Rebuilding Domestic Manufacturing: Strategies to Encourage Domestic Production/Supplier Investment

I've been reading quite a bit lately about strategies the US might employ if it was serious about rebuilding a domestic manufacturing base in areas that in part or whole have already moved offshore. One column that I recently came across comes from an industry practitioner, Michael Colozzi, in a regional newspaper. Yet the ideas he presents are anything but a local backwater. Colozzi believes that we need to fundamentally address labor and other laws in the US that are holding back the ability of domestic suppliers and manufacturers to compete on the world stage.

For example, take labor costs and manufacturing efficiencies. Colozzi suggests that China "encourages" 12-hour shifts in manufacturing, which "industrial engineers will tell you" are far more efficient for a manufacturing environment based on worker momentum and production per man-hour. In addition, in China, "workers work three 12-hour days one week and four the next. Overtime is paid based upon total hours worked in any four-week period. In other words, each month these workers work 14 days instead of 20 and log a total of 168 hours, of which eight are overtime ... By contrast, a 12-hour shift in America brings four hours of overtime."

Longer shifts without incurring the same overtime penalty benefit workers as well. Consider how "Three and four-day breaks revitalize production line personnel" and "Commuting costs incurred by workers are reduced 30 percent." Moreover, the Chinese have greater flexibility on scheduling on weekends, allowing seven-day schedules without requiring premiums for these days. Colozzi also goes into detail on how the export VAT rebate works in China, a subject we're way too familiar with based on personal importing and trading experience in our office, by providing tax breaks to Chinese manufacturers. To wit, "any manufacturer who exports 30 percent or more of their product is totally tax exempt for three to five years, depending on the region in which they are located and the product they manufacture. In some cases and for some products, the tax holidays are even longer. In addition, manufacturers enjoy an 80 percent tax rebate on taxes paid on raw materials purchases that are used to produce goods that are exported."

I agree with Colozzi that there are numerous paths that the US should consider to better compete on the manufacturing world stage. But until we get an Executive and Legislative branch that is willing to take on the interests (actually, I would argue dis-interests) of organized labor to overcome what have become arcane labor practices on the world stage as well as offering true stimulus and tax incentives to encourage export production, I think our chance of rebuilding domestic sources of supply in industrial markets will continue to remain low.

Jason Busch

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