Editor's note. Penned by Jason Busch and Lisa Reisman, this column originally appeared in the June print issue of Surplus Record. Because of the importance of the topic, we have reprinted it here.
We occasionally encounter authors that we think do a credible job of summarizing a policy or economic perspective in a way that's difficult for US manufacturing to disagree with. When we encounter well-formulated arguments for the future of manufacturing, the arguments often transcend a political viewpoint. They go beyond taking sides like a polarizing Democratic vs. Republican or union vs. non-union issue. Rather, they speak to a post-partisan viewpoint that stands for the future of industry, if not the overall country.
Michelle Nash-Hoff, a thirty-plus year veteran of the US manufacturing community, is one of these new post-partisan voices. The author of Can American Manufacturing Be Saved is a measured voice of industrial experience and pragmatism -- and one that believes manufacturing is absolutely the mortar that can help bind together the different elements of our fragile economy. On her blog, she writes, "It's the loss of manufacturing jobs that is keeping unemployment so high. Too many manufacturers are sourcing all or most of their manufacturing offshore ... they aren't producing or buying everything for their products in the United States. Since 2001, we've lost 63% of the US textile industry and 74% of the US printed circuit board industry. We lost 47% of communication equipment jobs and 43% of motor vehicle and parts industry jobs."
Nash-Hoff should be required reading for US industrial companies today -- not to mention politicians and others who represent our interests in government and trade. In her work, she makes the case for the "need to establish a national manufacturing policy to be able to maintain a strong manufacturing industrial base as the foundation of our economy and create the jobs our country needs." In establishing her perspective, she's strong on facts and short on rhetoric. Granted, she overlooks the importance of trade to some degree when it comes to the export growth of companies like Caterpillar and other industrial giants, but in general, her arguments are spot on.
It's hard to dispute that low wages and government machinations (e.g., currency manipulation) in developing markets like China have harmed the US's manufacturing economy. And it's even harder to argue with the notion that the loss of domestic manufacturing jobs will make it more challenging for the US to build resiliency into our overall economy. Yet ultimately, Nash-Hoff seems in favor of letting the free market -- and market access -- help drive jobs back onshore (with the aid of policy that helps counter the manipulative behaviors of other countries). Writing for a local news source in San Diego, Nash-Hoff penned a column last year that highlights the case of Vaniman Manufacturing, a dental equipment manufacturer, which had previously moved sheet metal fabrication in 2002 to China for what it estimated would be a 50% total savings.
Flash forward five years, and the company realized that thanks to "shipping delays, security hassles, and poor quality control," that the move was not worth it. Moreover, US sources were getting more competitive as well. According to the CEO of the firm, a new San Diego-based supplier "was able to nearly match the Chinese costs by developing more efficient and creative production techniques." Moreover, "Vaniman was able to significantly reduce its inventory and the space required for inventory, due to smaller lot sizes being delivered."
Cases such as this highlight how US manufacturers -- even those further down the supply chain -- can enhance their operations to better serve the needs of customers that have been let down by the supposed benefits of sourcing globally. If we're interested in saving and hopefully creating manufacturing jobs in the US, perhaps we should take a lesson from situations like this and find ways of teaching domestic manufacturing suppliers to be more competitive rather than simply raising trade barriers (unless warranted based on a response to Chinese or other country actions), which could come back to hurt exports. After all, when it comes to quality, price and overall resiliency, we'd sooner bet on the sustainability of efficiency, customer intimacy and the the free market -- in the Western sense -- over cheap labor and government manipulation any day.
Jason Busch and and Lisa Reisman