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U.S. manufacturing is in crisis, with almost 6 million jobs lost and 42,000 factories closed over the last decade. Even worse, we are losing know-how and ultimately control over our future. While the U.S. retains important strengths, U.S. manufacturing competitiveness is slipping rapidly. There is no reason to resign ourselves to defeat or to sugarcoat the challenges we face. We possess the tools, talent, and resources to revive manufacturing. But to do so we need a national strategy for manufacturing renewal. This report explains the five key reasons why we need to act quickly and boldly to revitalize our manufacturing sector.
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April 26, 2011
The Case for a National Manufacturing Strategy Presenters: Dr. Robert D. Atkinson, President, ITIF Stephen J. Ezell, Senior Analyst, ITIF Respondents: Mark Rice, President, Maritime Applied Physics Corporation Ro Khanna, Deputy Assistant Secretary, International Trade Admin. Aric Newhouse, Senior Vice President, National Association of
Manufacturers
Today’s Presentation
3
2
Why We Need a National Manufacturing Strategy
The State of U.S. Manufacturing 1
2
4 Outlines of a Strategy
Why Manufacturing is Important
U.S. Manufacturing: The Agriculture Story?
U.S. Manufacturing: Or the Rust Belt Story?
Flickr: Aphex Twin
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
Overall Manufacturing Grew Slower than GDP
Total manufacturing
Source: Bureau of Economic Analysis
Percentage Change in Real Value Added, 2000-2009
GDP
+5% +15%
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
And Most Manufacturing Sectors Shrank
15 of 19 manufacturing sectors shrank
Total manufacturing
Source: Bureau of Economic Analysis
Food, beverage and tobacco products Electrical equipment and appliances Chemical products Machinery Printing Wood products Motor vehicles Fabricated metal products Paper Products Primary Metals Nonmetallic mineral products Plastics and rubber products Apparel and leather Textiles Furniture
Percentage Change in Real Value Added, 2000-2009
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
Only Four Sectors Grew
Average share of manufacturing output
in 2000: 79%
Average share of manufacturing output
in 2000: 21%
Total manufacturing
Source: Bureau of Economic Analysis
Computer and electronic products:
+260.5%
Petroleum and coal products: +73.0%
Percentage Change in Real Value Added, 2000-2009
8
Real Manufacturing Value-Added As Share of GDP
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1987 88 89 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 2009
Manuf
9
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Nondurables
Real Manufacturing Value-Added As Share of GDP
10
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Durables
Nondurables
Real Manufacturing Value-Added As Share of GDP
11
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Durables
Nondurables
Computers
Real Manufacturing Value-Added As Share of GDP
12
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Durables
Durables - computers
Nondurables
Computers
Real Manufacturing Value-Added As Share of GDP
13
Source: Bureau of Economic Analysis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Manuf
Manuf - computers
Durables
Durables - computers
Nondurables
Computers
Real Manufacturing Value-Added As Share of GDP
Capital Stock For Many Manufacturing Sectors Has Fallen
Source: Bureau of Economic Analysis
-27% -29%
-6%
-21%
-14%
-5%
-3% -2%
-7%
Primary metals
1981
Textiles
1997
Wood products
2000
Apparel and leather
2001
Paper products
2002
Electrical equipment
2002
Plastics and rubber
2002
Food, beverage and
tobacco
2002
Motor vehicles
2003
Year of Peak Capital Stock and Percentage Decline Since
Source: Bureau of Economic Analysis
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
1959-1969 1969-1979 1979-1989 1989-1999 1999-2009
Percentage Change in Fixed Asset Investment, by Decade
Manufacturing
Total private fixed assets
Performing arts and spectator sports
Funds, trusts, and other financial vehicles
Overall Growth in Manufacturing Assets Has Stalled
Source: Bureau of Economic Analysis
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
1959-1969 1969-1979 1979-1989 1989-1999 1999-2009
Percentage Change in Fixed Asset Investment, by Decade
Manufacturing
Total private fixed assets
Performing arts and spectator sports
Funds, trusts, and other financial vehicles
Falling Behind Growth in Total Private Fixed Assets
Source: Bureau of Economic Analysis
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
1959-1969 1969-1979 1979-1989 1989-1999 1999-2009
Percentage Change in Fixed Asset Investment, by Decade
Manufacturing
Total private fixed assets
Performing arts and spectator sports
Funds, trusts, and other financial vehicles
As U.S. Moved from a Manufacturing to a Financial Engineering Economy
Today’s Presentation
3
2
Why We Need a National Manufacturing Strategy
The State of U.S. Manufacturing 1
18
4 Outlines of a Strategy
Why Manufacturing is Important
Why is Manufacturing Important?
1. Robust manufacturing sector needed to close the trade deficit.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Services Exports Non-manufactured Goods Exports
Manufacturing Exports
Compound Annual Growth Rate, 2000-2010 Compound Annual Growth Rate to Close Trade Deficit, 2010-2019
Export Growth Required to Close Trade Deficit
Why is Manufacturing Important? 2. Manufacturing is a key source of employment and good jobs.
0.0 2.0 4.0 6.0 8.0
10.0 12.0 14.0 16.0 18.0
Employment Multipliers by Industry
Why is Manufacturing Important? 3. Manufacturing is a key source of R&D and innovation activity.
0% 5%
10% 15% 20% 25% 30% 35% 40% 45%
Product Innovation Process Innovation
Percent of Companies Reporting Innovation by Industry
Why is Manufacturing Important? 4. Manufacturing and services are inseparable and complementary.
Why is Manufacturing Important? 5. Manufacturing is vital to U.S. national security.
Today’s Presentation
3
2
Why We Need a National Manufacturing Strategy
The State of U.S. Manufacturing 1
24
4 Outlines of a Strategy
Why Manufacturing is Important
Why We Need a Manufacturing Strategy 1. Other countries have manufacturing strategies.
Why We Need a Manufacturing Strategy 2. Systemic market failures affect manufacturing activity.
Why We Need a Manufacturing Strategy 3. Unlikely to get back key mfg. sectors once their lost.
Today’s Presentation
3
2
Why We Need a National Manufacturing Strategy
The State of U.S. Manufacturing 1
28
4 Outlines of a Strategy
Why Manufacturing is Important
What Should Washington Do?
Start Looking out for Number 6
Getting the 4 T’s Right
Flickr: marzzelo
Flickr: Alan Miles NYC Flickr: Nedral
Tech Talent
Trade Tax
Supported by a
National Innovation and Competitiveness
Strategy
Getting the 4 T’s Right
Robert Atkinson [email protected]
Facebook: facebook.com/innovationpolicy
Blog: www.innovationpolicy.org
YouTube: www.youtube.com/user/techpolicy
Website: www.itif.org
Twitter: @robatkinsonitif
Follow ITIF:
Thank You Stephen Ezell [email protected]
