Is a US manufacturing resurgence underway?
For years, the services industry dominated the US economy, pushing manufacturing to the sidelines. Factories were closed and jobs moved abroad. But a manufacturing resurgence could well follow the financial crises.
"Our starting target was to return to the level of manufacturing production as a percentage of the GDP, which was 15 percent before the three great recessions – the dotcom, 9/11 and the Great Recession," said Tom Duesterberg, Executive Director of the program "Manufacturing and Society in the 21st Century" with The Aspen Institute in Washington. The manufacturing sector currently accounts for about 12 percent of US gross domestic product (GDP).
Together with the Manufacturers Alliance for Productivity and Innovation (MAPI), the Aspen Institute has published a study that shows potential for the US manufacturing sector to experience a resurgence by 2025. The study projects an increase of 3.7 million jobs in the US during that period, compared with a "business as usual" situation. It also forecasts a US$1.5 trillion jump in production output and a corresponding hike in the nation's GDP, as well as a favorable balance of trade that could be reached by 2024. The share of the services sector and public service in GDP would drop accordingly, with growth in both areas slowing as well.
International trade agreements
Several factors could contribute to a boom in the manufacturing sector, according to Duesterberg. These include lower electricity prices, mainly due to the greater extraction of natural gas. Lower electricity prices would, in turn, have a positive impact on exports, as the increase in exports would be driven by energy-intensive sectors such as the chemical industry, the metal-producing industry and the steel industry. Fewer rules and regulations, lower taxes on capital-intensive product and the international harmonization of standards would also boost traditional industrial production.
The study recommends that policymakers continue along the path many are already pursuing, namely: bring talks on free trade zones with Asia (TPP) and Europe to a successful conclusion, continue with the intensified domestic oil and natural gas drilling programs, and both upgrade and expand the national electricity grid to handle greater input from wind and solar, as well as simplify regulation, strengthen training, align corporate taxes with the OECD average, and intensify government-funded research.
These aren't new ideas, yet their implementation is difficult, according to Ronald D. Bullock, chairman of Bison Gear & Engineering. "It's going to take a lot of dialog among policymakers to agree on a goal of improving the economy by taking some of these common-sense measures," Bullock told DW, pointing to the confrontational positions of the Democrats and Republicans. The politicians, he said, are often too engaged in minor issues when they should be "trying to find common ground." This was also the case in the 1980s, he added, when Republican President Ronald Reagan, together with politicians from the Democratic Party, laid the foundation for more than a decade of economic growth.
Input from friends
A pressing issue is to improve training. Numerous companies in the US have problems finding qualified people. "We get a lot of input from our friends in Germany, particularly on apprenticeships and mechatronics programs," Bullock said. "And what they're doing in career technical education is a good example for us in the United States. We've kind of gotten away from that over here."
Even Chad Moutray, chief economist of the National Association of Manufacturers (NAM) laments the scepticism confronting his sector. Manufacturing, he told DW, still has a negative image, especially among academics. Although factory work, he argues, is still largely seen as loud and dirty and for less-qualified people, this view is now changing as highly-qualified jobs required equally qualified people. And the president, as well as many other politicians in Washington, understands this shift, he maintains.
Robust global economy
Moutray believes politicians need to see the Aspen Institute's study. It allows them "to talk about policy," he said, and what they can do to achieve results. But for the institute's projections to become reality, the US must be able to rely not only on its Asian and Europe partners removing trade barriers, but also on a robust global economy.
"We need the rest of the world to buy our goods in order for us to reach that goal," Moutray said. "Basically, a lot hinges on us getting the global economy up and running."
Engineering News Archive