Just In Time -- How Level Is Your Playing Field?

Oct. 7, 2006
If you believe Congress is to blame for manufacturing's woes, then vote accordingly.

A recent study commissioned by the Manufacturers Alliance/MAPI and the National Association of Manufacturers (NAM) reveals that U.S. manufacturers are facing an "escalating cost crisis" due to a structural cost disadvantage compared with nine major U.S. trading partners: Canada, China, France, Germany, Japan, Mexico, South Korea, Taiwan and the United Kingdom. Structural costs for U.S. manufacturers are averaging 31.7% higher than comparable costs in those other countries. What is particularly alarming, according to the study, is that these costs have jumped by 9.3% in just three years.

So what exactly are structural costs, and what can U.S. manufacturers do to reduce them? Basically, these are external, non-production costs outside a manufacturer's direct control, which include corporate taxes, employee health care and pension benefits, regulatory compliance (i.e., pollution abatement), natural gas prices, and legal costs. And according to economist Jeremy Leonard, who conducted the study, because of these escalating costs, "fewer new manufacturing jobs have been created and less [money] is available to invest in research and development and worker training."

Solutions to these problems, Leonard proposes, will require government policies friendly to manufacturers' needs. For instance, the steady increase in the price of natural gas in the U.S. "is purely the result of policy decisions that have limited development of domestic reserves and Clean Air Act mandates that have increased demand." The best thing manufacturers can do to control structural costs, he suggests, is to elect policy makers who will carry through on legislation beneficial to manufacturing.

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"Clearly, Congress must act to turn the tide on this alarming trend," adds John Engler, president of NAM. "If Congress is serious about leveling the international playing field, they need to help, not hinder, the costs for doing business in America."

Based on NAM's analysis of which members of Congress are most supportive of manufacturing in America, however, it's not only possible but likely that roughly half of Congress sees things a bit differently. NAM recently recognized 126 Congress members for having a perfect 100% voting record on votes vital to NAM's pro-growth manufacturing agenda. Exactly 126 of them are Republicans. And of the 276 members who voted "pro-manufacturing" at least 70% of the time, a mere seven (six representatives and one senator) are Democrats.

Bear in mind, though, that it's a bit of a reach to presume that those who did not vote with the NAM bloc are "anti-manufacturing." I'm not aware of any politician who has openly stated, "I am against manufacturing and all it stands for." So perhaps "pro-manufacturing" has more than one interpretation. Indeed, the perception that the traditionally pro-business Republicans have been asleep at the wheel while China has emerged as a significant competitor has left many voters ambivalent as to whether either political party is truly watching out for the U.S. manufacturing industry.

In any event, the decision on which candidates will best represent manufacturing's interests is now yours. See you at the voting booth.

David Blanchard is IW's editor-in-chief. He is based in Cleveland. Also see Chain Reaction: David Blanchard's new blog about supply chain management.

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