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Editors Note: U.S. Manufacturers Need to Catch Up

Feb/Mar 09
With the nation facing its worse economic downturn in decades, businesses and workers alike have looked to the nation's new political leaders - and their economic advisors - for solutions to remedy the crisis. In response to this, our newly elected President created an economic advisory board in early February to guide him on ways to jumpstart the economy. And, in mid-February, Congress approved the $787 billion economic stimulus bill that was the centerpiece of President Obama's early agenda.

Despite the fact that the bill passed with no House Republican support, the National Association of Manufacturers (NAM) has thrown its weight behind it, saying it is a critical step to revitalizing the nation's economy. According to NAM President John Engler, NAM's members realize that "the American Recovery and Reinvestment Act is not perfect, but they believe the overall plan is an acceptable balance of tax cuts and investment designed to help" employers and their workers. NAM would also like to see further "tax relief for struggling companies [and] lower tax rates on overseas income reinvested in the U.S."

U.S. manufacturers employ nearly 13 million people and contribute $1.6 trillion annually to the nation's economy. With that in mind, the 1,850-member U.S. Business and Industry Council (USBIC) applauded Congress for keeping a "buy-American" provision in its final stimulus package, noting that this will provide a "precedent for other federal support programs for private industry" - especially those designed to assist the U.S. auto industry and to promote "green" manufacturing.

Scott Paul at the Alliance for American Manufacturing points out that a recovery of the manufacturing sector, which accounted for nearly a third of all jobs lost in 2008, is vital for the recovery of the U.S. economy. On average, manufacturing jobs pay 20 percent more than other forms of employment, and they have a strong multiplier effect, with each manufacturing job supporting as many as five other jobs in the overall economy. Paul also believes that investment in the nation's infrastructure and in clean energy technologies will only help to reverse the decline of the manufacturing sector if all materials are sourced locally.

Yet is this a reasonable request? Many large manufacturers have moved their production offshore. In 2008, more than a third of all goods sold in the U.S. were imported - more than double the percentage of 1991. In fact, most of the nation's solar panels and wind turbines are imported.

Consequently, the "buy-American" provision does allow imports from 38 countries with which the U.S. has trade agreements, and goods shipped to the U.S. from other nations would not be denied entry if doing so "would be inconsistent with the public interest." So proponents of free trade need not worry. University of Massachusetts economist Robert Pollin advises those angered by the provision to view it as an incentive for U.S. manufacturing companies to catch up with their foreign competitors. Now that's a worthy goal.

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