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January 1, 2010

CLOSE, CIGAR PENDING

The Obama administration's first comprehensive statement on manufacturing is more about government than it is about enterprise.

There are a number of odd aspects to the Obama administration’s first comprehensive statement about manufacturing policy.

For one thing, the statement, entitled “A Framework for Revitalizing American Manufacturing,” was announced by Vice President Joe Biden at a meeting of his Middle Class Task Force on December 16. Nothing overly strange about that, exactly, since the task force has job creation as a focus, and there are few better jobs to have than jobs in manufacturing. But more than a week after Biden issued the paper to what, after all, is a low-profile group, there was still no announcement of it—and no copy of it—available on the White House web site. Forward’s copy, in fact, came from the web site of the Alliance for American Manufacturing (AAM), the Washington, D.C.-based pro-manufacturing advocacy group formed by the United Steelworkers Union, United States Steel and other metals companies.

What’s more, no specific office signed the policy statement—not Biden’s office, not the National Economic Council, not even Ron Bloom, who is President Obama’s senior counselor for manufacturing policy.

“What we’ve done so far has barely broken the ice” of support for manufacturing, Biden said at the task force meeting. “We have a long, long way to go.”

No kidding. If manufacturing is an important topic, and it is, there certainly was no way to tell by the way the administration introduced its policy statement or the place chosen to introduce it.

As for the framework itself, the most promising part about it is the fact that someone wrote it and made the effort to draw together, in one place, all of the administration’s existing or potential initiatives that might, in some fashion, qualify to be under the banner of manufacturing. The implication is that the administration regards “manufacturing” as, possibly, its own topic in the same way that “climate change” implies its own distinct set of policy initiatives.

So what does the policy framework say? The authors apparently believe that the government is as, or more, important to the future of manufacturing than, say, free enterprise, markets or consumers. The report says, on the one hand, that manufacturers are responsible for the bulk of U.S. research and 90% of all patents, and, at the same time, criticizes manufacturing for “under investment” in research and in worker training. Much of the policy statement focuses on ideas that have been supported frequently by President Obama, such as seed money to develop new industries making things such as wind turbines, solar power, and nanotechnology.

FORGET THE ORDINARY

Next to nothing is said about the needs of the nation’s existing manufacturing base, although the report says that, taken alone, U.S. manufacturing would constitute the world’s ninth-largest economy. There is no mention of companies that make the things of our daily lives, such as screws, chairs, door handles, flatware, curtains, toothbrushes, and shoes. Indeed, at the Middle Class Task Force meeting, NEC Director Lawrence Summers, identified by Biden as the intellectual heart of the administration’s policies, said it was clear that “silicon chips are more important than potato chips.” This raised the ire of task force participant Robert A. McDonald, the chairman, president and CEO of Procter and Gamble Co., maker of Pringles.

The policy statement identifies seven areas for federal action beyond what already exists, which in some cases is considerable. They include:

  • Worker training
  • “Creation of new technologies” and business practices
  • Stable and efficient capital markets
  • More help for communities and workers that lose factories
  • Improved transportation infrastructure
  • Steps to improve foreign market access and a level playing field in trade
  • Legal, tax and regulatory regimes that promote manufacturing

Middle Class Task Force participants made nice about the policy framework, but spent a lot of time mentioning other areas that were missed or that need to be emphasized. As one example, there is no mention in the paper about the immense importance now assumed on the manufacturing stage by China and its mercantilist trade and currency policies.

Dan DiMicco, chairman, president and CEO of Nucor Corp. and director of Duke Energy Corp., told the meeting that the last two items, on trade and the domestic business environment, should be moved to the top of the list because if given a fair run at it, U.S. manufacturers could and would compete successfully with anyone in the world. Recognize, DiMicco said, that innovations developed here will be lost quickly to foreign competitors who will either match them or offer to make products using them for less money. “We come up with the innovations, and they will be manufactured elsewhere,” he said.

Mostly, though, reaction to the framework was relief that it was now possible to begin talking about the real issues that beset manufacturing.

“It’s a breath of fresh air that there seems to be someone in the White House who thinks we should have a manufacturing strategy,” says Scott Paul, AAM’s executive director. “The real proof is going to be implementation and the amount of resources that are put into making this a reality by the administration and the Congress.”

“It represents a lot of the things we’ve been saying, so it’s validating to know others share our concerns,” says Douglas Woods, president of the Association for Manufacturing Technology in McLean, Virginia. “Now that these critical issues are being addressed by the administration we will be able to get action and attention…and we will have more of an opportunity to work with the administration on crafting the key policies that they are now recognizing are crucial for manufacturing success in the U.S.” But he added, “The administration did not seek out enough true small and mid-sized manufacturing companies when composing the key elements of their proposed framework.”

Naturally, there’s no one in manufacturing who will object to greater financial support for research or training, or improved enforcement of trade laws. But whether this report is a positive first step on the way to improved industrial policies and practices, or merely another attempt to validate the administration’s pre-existing plans for a shopping basket of political initiatives, only time will tell.