Within a month of the presidential election in November, the National Council For Advanced Manufacturing (NACFAM) and the Information Technology and Innovation Foundation (ITIF) came out with policy recommendations for the burgeoning Trump administration.
NACFAM suggested encouraging policymakers to consider bills that would provide federal education funding for state programs that enable schools to hire more career counselors to help educate students about jobs in the area of advanced manufacturing.
NACFAM also promoted tax credits for employers that provide workers with technical skills that are required to use advanced manufacturing process technologies and incentivize industry-recognized certification and apprenticeship training programs.
Both increased capital investment and increased STEM talent could help drive productivity, Stephen Gold, CEO of the Manufacturers Alliance for Productivity and Innovation (MAPI), said.
“When productivity growth increases, so do living standards,” he added. “So there is a great deal of risk if we don’t enact policy to stoke the smart manufacturing revolution, and at the same time a great opportunity for gain if we can move forward on those policies.”
The ITIF, a science and technology think tank, urged the Trump team to articulate a national smart manufacturing strategy, ensure collaboration between the Manufacturing Extension Partnership centers and Manufacturing USA member institutes, direct the National Institute of Standards and Technology (NIST) to continue developing interoperable standards and “negotiate—and enforce—trade agreements that preclude partner nations from imposing barriers to cross-border data flows.”
As it did so, the think tank asserted that Trump “has made bolstering US manufacturing an important policy priority.”
Trump made proposals while campaigning that would directly impact the manufacturing industry.
Those proposals include lowering the corporate tax rate to 15%, threatening to introduce forced localization policies on US firms, relying on tax and trade reform efforts to boost job growth, shutting down the Export-Import Bank and cutting the Dept of Education Common Core.
Regarding trade pacts, Trump’s seven-point trade plan circulating at the start of the year outlined initiatives that included immediately informing NAFTA partners that the US intended to renegotiate the terms of the pact to better benefit US workers. If NAFTA partners did not agree, Trump would launch efforts to get the US to entirely withdraw from the deal.
The plan also included initiatives to: bring trade cases against China, in the US and at the World Trade Organization; withdraw from the Trans-Pacific Partnership, a measure that to date has not been ratified, and use his executive power to remedy trade disputes if China did not stop its “illegal” activities, including its “theft” of US trade secrets.
The plan was part of Trump’s efforts to negotiate trade deals that create jobs and increase wages in the US and reduce the country’s trade deficit.
The most pressing concern NACFAM and ITIF have about the proposals relates to international trade.
The commander in chief will, it seems, keep people guessing for a long while about actual policy moves in manufacturing.
A ‘wrong approach’ on trade
Trump’s announced plans to automatically cancel existing trade policies is “the wrong approach to take,” Fred Wentzel, executive VP at NACFAM said. “We would prefer to see the new administration examine its options first and quickly explore the probable outcomes before saying yes or no to any existing policy.”
How the administration will view the relationship of international trade and the larger issue of US economic growth remained to be seen in January.
“We must remember that the world now operates like a global village, which means people and products move freely throughout the village,” Wentzel said. “Trade within the village must be treated as ‘a natural way of life’ that permits all occupants of the village to enjoy free access to it. As everyone enjoys this privilege, the village’s economy will grow and prosper.”
Concerns vary by a firm’s size
Gold said the concerns small and large manufacturers have about the policies Trump introduced differ.
“Trump campaigned for tax reform; small manufacturers will want the Trump administration to work for changes in the tax code that benefit S corps as well as C corps,” he said. “Trump also campaigned for a rewrite of NAFTA and a moratorium on free trade treaties; manufacturers with global markets want to ensure that they continue to have access to their overseas markets, and that foreign barriers are not erected for their exports.”
Trump’s comments regarding consequences for companies shifting operations outside the US are something manufacturers will be watching closely, he noted.
Manufacturers open plants in other countries for a variety of reasons, but the most common is for the purpose of serving an overseas market, Gold said. The same occurs when foreign manufacturers open plants in the US in order to serve the American market.
“If the new administration wants to encourage manufacturers to remain in the country, it should work with Congress to develop incentives to create a more competitive environment for manufacturing business in the US,” he said.
Some of the policies Trump spoke about would benefit the manufacturing sector, he said.
Trump recognized the need for regulatory reform, to encourage more innovation and job creation in the sector, Gold said.
“Small manufacturers are disproportionately affected by bureaucratic red tape,” he added. “The newly elected president has also expressed a real interest in modifying the tax code, including reduced rates for both C and S corps and simplification. Manufacturers would welcome both of these initiatives.”
‘Proactive’ public policies sought
Stephen Ezell, VP for global innovation policy at ITIF, noted that nations around the world are implementing smart manufacturing strategies and making investments to ensure that their manufacturing enterprises are positioned to take advantage of the smart-manufacturing revolution.
“If the United States wishes to remain a leading smart-manufacturing economy, policymakers must implement robust, proactive, and coordinated public policies that support America’s manufacturing sector and its ability to leverage smart-manufacturing techniques,” he said.
Smart manufacturing could, the ITIF said, reduce the advantages low-wage nations have in the manufacturing industry in favor of higher-cost nations like the US, but only if policymakers act.
Recognizing the importance of smart manufacturing to their industrial future, several countries have launched policies and programs to support R&D, and deployment of related technologies, ITIF said, noting that those nations include China, Germany, Korea, Sweden and the UK.
“To ensure America’s continuing leadership in smart manufacturing,” ITIF in December urged Congress to:
- Pass the Small Business R&D Act;
- Reform the Workforce Investment Act system;
- Pass the Energy Modernization Act;
- Pass the Manufacturing Universities Act;
- Pass the National Fab Lab Network Act;
- Allocate funding to build out the Manufacturing USA network;
- Provide a stronger tax incentive for investment in machinery and equipment;
- Make the NIST Manufacturing Extension Partnership cost-share ratio more generous;
- Expand the development and use of standards-based, nationally portable, industry-recognized certifications designed for specific manufacturing sectors;
- Boost support for vocational-education programs at community colleges;
- Fund a pilot program to integrate the maker movement and makerspaces into high schools;
- Fund R&D into underlying technological challenges relevant to the Internet of Things;
- Fund the National Strategic Computing Initiative and federal high-performance computing initiatives; and
- Support trade agreements that preclude partner nations from imposing barriers to cross-border data flows.
- Maintaining the Ex-Im Bank and increasing its funding authorizations.
No new policy is a risk
Gold said there is definitely a risk in slowed, or lack of new, policy to support smart manufacturing.
“The countries that become leaders in smart manufacturing will attract more investment and more talent to their borders,” he said. “And, as has happened in other technologies, once a country loses an advantage it is hard to recoup losses.”
The US uses a worldwide tax system to tax overseas earnings, which encourages companies to keep their money overseas, Gold said.
US companies keep about $1.4 trillion in cash offshore in an effort to avoid paying billions of dollars in taxes, according to a report Oxfam America published in April.
“We need policies that will encourage domestic and foreign companies to make capital investments—and technology investments—in the US,” Gold said. “The most efficient way to encourage investment is through the tax code. I think that making our corporate tax rates more competitive will dramatically increase the amount of investment here.”
Will gridlock continue?
Washington gridlock is the reason very few new manufacturing-related policy decisions were made in the last six years, Wentzel noted.
“In a period of divided government and sequestration, policymakers haven’t focused on very many new initiatives or approved any that required new funding,” he said.
Because the Republican Party is in control of both the federal executive and legislative branches of government, more could get done, and possibly quickly.
Gold said there are major divisions even within the two major parties that have effectively prevented negotiations that might bring the two sides together.
“Policymakers pay lip service to smart manufacturing,” he added. “Unless a member is completely opposed to technology and economic growth, smart manufacturing presents a clear road to make factories more competitive. I sense [smart manufacturing] has real bipartisan support.”