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REBUILDING MANUFACTURING – THE
KEYS TO AMERICAN PROSPERITY
Michele Nash-HoffPresident, ElectroFab Sales
A manufacturers’ sales agency specializing in fabrication services
U. S. LOST JOBS AND COMPANIES
• From 2000 to 2010, the U.S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed.
• U.S. Department of Commerce shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”
US Manufacturing Employment Plummets
• Manufacturing employment down 28% since 2000• Manufacturing output down in 14/19 sectors • Losing leadership in strategic sectors
Source: BLS
Every billion dollars of net imports costs 6,000 American jobs. So last year’s $566billion deficit equates to 3.4 million jobs lost
TOP 10 TRADE DEFICIT COUNTRIES: THESE COUNTRIES ACCOUNT FOR 97%
OF U.S. 2017 GOODS TRADE DEFICIT
Workers’ Real Incomes Stagnate
• Economic stagnation for production/nonsupervisory workers
• Real weekly wage peaked in 1972
• Fell 24% to 1996• Bounce of 18% to
2017 • But after 45 years,
down 10%• Today: $756/week
Source: BLS via Advisor Perspectives
From Manufacturing to Serving Burgers, Shakes & Frappucinos
6M
8M
10M
12M
14M
16M
18M
20MManufacturing Employment
Food Service/Drinking Places Employment
• Food service/drinking place jobs will surpass mfg in 2-3 years• Manufacturing, Avg hourly earnings: $26.53; hours: 40.7 ($1080/wk)• Food/Drink, Avg hourly earnings: $13.94; hours: 26.2 ($365/wk)
JQI vs. US Trade Balance
• Good correlation: trade deficit & JQI
• Trade deficit destroys good quality jobs
-800
-700
-600
-500
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-300
-200
-100
0
70.00
75.00
80.00
85.00
90.00
95.00
Dec1991
Dec1993
Dec1995
Dec1997
Dec1999
Dec2001
Dec2003
Dec2005
Dec2007
Dec2009
Dec2011
Dec2013
Dec2015
Job Quality Index #1 Trade Balance
INDUSTRIES LOST
•Fabless chips•Compact fluorescent lighting•LCDs for monitors, TVs and handheld devices like mobile phones electrophoretic displays
•Lithium ion, lithium polymer and NiMH batteries
•Advanced rechargeable batteries for hybrid vehicles
•Crystalline and polycrystalline silicon solar cells
•Inverters and power semiconductors for solar
panels•Desktop, notebook and notebook PCs
•Low-end servers•Hard-disk drives•Consumer networking gear such as routers, access points, and home set-top boxes
•Advanced composites used in sporting goods and other consumer gear
•Advanced ceramics and integrated circuit packaging.
What Saved American Manufacturing?
• Wages rising in China• Returning Manufacturing to America (aka
reshoring)• Additive Manufacturing• Automation• Robotics• Industrial Internet of Things (IIOT)• Lean transformation
COSTS RISING IN CHINA
Reshoring Initiative• Harry Moser founded Reshoring Initiative in
2010 to return manufacturing to the U. S.• Objective: Change the Mindset from “Offshored
is Cheaper” to “Local Reduces the Total Cost of Ownership.”
• Train OEMs on why to source local & how to use TCO Calculator & suppliers on how to “sell” local sourcing.
• Encourage production near the customer
PPV AND LANDED COST MISS A LOT OF TCO
100%87% 77%
13% 23%
0%
20%
40%
60%
80%
100%
120%
TCO LANDED COST PURCHASEPRICE
PPV = Purchase Price Variance
Top Countries From WhichReshored and FDI’d
Rank Country Jobs Companies1 China 89,988 9072 Germany 64,383 2393 Japan 54,314 2244 Canada 19,964 1725 Korea 15,852 556 Mexico 13,020 987 Switzerland 11,043 518 Australia 10,173 229 United Kingdom 8,946 59
10 Italy 7,305 74Source: Reshoring Initiative Library,2 010 through 2017.
Reshoring from Region
Reshoring to U. S. Region
Sources: Reshoring Initiative Library, cases from 2010 – 2017
Rank State Jobs CompaniesAvg. Jobs/
Facility1 SC 73,256 262 2802 TN 46,572 164 2843 MI 35,407 182 1954 NC 33,198 221 1505 GA 31,877 148 2166 TX 30,601 157 1957 AL 28,225 118 2398 OH 26,551 182 1469 NY 19,838 188 13310 IN 15,908 144 138
20CA 7,589 232 33
Top 10 Offshore Negatives
Source: Reshoring Initiative Library, December 2017
Rank Negative Reasons Offshore # of times cited
1 Quality/rework/warranty 2922 Freight cost 1963 Total cost 1474 Delivery 1005 Inventory 916 Rising wages 88
7Supply chain interruption risk/Natural disaster risk/Political instability 78
8 Intellectual property risk 649 Communications 61
10 Green Considerations 53
Rank Positive Reasons to Reshore/FDI # of times cited
1 Government Incentives 5272 Proximity to customers/market 4933 Skilled workforce availability/training 4464 Image/brand 3985 Eco-system synergies 3366 Lead time/Time to market 2517 Infrastructure 2398 Automation/technology 211
9Manufacturing/engineering joint innovation (R&D) 155
10 Higher productivity 141
Top Positive Reasons to Reshore 10
Source: Reshoring Initiative Library, December 2017
Top 10 Reshored & FDI Industries:
Rank Industry Jobs1 Transportation Equipment 298,747
2Electrical Equipment, Appliances, Components 56,515
3 Apparel & Textiles 48,525
4 Computer/Electronic Products 45,2105 Plastic & Rubber Products 38,1706 Chemicals 37,4217 Machinery 21,6538 Wood & Paper Products 20,736
9 Medical Equipment & Supplies 20,68110 Fabricated Metal Products 19,889
2017 Reshoring & RDI
2017: 171,000 manufacturing jobs, up 50% from 2016 & up 2,800% from 2010
Policy Change Effect on Reshoring
Tailwinds likely to help reshoring• How corporations use cash flow from repatriation & tax cuts• Decline in the USD by fixing currency misalignment• Growth of world markets for offshore suppliers so domestic
suppliers have less competition to supply the U.S.• Increase in usage of TCO (Total Cost of Ownership)• Continued reductions in regulations• Continued improvement in skilled workforce programs• Environmental consciousness of domestic supply chains • Sustainability as a corporate strategy• Increase in U.S. investment could lead to greater productivity
and innovation.
WAYS TO REBUILD MANUFACTURING
• Develop a national manufacturing strategy to Improve business climate by
– Changing Tax, Trade & Regulation Policies• Return manufacturing through reshoring• Foster success of start-up companies through
incubators & accelerators• Train companies to transform into Lean
companies• Educate community/youth about career
opportunities in manufacturing
Solutions to Balance Trade for Economic Growth
1. Eliminate trade cheating2. Establish a Market Access Charge
– Devalue the dollar to balance trade3. Industrial Policy
– Defend industries vital to economic growth4. Wage Convergence
– Developing countries raising wages
MANUFACTURING STRATEGY
• Specify optimal tax, trade, research, regulatory, and innovation policies
• Rep. Daniel Lipinski (D-IL) introduced bill to develop mfg. strategy American Manufacturing Competitiveness Act (HR 2447) in 2014
• Wording incorporated into omnibus spending bill (HR 83) signed by President December 16, 2014.
WHAT IS WRONG WITH TRADE AGREEMENTS
• Investor State Dispute Resolution – handled by Foreign Tribunals not U. S. courts
• Buy America Act made Null & Void: waives procurement policies for all companies operating in trading partner countries
• Country of Origin Labeling not allowed by WTO • Increases number of L1 visas • Don’t address foreign mercantilism: currency
manipulation, product dumping, or government subsidies
U. S. ISM PURCHASING MANAGERS INDEX
Trump Agenda
• Trade reform
• Tax reform
• Regulatory Reform
• Energy Reform
Trump Trade Policies• Withdraw from TPP• Renegotiate NAFTA & KORUS• Negotiate bi-lateral trade agreements with United
Kingdom & Japan• Increase enforcement of current Trade
Agreements to reduce trade cheating• Address currency manipulation & Dollar
misalignment• Eliminate trans-shipping• Establish tax penalties for sourcing offshore
TRUMP’S PROPOSED TAX REFORM
• Reduce Corporate tax rate to 20%• Reduce Capital Gains Tax to 15%• Reduce tax brackets from 7 to 3• Border Adjustable Taxes• A one-time repatriation tax of 10%
– Note: Only 30-35% of manufacturers are C corps – the rest are Sub-chapter corporations, LLCs, partnerships, and sole proprietorships where taxes pass through to individuals so it is important to keep personal tax rates as low as possible
Coalition for a Prosperous America
• Non profit, non partisan organization that is an unprecedented alliance of manufacturing, agriculture and labor working for smart trade policies.
• Members include farmers, ranchers, associations, and businesses in copper, steel, livestock, textile, tooling, machining, electronics, software, and other industries, as well as the industrial labor.
Coalition for Prosperous America Recommends New Trade Policies • Congressional Resolution to establish goal of
eliminating trade deficit• Pursue trade deficit reduction as a primary
objective of agreements. • Renegotiate past agreements• Utilize tax, fiscal and monetary policies to
eliminate trade deficit• Aggressively and systematically attack and
neutralize foreign mercantilism.
HOUSE CONCURRENT RESOLUTION 37
• Expressing the sense of Congress that Congress and the President should prioritize the reduction and elimination, over a reasonable period of time, of the overall trade deficit of the United States.• Sponsor: Rep. Brooks, Mo [R-AL-5] (Introduced 03/22/2017)
BORDER ADJUSTABLE TAXES
• Consumption taxes are “border adjustable taxes” (Value Added Taxes or Cost of Goods Taxes) allowed under WTO rules.
• 159 countries have such taxes & U. S. doesn’t.• VATs average 17% globally so subsidize domestic
shipments abroad with a 17% tax rebate.• VATs can be used to cut domestic taxes by:
– Reducing personal and corporate income taxes– Reduce payroll taxes drastically
VAT COUNTRIES – REDNON VAT COUNTRIES - BLUE
HOW TO GET MULTINATIONALS TO PAY TAXES
• Reform taxes at federal level based on the Sales Factor Apportionment Framework.– Amount of corporate taxes "would be determined
solely on the percent of company's world-wide sales made in to U. S.
– Encourages exports because all exports are fully excluded from corporate income tax
– Profit to be taxed by the U. S. is determined by simple formula.
– Reduces or eliminates the tax incentives to locate jobs, factories, and corporate headquarters offshore
CURRENCY MISALIGNMENT
HOW TO FIX CURRENCY MANIPULATION/MISALIGNMENT• The U.S. dollar is currently 25.5% overvalued
according to calculations by Dr. John R. Hansen
• Japan’s currency is undervalued by 25% and Germany’s by 23.6%.
• His solution: Charge a Market Access Charge (MAC) of 0.5% charge “on any purchase of U.S. dollar financial assets by a foreign entity or individual
• Start on journey to become a “Lean” company• Implement Lean accounting• Use Design for Manufacturing software• Use “Reshoring Tools” to return mfg. to
America• Choose U. S. vendors to wherever possible• Become active in organizations that promote
these ideas, such as Coalition for a Prosperous America (www.prosperousamerica.org)
WHAT CAN YOU DO AS A COMPANY?
CAN YOU DO ANYTHING AS AN INDIVIDUAL?
• Don’t feel there is nothing you can do
• Margaret Mead said, “Never doubt that a small group of thoughtful, committed citizens can change the world: indeed, it’s the only thing that ever has.”
• Remember, our country was founded by a small group of people that did indeed change the world by forming the United States of America
• What are you doing to help rebuild American manufacturing?
• Are you helping companies make, buy, or sell more Made in USA products?
• How can you help more companies reshorecompetitively?
• What are you doing to develop the next generation of manufacturing workers?
QUESTIONS FOR YOU!
• Michele Nash-Hoff is an authorized speaker for the Reshoring Initiative on how to return manufacturing to America. She is available as a speaker on a variety of topics related to manufacturing and workforce development.
• Contact: Michele Nash-Hoff• Email: [email protected]• Phone: 619-265-7607• Author of Can American Manufacturing Be Saved? Why
we Should and How we Can• Columnist for Industry Week• www.savingusmanufacturing.com