Posted By Jeff Moad, January 12, 2017 at 2:07 PM, in Category: Industrial Policy
The incoming Trump Administration must move beyond one-off “name and shame” actions aimed at influencing large, global manufacturers to preserve domestic production and, instead, develop an aggressive and comprehensive manufacturing strategy focusing on tougher trade enforcement, tax reform, development and implementation of Manufacturing 4.0 technologies, and support for the expansion of a next-generation workforce, a panel of policy experts told the Manufacturing Leadership Council and guests this week.
Speaking on the eve of Donald Trump’s inauguration as President and following an election campaign that focused extensively on the preservation and restoration of manufacturing jobs and the U.S. industrial economy, the panel of experts expressed cautious optimism that, with the right focus, the new administration “can help encourage the industrial renaissance that is already underway,” said Jerry J. Jasinowski, former president of the National Association of Manufacturers and a member of the Board of Advisors for the Manufacturing Institute.
The special debate, sponsored by Frost & Sullivan’s Manufacturing Leadership Council for members and guests, focused on outlining the policies that the new administration should put in place to support U.S. manufacturing and, besides Jasinowski, included:
- Dr. Robert Atkinson, president and chief executive at the Information Technology and Innovation Foundation;
- John Bernaden, co-founder and past vice chairman of the Smart Manufacturing Leadership Coalition and former director of corporate affairs at Rockwell Automation; and
- Peter Holicki, senior vice president of operations, manufacturing & engineering, environment, health & safety operations and emergency services & security at The Dow Chemical Company.
The debate was moderated by David R. Brousell, co-founder of the Manufacturing Leadership Council.
Panelists agreed that the new administration must develop a comprehensive strategy that focuses on markets that are most likely to generate sustained growth. Atkinson said that means focusing assistance on “the parts of U.S. manufacturing that make sense. We shouldn’t be making t-shirts or Happy Meal toys or even assembling iPhones,” he said. “The focus should be on high value-added production.”
And, said Holicki, once its manufacturing policy is defined, the new administration must stick to it and act on it. “We have seen too many declarations of intent, and too little activity,” he said.
The new administration must continue work begun by the Obama administration to facilitate the adoption of emerging M4.0 technologies, panel members agreed. Specifically, the White House should continue to fund and grow the National Network for Manufacturing Innovation (NNMI), a network of research institutes, fueled by public-private partnerships, that is driving the adoption of 3D printing, smart manufacturing, lightweight and composite materials, and other M4.0 technologies.
The NNMI institutes are important, said Bernarden, to counter what has been under-investment in the application of new manufacturing technologies in recent years. And other similar programs such as NIST’s Manufacturing Extension Partnership are important to encourage small and medium-size manufacturers to invest in emerging technologies, panelists said.
But the Trump Administration must also tune tax and investment policies to make it easier for large and smaller U.S. manufacturers to adopt new M4.0 technologies that can drive productivity and growth, the panel said. Even many large manufacturers with more resources have been too slow to recognize and invest aggressively in potentially transformative M4.0 technologies, said Bernarden.
While President-Elect Trump has called for significantly lower corporate tax rates, it’s important that those reductions are not offset by the elimination of tax breaks that help manufacturers today, panelists said. It’s important, for example, that programs such as the Section 199 domestic production deduction and R&D tax credits survive.
If the new administration eliminates such programs, even while cutting corporate tax rates, “Maybe manufacturers will end up a little better off, a little worse off, or the same. We don’t know,” said Atkinson.
And the new administration must come up with creative new programs that encourage manufacturers to repatriate large sums of cash generated by their off-shore businesses. It’s estimated that U.S. companies are currently keeping trillions of dollars generated by offshore business in foreign accounts in order to avoid taxes. But, if the federal government were to offer those companies the opportunity to invest in tax-free industry bonds, said Bernarden, many manufacturers would repatriate those funds. The government could then use funds generated by the bond sales to make low-interest loans to mid-size and other manufacturers, helping them to invest in M4.0 technologies, said Bernarden.
“We need a stimulus package focused directly on giving a shot in the arm to mid-size manufacturers, small manufacturers, and large manufacturers that want to jump into factories of the future,” he added.
But the Trump Administration can’t focus just on taxes and technology, panelists said. It must also create and support programs that attract, prepare, and provide the next-generation workforce that will be required to drive M4.0.
“Trump should focus on trade and taxes, but it won’t be successful if it doesn’t focus on people and technology,” said Jasinowski.
Specifically, said panelists, the new administration should work with state and local governments and schools to create training education programs in high schools, trade schools, and community colleges that will attract a new generation workforce for industry and provide them with the technical skills they will need in the M4.0 era.
An example of such programs that deserve more federal support, said Jasinowski, is the Manufacturing Institute’s Dream It-Do It initiative which, in 2015, exposed 426,000 students and 76,000 educators and parents to the career opportunities presented by the M4.0 technology-driven transformation coming to manufacturing.
In designing such programs, panelists said, the administration must keep in mind that many new jobs in the M4.0 era will require hybrid skill sets and a combination of technical, manufacturing, and service capabilities.
The federal government must support such programs and educational reforms, panelists said, because manufacturers—particularly smaller companies—cannot afford to do it on their own.
Some large companies such as Dow are making investments in local education in order to bolster human resources required for plant expansion. But the government must help local governments and schools to create apprenticeship and vocational programs that not only provide needed technical skills but that also inspire a new generation to get excited about manufacturing, said Holicki.
“If we don’t get more respect and more excitement about manufacturing and we do not cherish people who make stuff, we will not be successful,” he said.
Finally, said panelists, the Trump Administration must take a more aggressive stance in enforcing trade agreements and laws, “particularly against China, which is mercantilist and whose actions have harmed the U.S.,” said Atkinson.
Panelists predicted that increased tariffs and border taxes will be part of the toolkit that the new administration will use to enforce trade agreements and reduce currency manipulation and subsidies from foreign governments that distort markets. Tariffs are likely to be used as bargaining chips that can help the administration strike new trade deals or enforce existing ones, said Atkinson.
Ultimately, said panelists, there is reason to hope that the Trump Administration will have a positive impact on growth of and investment in U.S. manufacturing.
Written by Jeff Moad
Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit