Deloitte: It's Time to Seize the Manufacturing Opportunity

U.S. has window of opportunity to bolster manufacturing competitiveness Obstacles include "crisis of confidence" in U.S. public about manufacturing Policymakers should take action to promote the talent, innovation, infrastructure and regulatory environment needed for manufacturing growth  

"Are we going to seize the opportunity or squander it away?" Craig Giffi asks.

The opportunity Giffi is talking about is to have policymakers take the steps needed to bolster U.S. manufacturing while foreign competitors are beseiged by economic problems. A vice chairman at Deloitte and leader of its U.S. Consumer and Industrial Products practice, Giffi has focused over the past few years particularly on the issue of manufacturing competitiveness.

Giffi says the window of opportunity is limited and has more to do with the "fortunes of our global trading partners" than any particular actions U.S. policymakers have taken. He cites the "extremely challenging situation" in Europe, cost escalation in China and Japan's currency struggles as a confluence of factors that are making this the right time for the United States to strengthen its manufacturing sector.

No one suggests that a manufacturing renaissance is without challenges. In a new Deloitte report, "Manufacturing Opportunity," the firm points to a "crisis in confidence" about manufacturing in the United States. At the same time Americans say the best way to create  1,000 jobs in a community is with a new factory, 18-to-24-year-olds "rank manufacturing dead last among industries" they would choose for a career. And while 79% of Americans say a strong manufacturing base should be a national priority, Deloitte notes, 55% believe U.S. manufacturing competitiveness is likely to weaken.

But Giffi says there is a path to manufacturing prosperity and it doesn't involve accomplishing "herculean things." Rather he says it requires making the right investments, training the right workforce and "making this an attractive place for manufacturers in particular to do business." He warns that inaction comes at great peril for the U.S. economy.

"The research is really clear that every country in the world is advancing its knowledge, its capability set, allowing it to make more advanced products," he tells IndustryWeek. "A pattern emerges that developing nations are using manufacturing to grow their economies and make them more robust. There is no race to the bottom. Everybody is advancing. It really is a race to the top."

Policy Recommendations for Improved Competitiveness

In "Manufacturing Opportunity," Deloitte points to four critical areas that are needed to support the manufacturing community:

Talent - The Deloitte study notes that manufacturing CEOs identify worker talent as the most critical factor in driving competitiveness. Developing this talent through education, says Deloitte, is the "most important element in ensuring manufacturing success." Deloitte says the United States needs to "maintain long-term, predictable federal and state support for universities, community colleges and the nation's research and science infrastructure." In particular, the report stresses the need to focus the educational system on developing skills in science, technology, engineering and math.

Innovation - The United States should not pursue a "race to the bottom" based on lower wages, but look for ways to promote R&D and innovation. The report notes many CEOs believe other nations have done a better job than the United States in "creating, pursuing and communicating national innovation strategies." The report recommends establishment of a "consortium of business, university, labor and political leaders to develop long-term U.S. manufacturing goals with a 15- to 20-year development horizon." A major goal of national innovation policy would be to get innovative ideas and technologies past the "valley of death" into commercialization.

Infrastructure - Calling infrastructure improvement "perhaps the clearest example of how government action can improve manufacturing competitiveness," the report calls for establishment of a national infrastructure bank, government-owned but independently managed, to support investment and financing for regional and national infrastructure projects. Among its recommendations, Deloitte says Congress should reinstate the Buy America Bonds program, which issued $181 billion in taxable municipal bonds. The report also says policymakers should establish a national energy policy that invests across the energy spectrum while encouraging energy efficiency and conservation.

Government Policy - The report calls for a series of tax, trade and regulatory changes to improve manufacturing competitiveness. They include reducing or eliminating taxes on repatriated foreign earnings, making the R&D tax credit permanent and establishing a fast-track authority for establishing free trade agreements based on a set of principles that address environmental and worker protection concerns and resolve trade imbalances.

Giffi said the report was released at this time in order to make sure that the presidential candidates are "informed about the importance of manufacturing" and factor the critical issues facing manufacturing into their platforms.

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