{"id":881,"date":"2018-12-04T18:22:43","date_gmt":"2018-12-05T02:22:43","guid":{"rendered":"http:\/\/savingusmanufacturing.com\/blog\/?p=881"},"modified":"2018-12-04T18:22:43","modified_gmt":"2018-12-05T02:22:43","slug":"navarro-warns-of-fragility-of-u-s-manufacturing-and-defense-industrial-base","status":"publish","type":"post","link":"https:\/\/savingusmanufacturing.com\/blog\/tradepolicy\/navarro-warns-of-fragility-of-u-s-manufacturing-and-defense-industrial-base\/","title":{"rendered":"Navarro Warns of Fragility of U.S. Manufacturing and Defense Industrial Base"},"content":{"rendered":"

If you don\u2019t watch CSpan, you missed an important speech by Dr. Peter Navarro, White House National Trade Council and Office of Trade and Manufacturing Policy Director, on November 9th<\/sup> at the Center for Strategic and International Studies in Washington, D. C.<\/p>\n

Dr. Navarro spoke about the manufacturing and defense industrial base and how U.S. economic strength is an element of national security and how it fits with the Trump strategy in dealing with the broader economic and defense issues. Dr. Navarro said that in December 2017, as part of formulating a national security strategy, President Trump introduced the maxim that \u201ceconomic security is national security.\u201d<\/p>\n

He explained that everything that the Trump administration has done is part of this strategy, such as tax cuts, deregulation to reduce the onerous regulations put in place by the Obama Administration, ending the war on coal, and the steel and aluminum tariffs. These are all part of supply side economics to help companies be more competitive and grow in a non-inflationary way.<\/p>\n

He commented that instead of the \u201cdoom and gloom\u201d of economists, there has been \u201ca flood of new investment and capital expenditures\u201d by steel and aluminum companies, and \u201cthe waivers granted by the Department of Transportation have gone down from a flood to a trickle.\u201d<\/p>\n

He said, \u201cIn my estimation, we have the finest U. S. Trade Representative in U. S. history.\u00a0 Doing the Section 301 investigation was a power that lay dormant for decades. This is the way we are able to now protect our technology from Chinese predation.\u00a0 It has been tremendously successful in doing that.\u201d<\/p>\n

He outlined how Trump\u2019s tough trade policy, backed up by tough action, has led to the renegotiation of two out of the three main trade deals \u2013 NAFTA, the Korea deal, and the WTO.\u00a0 With regard to NAFTA, now called the USMCA, he said, \u201cThe whole essence is a provision to bring domestic content back onshore and share the fruits of the assembly and supply chain with our neighbors to the south and to the north. This is a deal which will strengthen all three countries and strengthen the defense industrial base.\u201d<\/p>\n

He commented that President Trump is a man who thinks every day about how to put more American men and women back to work, particularly those who work with their hands. He discussed how during his time on President Trump\u2019s campaign trail, a report came out stating that one out of four people were out of the workforce, the so-called \u201cdiscouraged workers\u201d \u2013 men and women who had given up looking for work. He said, \u201cWe were told that the jobs for people who work with their hands were never coming back. Now, we have historically low unemployment., and rising employment among Blacks, Hispanics, and woman. Over a million people are back in the workforce through a fundamental restructuring of the manufacturing and industrial base.\u00a0 It isn\u2019t just the quantity of jobs; it\u2019s the quality of jobs.\u201d<\/p>\n

He said, \u201cI was blessed to be part of a large team that restructured the sale of arms to our allies and partners.\u00a0 From an economic security point of view, it means more jobs here, good jobs with higher wages.\u00a0 When you reactivate a supply chain, you activate 400 suppliers in that supply chain in 41 states. It helps expand production lines. If you are able to sell arms to allies and partners, it makes that country stronger.\u201d<\/p>\n

He then turned his attention to the findings of the \u201cAssessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States Report<\/a>\u201d that was prepared by the Interagency Task Force in Fulfillment of President Trump\u2019s Executive Order 13806.<\/p>\n

He said that an Interagency Task Force, led by DoD, created sixteen working groups with over 300 subject matter experts from across the federal government. Nine working groups focused on traditional industrial sectors, and seven working groups assessed enabling cross-cutting capabilities, such as machine tools. The report revealed that there are almost 300 gaps and vulnerabilities in America\u2019s manufacturing and defense industrial base.\u00a0 The Executive Summary states, \u201cCurrently, the industrial base faces an unprecedented set of challenges: sequestration and uncertainty of government spending; the decline of critical markets and suppliers; unintended consequences of U.S. Government acquisition behavior; aggressive industrial policies of competitor nations; and the loss of vital skills in the domestic workforce.\u201d<\/p>\n

Dr. Navarro asked the rhetorical questions, \u201cHow did we get to the place where the greatest military power in the world faces serious gaps, close to 300 gaps, in the defense industrial base?…What happens when you randomly cut off dollars from the defense department?<\/p>\n

He explained, \u201cThere are five macro forces that bear down on the defense industrial base:<\/p>\n

    \n
  1. Budgets and sequestration<\/li>\n
  2. Decline of American manufacturing capability and capacity<\/li>\n
  3. S. government procurement practices<\/li>\n
  4. Industrial policies of competitor nations<\/li>\n
  5. Decline of U.S. STEM and trade skills<\/li>\n<\/ol>\n

    He commented that the decline of the manufacturing base itself was due to the forces of globalization as well as the industrial policies and unfair trade practices of our economic competitors, our so-called allies, and our strategic rivals, particularly China.\u00a0 He said, \u201cThis report called out China for its policies of economic aggression\u2026China is engaged in unfair trade practices and currency manipulation.\u00a0 From 2003 to 2014, it was documented that China was the worse currency manipulator in the world\u2026so that we are running up annual trade deficits of half a billion dollars.\u201d<\/p>\n

    He showed a chart, titled \u201cChina\u2019s Categories of Economic Aggression.\u201d \u00a0He said, \u201cThis chart is founded on the underlying assumption that China is a non-market economy, a state-directed economy. They use international rules when they benefit them and violate them when it\u2019s to their benefit.\u201d\u00a0 He outlined` six economic strategies that China uses:<\/p>\n