After being dismissed as headed for an “inevitable and irreversible” death, American manufacturing is rebounding but this upswing is “fragile and its outcome is still quite uncertain,” Andrew Liveris, the CEO of Dow Chemical Co. (IW 500/22), told a manufacturing conference today in North Carolina.
U.S. manufacturing has created more than 500,000 jobs since 2010, Liveris told the @Manufacturing Works forum sponsored by NC State University’s Institute for Emerging Issues. In North Carolina, high-tech manufacturing in fields such as medicine, biotechnology and aerospace has been growing. Over the last year, U.S. manufacturers have announced more than 100 new investments nationally totaling more than $96 billion.
But along with these “encouraging signs,” Liveris told the conference, there are also several factors that are creating a drag on manufacturing growth. He cited uncertainty, “the constant enemy of business and investment,” caused by a gridlocked Washington, a debt-burdened Europe and a still-to-be-defined China. He noted that manufacturing employment has leveled off. In North Carolina, the state lost 115,000 jobs but has gained only 11,000 since the recession.
The manufacturing sector is reaching an inflection point, Liveris said, where this renaissance can “usher in a new era of American prosperity or we can let the resurgence taper off, job growth flatline and the sector fall prey to a policy vacuum where our policy is not to have one.”
Liveris lauded the “transformative” power of manufacturing. He said it could power the U.S. from an “economy in recovery to an economy renewed and leading the world.” He cited a report by the Boston Consulting Group that the nation could create 5 million manufacturing jobs by 2020. And he noted, those jobs could result in the creation of an additional three to five jobs each in the supply chain. He also pointed to manufacturing’s strength in exporting and in the growth of productivity.
“When natural gas is not exported or burned for energy but instead used as an ingredient in manufacturing processes, it creates eight times more value across the economy and five times the number of jobs in the supply chain,” Liveris said.
Liveris emphasized he was not describing the manufacturing of smokestacks and assembly lines of a bygone era but rather advanced manufacturing that lives at the “intersection of all the sciences” and provides “highly qualified, highly skilled, highly paid jobs” involved in creating groundbreaking products and meeting some of the world’s greatest challenges.
No Apology Needed for Industrial Policy
Liveris noted the important connection between building high-value products in America and innovation. “We build a virtuous cycle of innovation and value creation that leads to the next generation of products, and the next and the next,” he said, adding, “where production goes, innovation always follows.”
Liveris said countries like China have learned the value of the co-location of manufacturing and research and how it leads to rapid economic growth. “When companies like Dow go to China, I get red carpet,” said Liveris. “When companies like Dow go to Washington, I get red tape.”
He warned that China is not the only nation to have this vision of a robust manufacturing sector. “All the emerging countries have this vision of a national manufacturing sector. They are all clustering new technologies, new products with innovation centers. Manufacturing is attracted to their country and from there, they build a human pipeline. They are doing it in relatively short times. The cycle is compressing.”
These countries, he said, are developing “comprehensive, detailed national advanced manufacturing strategies,” he said. Countries are competing with companies such as Dow, he noted.
To compete effectively, Liveris said, the U.S. needs to make a collective effort to support manufacturing. He urged the development of innovation hubs and manufacturing centers throughout the U.S. that would support breakthrough technologies and greatly increase exports.
“We don’t have to start from scratch,” he said, referring to the advanced manufacturing plan produced by the Obama administration. That plan identified 11 technology platforms, he said, that America has the “inventory, institutions, universities, and talent to win at today.” He added that the country needs “thoughtful policy” and aggregate effort to win this competition. “If this sounds like industrial policy, I make no excuse,” Liveris said.
Liveris pointed to three vital elements that the U.S. should tackle to enhance its competitiveness:
Energy: The U.S. has many energy resources but leverages too few of them for its economic advantage, Liveris complained, with energy prices too often set by speculators, not producers. He called for a national energy policy that provides manufacturers, who consume one-third of the energy in the U.S., with more clarity and predictability concerning energy availability and cost. He also urged patience regarding the development of alternative energy sources. “New technologies are risky. Solar and wind will take time,” he said, adding “Are we frightened by one or two failures?”
Human Capital: Global companies such as Dow face a “talent deficit” in finding workers with science and engineering educations and technology skills. “400,000 graduates are needed by the nation’s companies in next three years and we’re not on track to produce them,” he said. He urged a national effort to “reskill” high school and community college students for technical jobs.
Business Climate: America needs a change in its business climate, Liveris said. He pointed to polls that one out of three CEOs and three of four small business owners believe “complex and expensive regulations are stifling America.” He called for collaborative regulations based on cost-benefit analysis, a lower corporate tax rate and adoption of a territorial tax policy.