What is in this article?:
- Manufacturing Resurgence in US Possible with 'Modest' Policy Shifts
- Actions to Control Costs, Improve Labor Force
Duesterberg: “At a minimum, this forecasting exercise ought to lend some hope that we can indeed look ahead to a manufacturing resurgence and the sustainable economic gains that it brings, if we choose to follow this path.”
There is ample potential for U.S. manufacturing to undergo a resurgence that by 2025 would lead to significantly more good paying manufacturing jobs, increase GDP growth and help create the first surplus in the nation’s goods and services balance of trade since 1975, according to a new econometric forecast model released today by the Aspen Institute and the Manufacturers Alliance for Productivity and Innovation (MAPI).
“The robust results presented in the study are achievable with only modest acceleration of current trends, and none of the policy recommendations mark a radical departure from current policy trajectories,” said Thomas J. Duesterberg, executive director of the Aspen Institute’s Manufacturing and Society program and the reports’ author. “But they require a willingness to change in a disciplined way.”
Stephen Gold, MAPI president and CEO, concurred: “With no changes in public policy the manufacturing base will continue to shrink as a share of GDP as it has for the past decade. With just a few policy shifts, however, manufacturing in America can experience a resurgence that will ensure new innovation, increased productivity, more jobs, and a rise in living standards on our shores.”
Under the study’s “manufacturing resurgence” scenario, manufacturing’s share of U.S. GDP would grow from the current 11.6% to 15.8% in 2025, a proportion not seen since 1998. That compares with 11.1% of GDP in 2025 using a baseline forecast where policy changes are not implemented.
U.S. GDP would increase by $1.5 trillion in 2025 according to the model, with most of the increase coming from manufacturing, compared to a “business as usual” scenario.
Manufacturing employment would grow by 307,000 a year under the resurgence scenario, totaling 3.7 million additional workers by 2025. That compares to a baseline projection where U.S. manufacturing would add just 23,000 workers annually.
The balance of trade in goods and services would dramatically shift from the current deficit of $500 billion to a surplus of approximately $700 billion, including nearly $200 billion in manufactured goods. Under the baseline scenario, the country’s balance of trade would continue to run deficits.
Capital investment in equipment and software, one driver of innovation and productivity growth, would increase by 12.1 % by 2025, relative to the baseline.
Increases in U.S. exports and a slowing in the growth of imports would account for more than half the gains in the manufacturing resurgence, Duesterberg told a press conference today. “Manufacturing exports grow at an 8.1% annual rate. This is only slightly higher than the 7.8% growth that we achieved since 2009. And I remind you that this was in a slow-growing world economy,” he said. Imports would continue to grow but at a 2.5% annual rate, compared to 4.2% in the baseline scenario.
Duesterberg said export growth is based on the assumption that growth in the world economy would improve. The report also forecasts that the U.S. dollar will weaken against most trading partners, declining by 15% in coming years. Other factors expected to help the trade balance include high productivity growth, technological leadership and the attractiveness of the U.S. as a destination for foreign direct investment.
The Aspen/MAPI report calls for more aggressive pursuit of free trade agreements, including the Transpacific Partnership with Asian nations and the Transatlantic Trade and Investment Partnership with the European Union.
“Some effective action is also needed to address the worrisome ‘competitive currency devaluation’ that can have material impact on trade flows,” the report states. If currency issues cannot be dealt with through the G-20, the report urges, then action should be taken through WTO and IMF actions to label nations as currency manipulators.