The condition of American manufacturing cannot be ignored

March 1, 2004
By Dr. Paul Freedenberg Vice President- Government Relations AMT—The Association For Manufacturing Technology

By Dr. Paul Freedenberg
Vice President- Government Relations
AMT—The Association For Manufacturing Technology

The Bush Administration's recently released plan to strengthen manufacturing (Manufacturing in America), acknowledges that something is wrong with the state of manufacturing in America today. While the plan lays out ideas on how to deal with existing problems, it ignores the condition of American manufacturing and is incomplete in its analysis and suggestions.

To the Administration's credit, it conducted a series of 23 roundtables around the country to hear the concerns of manufacturers. Grant Aldonas, the under secretary for International Trade, chaired many of the roundtables. From firsthand experience as well as from the feedback of AMT-member companies, I can say that many of the complaints he heard focused on Chinese trade and monetary policy.

Aldonas was articulate and promised his audiences that Commerce would be vigorous and aggressive in its efforts to ensure that China adhered to its commitments under the World Trade Organization, as well as the bilateral commitments China made to the U.S. Government.

However, the report is remarkably silent on the equally important issue of China's insistence on maintaining an undervalued currency to garner trade and investment from the West. Perhaps it is because the report was drafted by the Commerce Department and not the Treasury Department, which holds jurisdiction in this area. Whatever the reason, studies have concluded that China undervalues its currency by as much as 40% and is likely to continue this practice unless pressured by the U.S. and the rest of the international community. To completely ignore this factor and its resultant impact on our $130 billion bilateral deficit with that country is to provide a diagnosis detailing a series of important, though minor, ailments when the patient in question has a cancer growing in his body. While a revaluation of China's currency would not solve all of our manufacturing and competitiveness problems, no proposed plan for manufacturing revitalization can claim to be complete without addressing this critical issue. Sadly, the Administration's manufacturing report does not.

On a positive note, the recommendations of the report include a new Assistant Secretary of Manufacturing and Services, with a new Office of Industry Analysis, in the Commerce Department. It also creates a President's Manufacturing Council, with nominees from the manufacturing sector (particularly small and medium-sized businesses) to provide oversight and advice on the ongoing initiatives to aid competitiveness. There are also a number of tax and regulatory proposals put forward to reduce the cost and complexity of doing business in the U.S. If Congress acts on the Administration's proposals and if the new Assistant Secretary and the Manufacturing Council are put in place quickly, the competitive climate for American industry should improve.

The important thing is that the Administration has turned its attention to the problems facing manufacturing today. Let's hope that it does not suffer from a short attention span, and it quickly addresses the larger issues of international competitiveness, such as China's currency valuation.