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Stronger Supply Chains Are the Key to US Manufacturing Growth

Dec. 28, 2014
The new Congress and the President need to collaborate and take the necessary actions to ensure the success of our domestic manufacturers and keep our economy growing.

Since 2010, the U.S. manufacturing industry has experienced significant growth—often referred to as the manufacturing renaissance—due to a combination of organic growth, foreign direct investment and reshoring by companies like Apple, Caterpillar and Whirlpool returning their operations to the United States. According to a recent report from the Federal Reserve, the United States showed this type of manufacturing growth across the economy over the last few months. As manufacturers reshore, America is on its way to gaining back millions of jobs lost in the decade leading up to the global economic recession. However, to ensure continued growth, our government must address the concerns of U.S. manufacturers.

The U.S. manufacturing renaissance has been aided by the supply of affordable domestic energy. Access to abundant energy resources boosted U.S. manufacturing’s global competitiveness, making it economically attractive to reshore operations. Another essential element for industries that gets far less attention is the minerals and metals used in many manufactured goods. Just as we need secure and affordable power to keep U.S. manufacturers competitive, we also need a reliable and secure supply chain for minerals and metals.

A recent survey of manufacturing executives, commissioned by the National Mining Association (NMA), reveals that U.S. manufacturers are seriously concerned about how the supply of minerals and metals can impact the success of their businesses. Most survey respondents said they believe minerals and metals demand will only increase in the next 10 years. The items we depend on—ranging from health and transportation to communication needs, energy and even national defense—would not exist without minerals and metals. This includes everyday items like cell phones, laptops and cars, but also buildings, infrastructure, lifesaving medical devices and body armor.

Additionally, 91% of executives are concerned about supply disruptions outside of their control, citing geopolitics and increasing global demand as the most pressing factors. The Reshoring Initiative’s analysis of hundreds of cases of reshoring shows, consistent with the survey’s findings, that the most important reshoring factor is proximity: having a short supply chain. The benefits of proximity include lead time, freight cost, excess inventory and supply chain disruption risk.

These findings are not surprising. In fact, industry leaders and security experts testified at a House subcommittee hearing on “America’s Metals and Mineral Security” in July. Representatives from GE Global Research, the Doe Run Company, the National Defense Industrial Association, the Center for Advanced Energy Studies at Idaho National Laboratory and SNL Metals & Mining discussed the urgent need for a strong and stable supply of domestic minerals and metals. According to NMA’s survey, 80% of manufacturing executives believe the sourcing of minerals and metals from the United States will decrease our dependence on foreign raw materials, strengthen U.S. national security, and ensure job and economic growth in America.

As companies continue to reshore and the United States once again becomes a global manufacturing hub, domestic manufacturers will bolster demand for minerals and metals, thereby encouraging increased domestic mining and demonstrating the need for strong, stable supply chains of these critical materials. According to the United States Geological Survey, despite America’s $6.2 trillion worth of mineral and metal reserves, we rely on foreign sources for more than 50% of the minerals and metals upon which our manufacturers rely.

Supply chain disruptions impact manufacturers’ global competitiveness and, given the United States’ vast mineral resources, are wholly unnecessary. Access to a reliable and stable supply of minerals and metals is critical to ensure that the manufacturing industry remains a viable economic driver. Modernizing the United States’ outdated mine permitting system can provide this access and allay manufacturers’ supply concerns. Ninety-five percent of executives surveyed expressed concern about the length of the U.S. mine permitting process—which can take seven to 10 years—and its impact on the competiveness of the United States.

Nearly 90% of leaders in the manufacturing industry also support streamlining the mine permitting process to less than three years—in line with Canada, Australia and other developed countries with similarly demanding environmental regulations—to strengthen access to the minerals and metals vital to their operations. Overreliance on foreign sources of minerals and metals creates not only significant risk for domestic manufacturers, but also substantial costs to supply chains and, consequently, hampers economic prosperity.

Reshoring has made great progress but is still nascent. The net annual loss of manufacturing jobs has gone from about 150,000 per year in 2003 to about zero in 2013. To drive the reshoring trend into strong positive job growth requires that the United States have the lowest risk environment to help overcome the still large offshore labor cost advantage.

American manufacturers’ concerns confirm the need for policies that promote better access to domestic minerals and metals. This need has been recognized by the U.S. House of Representatives, which recently passed, for the third time, legislation to improve minerals mine permitting. As we approach the swearing in of 70 freshman House and Senate members, we encourage the new Congress and the President to collaborate and take the necessary actions to ensure the success of our domestic manufacturers and keep our economy growing.

Hal Quinn is the president and CEO of The National Mining Association. Harry Moser is the founder of the Reshoring Initiative. NMA is a sponsor of the Reshoring Initiative.

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