Commerce Department report highlights important role that manufacturing plays

January 12, 2012

The federal government should continue to invest significant amounts of money and time into research, education and infrastructure to re-establish the U.S. as a world economic leader, the U.S. Commerce Department said in a report.

The report, entitled "The Competitiveness and Innovative Capacity of the United States," was mandated last year by President Barack Obama as part of the America COMPETES Act, and was delivered to Congress on January 6, according to Industry Week.

Conclusions from the report, according to the news source, speak to how the U.S. can revitalize manufacturing by supporting research and development through tax credits and helping to create new product design methodologies.

Although the report outlines a general strategy that concerns improving education a shift in focus to math and science to help prepare the next generation, the Commerce Department noted that the creation of a flourishing manufacturing sector is crucial to the future of the U.S.

Throughout its history, manufacturing has been a source of prosperity, innovation, and pride for the United States. Manufacturing pays higher than average wages, provides the bulk of U.S. exports, contributes substantially to U.S. R&D, and protects national security, the report said.

According to the report, manufacturing is a tradable sector, making it a viable source of good jobs in the U.S. economy. The activity in the industry can be "transacted across distances," making it a volatile, yet potentially strong area for growth.

The report noted that the U.S. is currently at a crossroads for manufacturing, as an increase in off-shoring work and rising costs provides a challenge for businesses. However, due to these obstacles, the industry has adapted.

"Between 1987 and 2010, labor productivity in manufacturing rose at a 3.4 percent annual rate, almost 50 percent higher than the 2.3 percent annual rate in the entire non‐farm business sector," the report outlined as a positive effect from increased competition in the sector.

It is because of this improvement in productivity that the Commerce Department believes that the U.S. can remain a power in the sector. According to the report, with more government investment into the industry, American companies will see continued success.

The report noted that the government should invest in share technology infrastructure to help U.S. companies improve manufacturing, as this would help entrepreneurs by sharing the quest for innovation with these individuals.

"Government policy could increase the returns earned by the private sector on basic research-through policies such as tax credits and a well-functioning patent system-and encourage the private sector to do more basic research," said the report.