Reinvigorating U.S. manufacturing, saving American jobs

February 24, 2012

If President Barack Obama wants to bring a critical mass of foreign-based manufacturing production and associated jobs back to the U.S., tax breaks and other domestic incentives may not be enough, MarketWatch reported.

According to the news source, although the idea of "insourcing" could benefit manufacturing strategy in the U.S., a majority of the turnaround would have to come from a reversal of misguided U.S. trade policies.

The president's strategy, unveiled in the State of the Union address, highlights how American innovation and productivity still generally lead the world, and a convergence of several other factors may help the U.S. retain a competitive advantage.

Obama spoke to how tax policy revisions and better worker training would help to lower production costs for companies in the U.S., increasing the competitive edge, especially in advanced industries where labor costs are small.

However, there is a need for more government intervention, like in Germany and Japan, as they generally subsidize key components of manufacturing, according to MarketWatch.

The news source noted that the U.S. government would also have to change its trade policy with countries like China, as multinational corporations that are based in the U.S. still enjoy the same protections that American business receive, despite a significant portion of their production occurring overseas.

Howard Wial, a fellow for the Brookings Institution Metropolitan Policy Program, wrote an article for CNN describing how the common perceptions about the manufacturing industry in the U.S. are wrong.

He noted that increased use of technology, automation and more productive workers are not what is limiting a growth in the creation of manufacturing jobs, as he too spoke to the need for new policies concerning the sector from the U.S. government.

Wial outlined how the U.S. could take a harder line against China's currency manipulation and wage suppression, as it could have controlled the initial outsourcing trend in the early 1990s that brought many manufacturing jobs to Asia.

According to the article, thanks to rising wages in China and increased shipping costs, along with potential incentives for companies to keep manufacturing jobs in the U.S., this trend could stop. This, coupled with increased funding for the Manufacturing Extension Program along with other federal and state efforts, may help to bring work back to America.

"These trends are the basis for a more robust federal manufacturing policy. If we build that, the United States can stem and even reverse its losses of manufacturing jobs," said Wial.