no Democrat would want to allow any credit to go to a Republican, which might help them win re-election, and no Republican would want to allow any credit to go to a Democrat, which might help them win re-election.   We will need to wait until after the 2012 election before we have any hope of such legislation being considered.

Finally, the Obama administration is considering a high-level task force to manage China trade enforcement issues. Such a task force is desperately needed and long overdue.  The challenge will be to ensure that the task force has the authority to take bold steps to lower our trade deficit with China.  Holding China accountable for their compliance with terms of their membership in the World Trade Organization would be a major step in helping American manufacturers compete in the global marketplace to be able to succeed, grow and create jobs in America instead of China.

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