The Manufacturing Czar Deals With Unrest

In answer to complaints that manufacturing was the forgotten sector in the U.S. economy, President Bush promised to appoint a "manufacturing czar" in December 2003. Manufacturing had suffered through three years of steady decline, almost three million jobs were lost, and what had begun in the 1990s as tentative steps to create off-shore facilities in China had become a stampede.

In the few short years since the trend had begun, China had passed the United States in both direct foreign investment and machine tool consumption (by 2004 China would reach double our consumption and threatens to be triple our level by the end of this year). Three years ago, manufacturing was experiencing a threatening environment, and the President believed that he had to do something to demonstrate that he was concerned.

So the Commerce Department's International Trade Administration held dozens of roundtable meetings around the country, listening to the concerns of U.S. manufacturers. A number of AMT company executives and I participated in these forums to inform the Administration of the problems of the industry. The Under Secretary for International Trade at the time, Grant Aldonas, listened attentively and then helped to write a report on the problems he identified, "Manufacturing in America," complete with 50 recommendations aimed at alleviating the problems facing American industry.

After some initial stumbling, the Bush Administration created a "Manufacturing Council," with 15 private sector representatives to advise the President on what ought to be done to correct the problems facing industry. A new "Manufacturing Czar" with the title of Assistant Secretary for Manufacturing and Services was also created to act as a voice within the Administration for the Council and for the broader manufacturing sector. Albert Frink, a manufacturer who had built his own successful business in California using a Small Business Administration loan, was installed as the new "Manufacturing Czar." By mid-2004, there was some optimism that finally the problems would be addressed.

It is now almost two and one-half years since the new era for manufacturing was commenced. The economy is much stronger and jobs and industrial production are at an all-time high. But little credit is given to the new structure at the Commerce Department, and there is great criticism in states such as Michigan that the Administration is continuing to ignore them. A recent story in the Detroit News noted that the new "Manufacturing Czar" has rarely been in the same room with the President and that he seems to have little voice and even less influence on the economic policies that affect the fortunes of manufacturing in big industrial states.

My own experience with Assistant Secretary Frink has been very positive, and I do believe that he has attempted to speak out for industry within the Administration whenever possible. But it is clear to me that the problems the industrial sector faces are larger than can be addressed by issuing 50 recommendations, or even constant advocacy by a manufacturing czar.

Fundamental problems plague industry today. We have a tax and regulatory system that adds 22 percent to the cost of manufacturing in the U.S. over its industrialized competitors, according to a recent Manufacturers Alliance/MAPI study. We also have a tax system that does not encourage modernization of capital equipment through aggressive depreciation schedules as the Europeans and the Japanese do.

Finally, the short list of problems should include the unwillingness on the part of the Administration to press our major trading partner, China, to price its currency fairly, which leaves us with a 40 percent price disadvantage. Until the Administration is willing to deal with these fundamental manufacturing problems, all the face time with the President and advocacy of a manufacturing czar will do very little good.