Lifezette: Urgent Steps for Trump to Save American Manufacturing
Kevin L. Kearns
Friday, December 23, 2016
|Kevin L. Kearns is President of The United States Business and Industry Council. Prior to joining USBIC in 1993, he was a Senior Fellow at the Manufacturing Policy Project, a Washington, DC think tank. For 13 years before that he was a U.S. Foreign Service Officer with overseas assignments in Germany, Korea, and Japan, where he witnessed firsthand the operation of highly cartelized, mercantilist economies. |
The all-important U.S. manufacturing sector is beset by a number of critical problems — particularly adversarial foreign practices. And while Donald Trump, the president-elect, campaigned on a loose platform of saving U.S. manufacturing jobs, halting outsourcing, renegotiating trade deals, and stopping trade cheating, the simple fact is that reversing the nation’s industrial decline will take a herculean effort, beginning with the adoption of a comprehensive national industry-technology plan.
The usual GOP solutions — lowering taxes and regulations — while necessary, just aren’t sufficient, given foreign industrial strategies to wrest market share away from U.S. companies at home and abroad. The country can’t simply “cut” its way to prosperity, as some Republican leaders suggest, leaving America’s fate to the “magic of the free market.”
Education, training, and handouts do not create a single new job … or advance a single new technology or production process.
“Cut it and forget it” would be a grave strategic mistake, for the simple reason that global markets are constantly being manipulated — by currency devaluation
s, by subsidies
, by non-tariff barriers, by border-adjustable taxes, by economic cyber-warfare, by intellectual property theft, by forced technology transfer. The list goes on. As the saying goes, “You can’t beat something with nothing,” and the detailed industrial policies of America’s major trading partners are a very big “something” to surmount.
If Donald Trump is to reverse the nation’s industrial decline and make our economy great again for all Americans, he is going to have to assemble a wide-ranging team to develop and implement a strategic vision for the survival of American manufacturing and technology. And — brace yourselves, Republicans and Libertarians — the government is going to have to lead the effort. It is the only institution large enough to lead this complex effort.
For such a plan to work, Trump must diligently consult with the nation’s manufacturers, technologists, scientists, and engineers to form a national strategy and to implement it. Not only should the private sector be involved, but also academic and government organizations specializing in science, technology, and manufacturing processes. These are the people who know best the state of the market and the sectors in which America lags or is no longer a player.
Overall, domestic manufacturing’s revival will require an effort as massive and dedicated as the WWII Arsenal of Democracy campaign. So, in order to restore the nation’s industrial preeminence, here are a few suggestions for an America First manufacturing and technology strategy:
1.) It has to be unilateral, not dependent on other countries’ agreement for implementation. The United States must control its own destiny. It doesn’t matter what other countries want. America must act decisively in her own long-term economic interest.
2.) It has to be comprehensive. An export promotion program here and a renegotiation there won’t do. Tinkering at the margins will only help marginally.
3.) It has to be granular, drilling down into the industries, technologies, and basic sciences America needs to maintain long-run preeminence. No industry or technology should be off the table, including industries that have been degraded, destroyed, or abandoned.
4.) It has to focus on advanced technology products and complex manufacturing processes. They are the key to economic success. America must build complex things. The know-how gained in high-tech manufacturing is the single most important ingredient for leaping ahead to next-generation products.
5.) It has to contain proactive measures to prevent currency manipulation and to keep the dollar competitively valued against other currencies. Manipulation must be dealt with swiftly. The price of the dollar relative to competitors’ currencies must be assiduously managed by the Treasury Department as it is central to a successful national manufacturing plan.
6.) It has to include quotas
and tariffs to ensure that remaining U.S. manufacturing sectors thrive, new industries prosper, and greenfield foreign direct investment
flows into the country.
7.) It has to contain mandatory domestic American content requirements for infrastructure and other government purchases, and they should be high. The North American content requirements of NAFTA must be raised (if NAFTA survives). The American content requirements of the Defense Production Act and other such laws must be raised significantly toward 100 percent.
8.) It must make ‘Buy American’ provisions central to government procurement at every level. The U.S. government market is the one that matters most and the one we can control. It spends American taxpayer dollars and should be reserved for American firms. Efforts to open up all countries’ government procurement should be abandoned as quixotic. The U.S. will follow the rules but foreign countries will not.
9.) It must require licensed production of goods by American firms (or joint venture
s) for all levels of government contracts in sectors where there are no or only small U.S. producers left. Attendant technology transfer should be mandatory.
10.) It must streamline U.S. trade law, so that it can be used to quickly halt foreign predatory practices, such as “dumping
.” The Trump administration should not wait for domestic industries to file injury cases but should readily self-initiate cases.
11.) It must include the border-adjustable provisions of the Brady-Ryan tax plan — or a similar border-tax mechanism — and see they are passed into law promptly to counter the VAT systems currently used by 160 of America’s trading partners. For 65 years, VAT schemes have been used to circumvent market-opening tariff cuts and to discriminate against American exports
12.) It must concentrate on growing the American economy through production in and for the home market. Chasing market share abroad through new bilateral trade agreements is a fool’s errand. The American market is the big prize. New trade deals will not provide the wherewithal to address America’s production and know-how deficits.
13.) It must include an extensive national effort to “bulletproof” our nation against foreign hacking of government agencies, infrastructure, and businesses. Commercial cyber-warfare directed against manufacturing and technology firms, their intellectual property, and business plans must be made next to impossible, and fast.
14.) Finally, Donald Trump must be willing to go it alone, as he did during the campaign. He must not succumb to the siren song of moderation or “gradual change” as a solution for bringing back manufacturing. American industry is in too much trouble for gradualism. Nor must he feel obligated to keep the country in trade agreements or multilateral organizations that have failed to fulfill their economic promises, or worse, are being used as weapons against our businesses and laws.
As for our workforce, there is suddenly much talk among political elites of responding to the newly discovered “forgotten Americans” with better K-12 education, more vocational training, guaranteed incomes, and other government benefits. American workers, many of them Trump voters, know instinctively that such a response only treats symptoms, not the underlying disease.
Education, training, and handouts do not create a single new job — except for teachers, trainers, and bureaucrats — or advance a single new technology or production process. Only a revived industrial sector can do that.
It’s going to be a gargantuan task for Donald Trump to revamp America’s manufacturing economy. But there is really no alternative if the country is to avoid ultimate catastrophe. The good news is that the United States still has the talent and resources to make a national manufacturing and technology plan a success. However, it must act before these are too degraded to be effective.
Donald Trump wants to make America great again not just for those who elected him but for all his countrymen, as well as future generations. A bold, unilateral course of action as outlined above is needed, and needed soon, in order to stop the nation’s current industrial decline, and to rebuild our industry, technology, and economy.
Kevin L. Kearns is President of The United States Business and Industry Council. Prior to joining USBIC in 1993, he was a Senior Fellow at the Manufacturing Policy Project, a Washington, DC think tank. For 13 years before that he was a U.S. Foreign Service Officer with overseas assignments in Germany, Korea, and Japan, where he witnessed firsthand the operation of highly cartelized, mercantilist economies.