January 16, 2004    Volume 11, No. 2

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Commerce Department Finishes Long-Awaited Manufacturing Study

The Bush administration on January 16 released its long-anticipated study on what the government should do to address the steep downturn in the U.S. manufacturing sector. Originally scheduled to be released in September, the 88-page report became exceedingly complex, according to those involved in writing various iterations of the document entitled "Manufacturing In America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers."

Manufacturers are generally pleased with the result, though they admit that the report repackages many long-standing Bush administration policy initiatives into one place, including making the tax cuts permanent, tort and regulatory reform, and energy and health care initiatives.

Nevertheless, Secretary of Commerce Donald Evans pledged that the study is the first step in reorienting the federal government toward addressing polices that improve the competitiveness of U.S. manufacturers.

"When I came to Washington, I started to focus on this sector of the economy and I asked, 'Who is responsible for manufacturing?' And nobody could answer the question," Evans said at the unveiling of the report in Cleveland. "Management 101 to me is if you have a critical area of the economy you should have one person focused on it every day." The Bush administration "is going to make sure there is a consistent, steady advocate for manufacturing in Washington, D.C., and in the federal government," Evans said.

The report lists 63 recommendations, but the most important aspect of the endeavor is focusing the administration's attention on manufacturing, Evans emphasized. A new manufacturing position will be created within the Commerce Department and a variety of interagency working groups and task forces will be chartered throughout government to pursue policies regarding fair trade, R&D funding and regulatory reform.

When the Bush administration leaves office, "the job won't be done, but what we'll leave behind is a legacy of an organizational structure...that is going to be focused on the manufacturing sector," Evans told employees gathered at the Lincoln Electric factory in Cleveland. "The person who is responsible will be held accountable and coordinate all across the administration and government issues that are important to manufacturers."

Those involved in various iterations of the report said report authors had to overcome many of the raw emotional appeals made by manufacturers for the government to take more strident measures to counter surging imports. "Talking about 'fair trade' is generically okay for the administration in diplomatic circles," says one manufacturing trade association executive who contributed to the study. "The 'fair trade' mantra mutes the intense criticism manufacturers levied against our government and many of our trading partners."

The study was also delayed by the need to do fact checking and to counter protectionist arguments that dominated many roundtable discussions. Editing the document also became a challenge, say others. "It was a thesis project for those in the [Commerce Department] to learn the role that manufacturing plays in the society," says one government contributor. "There wasn't anybody here [at Commerce] who understood the importance of manufacturing" prior to the start of the study. "That slowed us down, but now that's changed."

The document leaves the status of the Manufacturing Extension Partnership program somewhat in limbo. No funding level was mentioned for the program. The Bush administration's 2005 budget submission will reveal its intentions. Last year, it requested almost a 90 percent reduction in spending for the popular program, though the report gave it a muted endorsement (see page 70).

The report can be downloaded from the Commerce Department's Web site at http://www.doc.gov.

Among its recommendations are:

  • Create an Assistant Secretary of Commerce for Manufacturing and Services.
  • Lead benchmark analysis studies to identify and prioritize those areas of public policy that have the most impact on manufacturing competitiveness;
  • Create a new Office of Industry Analysis that will assess the cost competitiveness of American industry;
  • Establish a President's Manufacturing Council to provide oversight and advice on implementing the President's Manufacturing Initiative;
  • Create an Interagency Working Group on Manufacturing chaired by the Secretary of Commerce for Manufacturing and Services.
  • Make the tax cuts permanent.
  • Reduce cost of tax complexity and compliance.
  • Make the R&D tax credit permanent.
  • Reduce the cost of healthcare.
  • Modernize the legal system to eliminate frivolous lawsuits.

  • Reduce the costs of regulation.
  • Establish an inventory of potential regulatory reforms that would lower the cost of manufacturing.
  • Enact a comprehensive energy policy.
  • Invest in innovation.
  • Review federal R&D funding for generic technologies, engineering and the physical sciences;
  • Create an interagency working group on manufacturing R&D;
  • Strengthen partnerships to promote manufacturing technology transfer;
  • Support a "newly coordinated" Manufacturing Extension Partnership and create a national virtual network of centers of manufacturing excellence;
  • Encourage the Small Business Innovation Research (SBIR) programs run by federal agencies to focus on manufacturing;
  • Explore new opportunities for establishing cooperative research programs between national laboratories and universities in innovative manufacturing technologies.
  • Strengthen education and enhance workforce skills.
  • Establish a high-school and technical education partnership initiative;
  • Establish personal reemployment accounts;
  • Coordinate economic adjustment for manufacturing communities;
  • Improve delivery of assistance for and retraining of displaced workers;
  • Promote open markets and level playing fields.
  • Encourage economic growth and open trade in capital markets abroad;
  • Negotiate trade agreements that benefit U.S. manufacturers;
  • Pursue elimination of foreign tariff and non-tariff barriers to exports of U.S. manufactured goods;
  • Negotiate the elimination of trade distorting subsidy practices;
  • Enhance the effectiveness of trade enforcement tools such as the WTO;
  • Enforce U.S. trade agreements and combat unfair trade practices affecting U.S. manufacturers.
  • Reinforce the efforts of the national Intellectual Property Enforcement Coordination Council;
  • Establish an Office of Investigations and Compliance within the Commerce Department;
  • Establish a task force within the Commerce Department's Import Administration to pursue the elimination of foreign unfair trade practices;
  • Reinforce efforts to promote the sale of American manufacturers in global markets.
  • Promote global recognition of use of U.S. technical standards;
  • Update and reauthorize U.S. export control laws.

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