Sunday, January 11, 2009

U.S. manufacturing base needs shot of rejuvenation

U.S. manufacturing base needs shot of rejuvenation
Posted by Doug Dugal:

Research and innovation made the U.S. the leader in the agricultural industry. Even today we could be called the food basket of the world.

During the industrial revolution, the U.S. again became the leader. But lately, our manufacturing base is eroding due to outsourcing. Keep in mind that outsourced services can be easily brought back to the U.S., but bringing back outsourced manufacturing facilities will be difficult, time-consuming and expensive.

U.S. manufacturing base: Loren Thompson is quoted by Greg Grant in the Dec. 15 issue of Policy that in 1981, manufacturing made up nearly 25 percent of the U.S. economy, compared with 12 percent today. Our merchandise trade deficit doubled to $800 billion and those trends are driven by the erosion of domestic manufacturing. If America loses what's left of its auto industry, or its aerospace industry, or its chemical industry, our superpower status will ebb away.

The long-term implication is that soon the U.S. will no longer build anything. The fact, however, remains that economic growth generated by making world-class products is more sustainable. It is not that other countries are better at manufacturing than we are; they are just better at protecting their manufacturing base.

Paper industry manufacturing base: The mantra that we are the biggest and the best is losing its luster. We must wake up to reality. At one time China was the fifth- or sixth-largest producer of paper and board; now it is the second largest and quickly catching up with the largest producer, the U.S.

In the last 15 to 20 years China has installed more than 30 paper machines, whereas the U.S. has shut down many. Writing and printing papers are already under attack from China. Pretty soon our tissue and towel manufacturing will be under pressure as well; China is now buying high-speed tissue machines. We were a net exporter of paper goods; soon we will be a net importer.

Conclusion: Currently the world business environment is going through a "hiccup."

But, I think, over the long run future growth markets for consumer goods will be India, China, Africa and certain parts of South America because they have huge numbers of "information/goods hungry" consumers. Industrialized nations such as the U.S. and Japan are mature markets and will not have extensive growth unless nifty value-added products are developed through research, development and innovation. We need to revitalize the U.S. manufacturing base to satisfy domestic market, fast. The choice is ours: Either the U.S. can close mills and withdraw or protect manufacturing base and seriously compete.

I think our dependency of essential goods on foreign countries may be a big mistake in the long run. One of the major reasons is that we put economic "sanctions" on certain countries when their actions are against our national security interests. These economic sanctions also include "goods" those countries need but do not produce. So if our manufacturing base is compromised, guess who is going to put sanctions on whom? Just a thought. Wise up.

Free-trade agreements must have the same playing fields for all traders. Granted, in the global economy goods will be produced where they are made best; but why can't that manufacturer be the United States?