We received dozens of questions during last week’s Crisis Brings Consensus digital conference, which examined how the United States can bring back critical manufacturing in the wake of the COVID-19 pandemic. Unfortunately, we ran out of time during the two-hour event to answer all of your questions, and so we decided to answer more of them right here, in blog form. We tried to answer as many of the questions that we have answers to. We also combined similar questions into one entry, where appropriate.
What is the current plan to unweave our manufacturing supply chains from China? How do we gain traction to bring manufacturing back to the US from overseas? How can the federal government help Americans take over these gaps in our supply chain and get our empty factories back up and running?
It’s clear that some “unweaving” was already underway prior to the pandemic, aided by Section 301 tariffs and a desire on the part of manufacturers to diverse supply chains and mitigate risks. While Congress and the Trump administration have not yet settled on a definitive strategy, there are multiple approaches under consideration: Additional trade actions, tax incentives, grants or guaranteed loans, and investments in infrastructure, workforce and innovation to make the U.S. more competitive. Moreover, there is growing agreement on the logic of leveraging public procurement to reshore key industries. The Department of Commerce, the Department of Defense, and other agencies have been identifying key vulnerabilities in supply chains. We’ve also been identifying them for at least the past eight years in reports such as Remaking American Security and Preparing for 21st Century Risks. —Scott Paul
The Coronavirus has decimated our country and has revealed the dire need for domestic production within our own borders. Aside from the President invoking the Defense Production Act to aide in the manufacturing of ventilators and to ensure the production of additional N95 face masks, what measures do you believe Congress, states, or the powers that be, should take to secure a path forward to ensure America stops being dependent on foreign production to flourish?
We can look to New York, one of the states hardest hit by COVID19, for guidance. In the midst of the crisis, Governor Andrew Cuomo assured that the New York Buy American Act became permanent policy as part of the budget bill signed into law in April. Buy America preferences ensure taxpayer money is reinvested right back into local communities, supporting good-paying jobs and the economy, rather than being sent overseas to the lowest bidder. The federal government should look at what manufactured goods beyond infrastructure and national defense will be needed going forward and apply Buy America preferences accordingly. States that do not apply any sort of domestic preference to what they procure with their tax revenue should re-examine that approach, and states like New York need to look beyond iron and steel and include other manufactured goods. By ensuring taxpayer dollars are used to support American manufacturers and workers, the United States will strengthen its critical manufacturing base and be better positioned to respond to the next crisis. —Brian Lombardozzi
How long will this process take? What are the goals on time?
The short answer to this is: No one knows. The challenges with offshoring have been building up for decades, and they won’t be reserved overnight. That said, there are concrete steps that we can take to turbocharge the trend of reshoring supply chains. And, the more consumers state a preference for “Made in America,” the more products we will see made here. See our response to Question No. 1 for more details. —S.P.
Can we penalize the companies that send our jobs to China and other countries?
Well, we can start by not rewarding companies for sending our jobs overseas! As Sen. Sherrod Brown (D-Ohio) pointed out during last week’s conference, America’s tax code still benefits companies that offshore production. That lines the pockets of stakeholders but comes at the expense of workers. Offshoring also has meant the United States has lost much of its ability to ramp up during a crisis. So, it makes sense that the tax code would be one thing for policymakers to examine as they look at ways to bring back critical manufacturing. Instead of rewarding offshoring, as the U.S. does now, it should incentivize companies to bring production back and make it less appealing to move overseas. On top of that, we should require any company taking government stimulus funds to bring more of their manufacturing operations back, whenever possible. And we should also put in place robust Buy America provisions that ensure when taxpayer money is spent on things like infrastructure, that money is given to American companies and workers. —Elizabeth Brotherton-Bunch
What actions are being taken to bring pharmaceutical manufacturing back to the US? I have heard that about 75% of the vitamins consumed in the U.S. come from China. How did this happen? In light of the recent problems with getting personal protective equipment (PPE) out of Chinese factories, do you believe we should be manufacturing such a high percentage of this equipment there?
The COVID-19 pandemic has underscored America’s dependence on imports for our medication and PPE, but this has been a longstanding problem. Back in 2018, Rosemary Gibson — who literally wrote the book on this issue — noted on an episode of The Manufacturing Report that 80 percent of active ingredients in our pharmaceutical and over-the-counter medicine come from China or India, and most of the medicine made in India contains ingredients made in China. This was no accident, Gibson explained. China set out to become the world’s pharmacy as part of its “Made in China 2025” plan. Which brings us to the current pandemic. There have been major concerns about both pharmaceutical imports and PPE, further exacerbating an already fraught public health crisis. Some first steps have been taken to correct this, there are several pieces of legislation out there designed to tackle this problem, and there’s speculation President Trump will issue an executive order aimed at addressing the issue. But it’s clear that the United States must make it a priority to reshore the production of our medicine, medical supplies, and related supply chains. —E.B.B.
As a past union president of a paper mill that closed in western Maryland in 2019 and an activist that testified in D.C. on illegal dumping of paper in the United States from China, are there any discussions over incentives for American companies to restart any of the many shuttered facilities to reduce our independence on Chinese imports?
Thank you for this heartfelt question. We know that many well-paying jobs and families have been impacted by these plant closings. As you know, AAM has been strongly supportive of anti-dumping and countervailing duties on imported paper products. We believe the U.S. Department of Commerce and other agencies should play more active roles in finding suitable investors and restarting production, or repurposing these facilities. And in the future, our policies should focus on layoff aversion, rather than trying to “adjust” laid off workers to new jobs. —S.P.
Would you support the elimination of sales tax for two years on any product returned to the U.S. from China? While this might cause a loss of revenue, there would be a gain in income tax that would far outperform a 7% sales tax when compared to a 30% income tax. This could be an easy way to revitalize American-made.
What an innovative suggestion! Eliminating sales taxes would be in the purview of state policymakers. However, at the federal level, some changes in corporate and other taxes, and consumer incentives, are among the proposals that are currently on the table. Also, completely agree that a small incentive would provide large dividends for the U.S. economy in terms of wages, taxes paid, and indirect activity. —S.P.
Should the U.S. Government use some of the money collected from Chinese tariffs to provide direct – or indirect – incentives to U.S. companies to move production from China back to the United States?
Great question and this is an area that Congress and the Trump administration need to explore. In 2000, the Continued Dumping and Subsidy Offset Act (CDSOA), commonly known as the “Byrd Amendment,” became law. The act redirected import duties collected in antidumping or countervailing duty investigations to the injured parties that petitioned for the relief. However, CDSOA was repealed several years later after an appeal at the World Trade Organization (WTO). The repeal was controversial and years later is just one of many examples of overreach by the global body that goes against the interests of American workers and domestic manufacturers. —Scott Boos
We must go back to manufacturing are OWN needs. Waiting for China is UNACCEPTABLE. We are better than that.
While it’s not likely that the United States could supply all of its own goods and services, and it’s also true that we have many goods and services to sell abroad so trade is beneficial in many ways, we should certainly restore some balance, reshore supply chains, and get manufacturing growing again. Some ideas to do that are contained in the answer to question No. 1. —S.P.
Are there resources available to help connect small manufacturers such as myself who need financial help with local leaders? If you are looking for a movement to bring manufacturing back to this country, it’s the smaller companies like us that will be more than willing to join and jump in. What steps should be taken to get input from small businesses to ensure that policies being considered are going to help them as opposed to hurt them?
First off, small American manufacturers should be commended for their efforts to keep it Made in America, despite the fact the system is largely stacked against them. This crisis has proven how important these folks are. There are perhaps thousands of cases of small shops dropping everything to make personal protective equipment for health care workers. Without their efforts, America’s ability to cope with this crisis would have been even worse. One of the best resources out there is the Manufacturing Extension Partnership (MEP), a public-private partnership specifically designed to help small and medium-sized manufacturers. It operates centers in all 50 states (and Puerto Rico!) and offers help with everything from strategic planning and market research to supply chain issues and advanced manufacturing services. Last year, it helped 28,213 individual manufacturers, which led to $15.7 billion in sales and $1.5 billion in cost savings. —E.B.B.
How do American companies counter the quest for ever-lower prices with decent pay for their employees? Is there a way to change American consumer values through education/promotional material or the like?
There are a couple ways to do this. Reversing decades of failed trade policy that have allowed subsidized and dumped products from countries with lax labor, environmental and safety rules would certainly help level the playing field. Investing heavily in infrastructure, workforce development, and programs like MEP also drastically improve our competitiveness. But I’d like to focus on the second part of your question. I think getting at this has less to do with consumer attitude than it does with empowering consumers. Many polls point to a real preference for purchasing American-made. Some have even shown many Americans are willing to pay a modest premium. But all too often, doing so can be an arduous, if not impossible task. Right now, for example, there are no rules requiring online retailers to provide information about where a product is manufactured. This leads to false claims, counterfeit, and sometimes even unsafe, goods, and quite often, no information whatsoever about where the product is made. Further, many unscrupulous companies falsely claim Made in USA with little to fear in the way of punishment. For the first time, just this spring, the Federal Trade Commission fined a company $1 million for false Made in USA claims. Alone this won’t fix the problem, but this is an important first step in showing importers that try to stick a Made in USA label on a foreign-made product that there could be consequences. Stronger enforcement, with real consequences, along with increased transparency to provide consumers with the information they need to make informed decisions, could go a long way to spurring more consumer demand for U.S.-made goods. —Riley Ohlson
Many of the essential workers in my area have had to deal with several changes in their work environment including reduced hours and rolling temporary layoffs. With the Cares Act, laid off workers receive more money than many still working. Is there relief on the way for those of us still working?
Thank you for the question. With unemployment expected to be more than 20%, income support for those who have been laid off is still essential. We also favor having Congress and the Administration to find incentives for companies to bring back workers and keep those already working on the job, safely of course. There are many things our policymakers could and should be doing to lower health care costs for working Americans, help with child care expenses, and make sure that work pays. —S.P.
What are your policy plans to address the substantial unemployment that results from the COVID-19 Economy Shutdown? Would you be willing to consider a bill recently introduced in the House (HR 6422) to create a $4 trillion national infrastructure bank? That bank would lend for infrastructure projects across America, creating 25 million new jobs that could provide training, and re-employ from among the 36 million Americans who permanently lose their jobs, all without creating new federal debt.
First and foremost, Congress and the Trump administration must swiftly respond to the public health crisis and ensure people who need relief and help are receiving it, through income support, food, health care, and other basic needs. We also agree that a significant fiscal boost will be necessary to get the economy restarted again, once it is safe to do so. That should include infrastructure investment, of which a bank could certainly play a role, consumer incentives, and perhaps some tax relief measures as well. —S.P.
What is the role of advanced manufacturing technologies (AI, machine learning, digital thread, augmented reality, etc.) and innovation in strengthening our industrial base and growing American manufacturing?
“Advanced manufacturing” is not just about lasers and robots (although there is some of that), but rather about the need to advance all American manufacturing. Innovation and advancements in manufacturing have been happening since the industrial revolution began, and while now they take on different forms, they have always played a role. We need a relevant, sustainable and transparent national strategy for how advanced manufacturing strengthens our industrial base and grows domestic manufacturing in the U.S. that includes the voice and expertise of the manufacturing workforce, as well as the leading “technologists” from across industry and universities. Those voices combined will be needed to develop this strategy and aid in the coordination of public and private investments to support such a strategy. —B.L.
How can we develop higher technology manufacturing to compete with low-cost countries using our higher paid labor?
There are a number of avenues to achieve this, so I’ll just mention two major ones that I think are critical to getting this right. First, procurement policy. Federal, state and local governments spend billions of dollars on materials and manufactured products every year. Domestic preferences currently only cover a fraction of this spending. By expanding the application of domestic preferences and closing the many loopholes that exist, you’d be helping create demand for lots of products and materials, everything from iron and steel to computers and telecomms equipment and from office furniture to next generation electric buses. A second critical area is trade. We have seen the impact of decades of trade policy that did not place enough emphasis on trade enforcement and often overlooked predatory trade practices. It is essential that our trade enforcement laws are maintained, and avenues should be explored to further strengthen them. Further, trade deals should be negotiated with an eye towards creating a level playing field and boosting manufacturing. —R.O.
How can we integrate national labs, universities, think-tanks, etc. to innovate better solutions to bring home larger manufacturing operations by being more efficient and profitable?
As part of the Revitalizing American Manufacturing and Innovation Act passed in 2014, a requirement was set forth for a national strategy for advanced manufacturing. This is a good start, but consideration should be given to a broader strategy that covers the entire manufacturing ecosystem. I would also point to two programs that do some of the work you’re talking about. First is the Manufacturing Extension Partnership (MEP), which was created to work with small- and medium-sized manufacturers, disseminating best practices and providing resources to improve competitiveness throughout the supply chain. This program has been very successful and despite modest federal investment, has seen outsized returns. Second, Manufacturing USA, formerly known as the National Network for Manufacturing Innovation, was established to bring together government, the private sector and academia to conduct applied research, establish global leadership in emerging manufacturing technologies, and enhance U.S. competitiveness. Very similar to the network of Fraunhofer Institutes in Germany, Manufacturing USA has created Manufacturing Institutes in specific fields to bring together great minds and resources, both private and public, to work on everything from photonics to additive manufacturing to clean energy. There are currently 14 of these institutes (for comparison, Germany has over 70). —R.O.
Michael Pettis, author of Trade Wars are Class Wars, suggests imposing a one-off entry tax on foreign capital inflows, which would eliminate the current deficit and would force the cost of adjustment on banks and financial speculators, unlike tariffs which force the cost onto businesses and consumers. He believes this would be an efficient way of fixing the American role in global imbalances and make it more difficult for foreigners to dump excess savings into U.S. financial markets. What are your thoughts on this?
A market-access charge or entry tax on foreign capital inflows are two innovative proposals to rebalance our international trade deficit. Senators Tammy Baldwin (D-Wis.) and Josh Hawley (R-Mo.), who both appeared at our conference, have authored legislation that would accomplish some of this. Some economists view this concept as an elegant solution to this longstanding challenge. However, there has been no movement in Congress or within the Trump administration to enact such a change. —S.P.
The President recently issued an Executive Order in order to protect the United States Bulk Power Systems, which is vital to the nation’s energy security, supporting national defense, emergency services, critical infrastructure, and the economy. Would you agree with the immediate need to enhance US energy storage manufacturing and support the Department of Energy managing a program to fund and advance U.S. manufacturing facilities as its goal?
We completely agree with you that US energy storage manufacturing is critical, and that Department of Energy programs and funding should be dramatically expanded. Right now, the US has a fraction of global market share, and our domestic market is dominated by only two or three firms. We need more competition, more innovation, more production of energy storage systems, and a larger domestic ecosystem. —S.P.
In response to coronavirus, legal scholar John Yoo says, “The United States could expropriate Chinese property in the United States. Conceivably, Washington could even cancel Chinese-held treasury debt and using the proceeds to create a trust fund that would compensate Americans harmed by the pandemic.” Why not?
Thank you for sharing this interesting argument. We do believe that at a minimum, U.S. tax dollars shouldn’t be aiding companies affiliated with China’s government in any way. That includes public procurement dollars, and extends well beyond that. —S.P.
A key motivator for industrial policy discussions is to compensate for the failures of U.S. corporations to pursue policies that nurture the nation’s industrial base while providing high productivity jobs justifying high wages. Northern European corporations are better at that, thanks to the presence of employees on their boards, called codetermination. As a result, their nations (Norway, Sweden, Denmark, Germany, the Netherlands) routinely have current account trade surpluses approaching 10% despite paying the world’s highest wages. Why? Their corporations export goods and services, eschewing the low wage arbitrage common with U.S. corporate boardrooms. Codetermination has proven that corporations are more proactive in planning for rough periods like today. Could codetermination help resuscitate U.S. industry?
Codetermination is an excellent idea, and many United Steelworkers union relationships with its employers include seats for union-appointed board members. Moreover, while the Business Roundtable has publicly stated that “stakeholder” concerns should rise to the level of “shareholder” concerns, there seems to be little evidence that it is the case. One possible solution, beyond more codeterminiation, is changing accounting and other corporate disclosure requirements to better reflect the value of stakeholder contributions to its success, rather than merely reporting quarterly earnings. —S.P.
Employee Stock Ownership Plans (ESOPs) are one of the best vehicles for equitable distribution of wealth appreciation in America and guarantee that any money that the U.S. government invests in American companies will be shared by the greatest number of working-class Americans. Why not give special governmental investment in the form of investment grants, R&D grants, equipment purchasing grants, low interest equipment loans, etc. to manufacturing ESOPs? That money would land directly in the hands of more American workers.
What you propose makes sense, and some states have programs that do similar things. It is an idea that should be explored on the federal stage. Companies with broad-based ownership are more stable than companies without broad-based ownership. Employee ownership is a powerful community wealth building strategy, and has powerful economic stabilizing effects: between 2000 and 2008, while the number of manufacturing jobs fell 29 percent in the state of Ohio, employee-owned manufacturing jobs held steady, dropping only 1 percent. Nationally, in 2010, 12.1 percent of all workers—nearly one in eight—had faced a lay-off in the previous 12 months; by contrast, only 2.6 percent of workers who were employee-owners were laid off. Employees at ESOP companies have, on average, 2.5 times more retirement benefits than employees at comparable companies that are not employee owned. Wages, depending on industry, are 5-12 percent more than jobs at comparable non-employee-owned companies. Productivity at employee-owned companies is also higher (this is why, of course, ESOP companies can provide higher wages and better benefits). On average, productivity increases by 4 to 5 percent in the year ahead an ESOP is adopted; over a 10-year period, ESOPs have 25 percent faster job growth than comparable non-ESOP companies. —B.L.
Large companies like 3M rely on tier 1 and tier 2 type suppliers for their unique equipment and tooling in order to manufacture their products. The larger conglomerates have typically in the past offshored much of their tier 1 and 2 manufacturing capabilities to foreign entities. Why doesn’t the government fund and invest in the companies that are true tier 1 and tier 2 companies? If you incentivize the tier 1 and tier 2 manufacturers to invest and modernize, then they can provide 3M and similar companies with the onshored services that they originally off-shored.
Transparency deep into supply chains is often lacking. It is important that the U.S. not become simply a site of final assembly, but also captures the value throughout the supply chain. As some of the answers to your question are likely more political in nature, I’ll focus on some efforts underway and how these could be bolstered. First is the MEP program, which has for decades been on the frontlines helping small- and medium-sized manufacturers adopt best practices as they evolve. Since its founding, the MEP has been tasked with additional objectives, from assisting with export promotion or the establishment of training programs to supplier scouting to connect U.S. manufacturers with government procurement opportunities. Ensuring policy makers hear from the MEPs about what the companies they work with need is important, as is ensuring adequate funding. Second, procurement rules can help incentivize these investments. By closing loopholes that allow foreign-manufactured products to be purchased by government agencies, you would be incentivizing more of these companies to expand capacity here. Third, it’s essential we get trade right. Despite investing over a billion dollars in battery and storage technology, for example, China has eclipsed the U.S. in this space through a variety of unfair trade practices. —R.O.
What assurances do American workers have that the interest in bringing jobs back to this country won’t fade after the election?
Your vote matters and it is a great responsibility that each of us carries to vote for those we believe will put actions behind their words. Unfortunately, we have seen too many elected officials, including all of the recent presidents, Democrat and Republican, make bold statements about holding China accountable only to take a much softer approach after taking office.We hope that the public awareness of both the importance of being prepared for future emergencies and holding China accountable will be shared by those in office in the years ahead. The livelihoods of milliions of manufacturing workers and their families depends on it, as does our broader economic and national security that affects every American. —S.B.
When and who will ensure AMERICANS’ constitutional rights are FRONT and CENTER and RESPECTED?
Ultimately, voters bear the great responsibility of ensuring that their leaders in Washington, D.C. respect the constitutional rights of Americans. It is important to vote in the presidential and congressional elections, as established by Article One and the 12th and 17th Amendments to the United States Constitution. Your vote matters and has a big influence on the future of the economy and your constitutional rights. —S.B.