Robert E. ScottDirector of Trade and Manufacturing Policy Research

Economic Policy Institute

WHAT FUTURE FOR U.S. JOBS AND MANUFACTURING?

REVIVING U.S. MANUFACTURING

A Presentation to the Board And Staff of

Interfaith Worker JusticeMONDAY, DECEMBER 10, 2012

Why is manufacturing important?

• Source of high wage/good benefit jobs for workers without college degrees.

• Cannot close the trade deficit without exporting more manufactured goods.

• Best way to bring economic recovery – we need sustained demand, no bubble.

• One job in manufacturing supports 2-3 additional jobs, eg, networks of suppliers, R&D, process engineering, etc; the loss of manufacturing means the additional loss of other high end, highly skilled jobs.

• Manufacturing is essential to technological innovation.

Why is manufacturing important?

Manufacturing is essential for a healthy economy

with good jobs

Manufacturing Trends

What have been the trends in U.S. manufacturing?

U.S. manufacturing employment, Jan 1970-Oct. 2012

The Trend in U.S. Manufacturing

• 1970 – 1998: High manufacturing productivity growth was offset by rapidly growing demand for domestic manufactured, so manufacturing employment was roughly stable.

• 1998 – 2010: 6.1 million manufacturing jobs lost. • Productivity growth caused only a small share of

the manufacturing jobs lost since 1998. • Most of the lost jobs were due to the huge rise in

the U.S. trade deficit in manufactured goods.

Jobs and the Trade Deficit with

China

What happened to manufacturing

There has been a big decline in the growth of value added in

manufactured goods produced in the US, either for domestic consumption or export, largely due to a rise in the

value of imports, harming the economy and workers.

The Decline in Manufacturing

Is the decline in manufacturing the inevitable result of productivity gains and/or globalization … so there’s nothing we can do about it?

• NO

The Decline in Manufacturing

What caused the decline in manufacturing?

The Decline in Manufacturing

The decline in manufacturing is largely due to policy choices – today we discuss the two most important ones.

1.Unfair trade practices2.Lack of support for the manufacturing sector

Unfair Trade Practices: 1

Currency manipulation • Approximately 20 countries are significant

currency manipulators including China, Taiwan, Malaysia, Saudi Arabia and Switzerland

• Eliminating currency manipulation could create 2.2 million to 4.7 million U.S. jobs over next two to three years.

Unfair Trade Practices: 2

Subsidies / dumping•China has poured tens of billions of dollars over the past decade into:

• Steel• Paper• Auto Parts• Solar panels• Glass

•China’s Steel capacity has increased ten-fold in a decade• China and many other countries found guilty in

dumping cases (sales below cost) in many products

Unfair Trade Practices

There is a conflict of interest between Wall Street (financial institutions, large retailers, and ? multinational manufacturers?) and Main Street.

Our policies support and our politicians are siding with Wall Street, not our Main Street manufacturers, but this is not in the best interests of the people of the US.

Unfair Trade Practices

Our trade problems and loss of manufacturing are largely driven by “Wall Street” corporations (multinational manufacturers and financial firms) that benefit from other countries’ unfair trade practices which allow them to produce cheaply abroad. The Citizens United decision enhanced the power of MNCs and Wall street firms.

Our trade/manufacturing problem is a political, not economic, problem.

It is not an inevitable outcome of globalization or productivity increases in manufacturing.

Lack of Support for Manufacturing

Other countries with strong manufacturing sectors provide support for manufacturers that we fail to do.

The U.S. could and should support manufacturing. We’ll discuss specifics in upcoming slides.

What can be done to address unfair trade practices and provide support for

manufacturing?

What Can Be Done re: Unfair Trade Practices

• Eliminate global currency manipulation. Outlaw purchases of U.S. government securities by countries that won’t sell their own. This is legal under the WTO principle of reciprocity.

• End subsidies. The most egregious are illegal under WTO. We need an independent government agency to initiate fair trade cases.

• Trading system reform. Revise U.S. general administrative trade law.

What Can Be Done re: Support for Manufacturing

• Increase spending on training and community college programs

• Increase government R&D (nondefense)• Greater access to capital for manufacturing firms• Manufacturing extension service• Invest in new industries, make commitments to new

products (government purchases)• Invest in infrastructure: in short term, creates jobs and

increases demand for manufactured goods; in longer term, boosts private sector productivity

Manufacturing in the U.S.

The U.S. can have, and needs to have, a strong manufacturing sector.

It is a question of power, politics, and internal U.S. policies that can and must be changed.

Additional Resource

Harold Meyerson, “The Politics of Industrial Renaissance,” American Prospect December 2009

U.S. manufacturing: Growth in real value added and labor productivity,

1990-2011

U.S. manufacturing: Goods trade deficit,

1989-2011

U.S. manufacturing: Real value added, 1989-2011

Trade and Manufacturing Employment