July 28, 2003
The Manufacturing World's China Conflict
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commentary

The Manufacturing World's China Conflict

Commentator Barbara Hackman Franklin, former U.S. secretary of commerce and president of Barbara Franklin Enterprises, takes a look at a growing problem in America`s manufacturing sector.


"A political issue about China is quietly brewing on Capitol Hill. Small and medium-sized manufacturers are sounding the alarm. They are losing business to lower cost Chinese competitors. The rub is that some of this competition is coming from the Chinese branches or partners of large U.S. companies. It's true that a number of large American manufactures are beefing up their operations in China. They want to build a base, and gain the advantages of lower-cost manufacturing. This shifting of production facilities to lower-cost areas is part of the fabric of globalization. It's something larger companies can do with relative ease. But small and medium-size companies simply don't have the
resources to shift production so easily. They are feeling the pinch and China is an easy scapegoat. These firms point to other examples of unfair competition: the burgeoning trade deficit; and China is dragging its feet on its WTO commitments. Politically, it's the small- and medium-sized players against the Goliaths: China and the multinationals. But small companies are this economy`s biggest job creators, and they have political clout. My bet is they will find an attentive ear as elections approach. Presidential candidates and Congress will have to take a fresh look at the costs, regulation, litigation, and health care if we want to keep more manufacturing here at home."


-- Barbara Hackman Franklin,


THE BUSH ADMINISTRATION'S MANUFACTURING AGENDA


In the following paragraphs, the U.S. Dept of Commerce outlines the goals and objectives of its manufacturing agenda.


"'Made in America' remains the global gold standard, the mark of the highest quality and most innovative products on Earth. Our manufacturers demonstrate the best in American jobs and American values, enhancing our national competitiveness while improving lives around the world."


-- Donald L. Evans, Secretary of Commerce

The Bush Administration is aggressively supporting American manufacturing workers with a robust policy agenda that promotes an entrepreneurial business climate, invests in innovation, and ensures our citizens are protected and productive. From tax to trade to education to health care, the President's agenda will improve manufacturing competitiveness and create sustainable economic growth.


I. PROMOTING AN ENTREPRENEURIAL BUSINESS CLIMATE


  • PRO-GROWTH TAX POLICIES: The President took office with a slowing economy about to enter a post-bubble recession. Since then, the President has offered bold fiscal policies that provide short-term stimulus and long-term growth. Many experts credit the landmark 2001 tax relief package with shortening the length and impact of the recession. The stimulus package passed in March 2002 included increasing expensing for business capital expenditures by 30% for three years, of particular importance to manufacturers. And in the new jobs and growth package proposed this year, the President would end double taxation of dividends, accelerate the 2001 tax relief, and encourage job creating
    capital investment by increasing current expensing limits - all high priorities of U.S. manufacturers


  • FREE AND FAIR TRADE: The President is deeply committed to free and fair trade which will provide a level playing field and unfettered access for U.S. manufacturers to global markets. Despite inheriting a trade agenda that failed in Congress and stalled in Seattle, the President secured trade promotion authority from Congress and re-energized the WTO process in Doha. The Bush Administration is fighting for American workers and consumers on the world stage by pushing for a world free of duties by 2015, new bilateral free trade agreements, a Free Trade Area of the Americas, for substantial reform of the export control regime, and for replacing the FSC tax provision with WTO
    compatible rules. The President's trade priorities will enhance economic growth, create better paying jobs, raise standards of living, and promote freedom.


  • LIABILITY REFORM: Frivolous lawsuits don't create jobs or help grow our economy. Excesses of the tort liability culture hinder American workers and manufacturers through increased health care costs and increased liability insurance premiums. While consumer protection remains our paramount concern, and people who have been harmed deserve their day in court, we can and must pass common sense medical liability reforms.


  • RESPONSIBLE CORPORATE STEWARDSHIP: While the vast majority of American business leaders exemplify the character and values on which our free enterprise system rests, wrongdoing in the late 1990s by a few executives caused a serious confidence crisis in our markets. In response the Administration has taken aggressive steps to restore investor confidence and pensioner trust, investigating and prosecuting those who broke the law and closing loopholes to increase investor information.


  • II. INVESTING IN INNOVATION AND TECHNOLOGIES FOR TOMORROW


  • RESEARCH & DEVELOPMENT: The Administration is committed to maintaining American leadership in technology development and commercialization. Americans will never win the game to see who can pay their workers less - we don't want to, and continued innovation means we will not have to. Innovation excellence starts with research and development, and since taking office the President has proposed record levels for federal R&D -- $123 billion in 2004, up over 25% since taking office. In addition, since 2/3rds of our national R&D is performed by the private sector, the President has asked Congress to make the R&D tax credit permanent - a long-time priority for advanced manufacturers.


  • DEVELOPING STANDARDS AND COORDINATING FEDERAL EFFORTS: As the principal non-tariff barrier to American goods reaching markets around the world, standards and technical regulation can be an obstacle to the free flow of commerce. The Administration is working with principal trading partners, government agencies and industry to develop a global strategy that will get US products to the international marketplace faster and cheaper. The National Institute of Standards and Technology (NIST) is leading a team of six federal agencies to address manufacturing research and development issues across the federal government. The Administration continues to offer US manufacturers a
    wide number of useful services to meet technical challenges and improve measurement capabilities.


  • INTELLECTUAL PROPERTY PROTECTION: For any knowledge-based economy to succeed, it needs to protect intellectual property. Advanced manufacturers are especially dependent upon strong and consistent protections that allow them to recoup their investments in advanced technologies and capitalize upon their innovations. The Bush Administration has made international enforcement of intellectual property rights a top priority, at the same time dedicating the needed resources to improve operations (higher quality, faster turnaround) at the US Patent & Trademark Office, and we are working with our trading partners to achieve an electronic, globally harmonized patent system. The
    President has also dedicated $1.404 billion in his FY2004 budget for the U.S. Patent and Trademark Office in order to improve quality and implement e-government initiatives for patent and trademark application processes. In addition, the President's budget reflects DOC's efforts to eliminate the practice of using USPTO fee revenues for unrelated federal programs.


  • INFORMATION INFRASTRUCTURE: The American economy has become a knowledge-based system. From basic service jobs to advanced manufacturing, our success in the 21st century will depend heavily upon our information infrastructure, particularly our ability to access and use high-speed information networks. The Bush Administration has aggressively promoted broadband deployment and usage, while taking comprehensive steps to more efficiently manage the radio spectrum.


  • ENERGY & CONSERVATION: The Bush Administration is committed to sound conservation policies that use technology to promote energy efficiency, reduce our dependence on foreign oil and improve our environment. Because the greatest progress will come about not through litigation and regulation, but through technology and innovation, the President has proposed investing over $1 billion in hydrogen fuel cells and fusion energy research. We have proposed a national energy plan that encourages greater efficiency, increases domestic production, improves conservation and invests hundreds of millions more into Global Climate Change research and understanding.


    III. PROTECTED AND PRODUCTIVE CITIZENS


  • NATIONAL SECURITY: For our economy and society to move forward, we need to protect our citizens around the world. Since September 11, this President has taken bold steps to establish a homeland defense infrastructure, harden U.S. targets, better inform citizens, and hunt and destroy terror networks around the world. Our manufacturing base remains central to our overall security efforts, developing more effective weapons and protective technologies, working closely with first-responders and military planners and strengthening its own infrastructure against vulnerabilities.


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