Manufacturing has been the historical bedrock of the US economy and the foundation for economic growth throughout the world.
In fact, Andrew Liveris, CEO of Dow Chemical and author of Make it in America (2011), notes:
The American manufacturing model, the one that created so much prosperity here over the past century, that created the middle class, was the most successful economic model in history. Other nations learned from that success.One of the things those nations learned was that in order for business to thrive, they needed to create a business-friendly environment.
We learned the opposite lesson. US manufacturers currently face 20% higher imposed costs than those experienced by our primary trading partners. These costs occur in the form of taxes, employee benefits, tort costs, regulatory compliance and energy costs.
Yes, you read that correctly. It’s more cost effective to locate and operate in eight of our nine largest trading partners. In alphabetical order, these are:
- Canada
- China
- Germany
- Japan
- Korea
- Mexico
- Taiwan
- United Kingdom
Only France has a higher structural cost burden and lower cost advantage in a head-to-head comparison of the five cost factors. US policymakers are pricing US manufacturers right out of the global marketplace.
Manufacturing is an uphill climb under the best of circumstances. In the US, manufacturers start that journey with backpacks 20% heavier than almost every major trading partner. That's a significant competitive disadvantage.
Now, consider this: In the past three years, these excess costs have increased nearly 3%. If that basic trend continues, by 2020, US manufacturers will be hauling backpacks 30% heavier than competitors.
At what point does a competitive disadvantage become an insurmountable obstacle?
US policymakers must take a close look at the costs they continue to impose on manufacturing, because manufacturers are certainly crunching the numbers, reading the runes and studying the spreadsheets.
And while they're at it, they're asking: Should we make it in America?
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Manufacturing Institute: 2011 Structural Cost Report