California Manufacturing Task Force Urges New Manufacturing & Trade Strategies

At the Northern California Manufacturing Summit held in Sacramento on February 19, 2016, attendees had the opportunity to sign up to be on a Manufacturing Task Force to prepare a report after selecting the most important issues affecting manufacturing during the concluding breakout session. Over the last month, the Task Force conferred via conference call and email to create a report that was approved last week. As chair of the California chapter of the Coalition for a Prosperous America, one of the co-hosts of the event, I disseminated the report to all of the summit sponsors, partners, and attendees, as well as all of the Congressional Representatives, State Senators, and Assembly members in the Sacramento region. The report will be disseminated to the rest of the California Congressional delegation in the near future. The final report is shown below. 

Michele Nash-Hoff| March 23, 2016 |Can American Manufacturing Be Saved]

“We are the business and community leader Task Force established by the ‘Northern California Manufacturing Summit’ event held in Sacramento on February 19, 2016. Nearly 100 business owners, civic, academic and labor leaders met in Sacramento for this nonpartisan economic summit to explore solutions to grow California’s manufacturing opportunities.

Co-hosts Placer County, the City of Sacramento, the Coalition for a Prosperous America were joined by lead sponsors Gerdau and the United Steelworkers Union, as well as more than a dozen other local and regional business and community organizations to sponsor the event. Participants and event partners listed below collaborated and prioritized the most important issues that face California manufacturers. A Task Force was created to deliver the group’s consensus to policy makers and to work for implementation.

A Manufacturing Strategy to promote growth should be a top state and national priority. Manufacturing not only creates innovation and wealth, but manufacturing has the highest jobs multiplier of any sector. Unfortunately, California lost 33.3% of its manufacturing industry representing more than 600,000 manufacturing jobs between 2000 – 2010, some to other countries and states. California is improving, but is lagging behind the rest of the U. S. in growth of the industry jobs (2% vs. 7.6 %.) Since the end of the recession, manufacturing’s share of California’s GDP has been 11.2% compared to 22.6% for the U. S. as a whole. California has remained at the ranking of 50^th for its business climate by the Small Business Entrepreneur Council Survival Index since 2013.

Manufacturing jobs provide a good, family-supporting wage compared to most service jobs. Long-term economic health in California cannot rely on service and public sector jobs. Policy makers and the public often underestimate the high-powered job growth benefit of a vital manufacturing industry.

We are advocating that our state and federal leaders take action on a progressive and comprehensive manufacturing strategy. This strategy would promote many of the desired initiatives supported by our business leaders, scholars, and working men and women across the country, including, but not limited to, tax reform, a balanced Trade initiative, regulatory reform, and workforce training programs. A broader Manufacturing strategy will have the most positive and lasting impact on our economy and the environment over any one single initiative.

We should be leading the world by not only educating people who will be designing the world’s most innovative products but manufacturing them as well. The benefits from a more balanced trade and manufacturing strategy will be to grow much-needed middle class jobs outside of the service industry and help to address environmental concerns from outsourcing to the lowest bidder in other parts of the world that do not have our environmental regulations or workers’ rights.

When manufacturing is outsourced to the lowest bidder for short-term gains we all lose. Our loss of good paying middle class jobs and the associated pollution and environmental impact is felt by all. By leveling the playing field, we can help to reduce pollution around the world and build a stronger middle class here in this country.

We must level the playing field by implementing a comprehensive manufacturing strategy. One that will encourage companies to make their products here offering good paying jobs and ensure that companies importing goods have to comply with the same common sense regulation we all support for clean air, water, and land, as well as safe working conditions.

The total cost of manufacturing overseas is much higher than what our short-term calculations show. We need to promote a manufacturing strategy that takes into account the total cost, not just the initial cost for a short-term gain. Instead, we should look at environmental impact, loss of intellectual property, human rights violations, and supply chain risk among other factors when making this calculation. When done this way, more companies will follow the emerging leaders in the reshoring movement, which is something we should all support. 

Additionally, attendees determined a comprehensive Trade Strategy isa top national issue that affects manufacturing in California. A national goal of balanced trade trade policy is necessary to grow jobs and the economy. Federal officials have refused to set a goal of the U.S. producing and exporting more than it imports. Instead, federal policies incentivize offshoring and unfairly subsidize imports thereby rewarding foreign mercantilism. The U.S. has the biggest trade deficit of any country in the history of the world. In 2015, the U.S. imported $759 billion more goods than it exported. We consumed more than we produced. Our 2015 trade deficit subtracted nearly 4% from our gross domestic product. (U.S. Bureau of Economic Affairs). Successful trading requires a comprehensive, integrated strategy to promote manufacturing as an essential element of our economy. We ask that you join us in setting a goal of a national balanced trade strategy. 

We need to shift towards border adjustable consumption taxes and away from taxes on income and jobs to neutralize foreign manufacturing advantages.  Over 150 countries have border adjustable consumption taxes (VATs) within their tax mix to lessen reliance on income and job taxes.  Manufacturers shipping to the U.S. receive an average 17% consumption tax rebate which subsidizes their exports.  U.S. companies not only pay U.S. taxes, but also pay the average 17% foreign consumption taxes on outgoing shipments.  Because California has the highest personal and corporate income taxes and capital gains taxes in the country, the addition of the foreign border adjustable consumption taxes makes it even more difficult for California companies to be globally competitive. 

We ask that you consider revenue and distribution neutral tax reform that addresses this foreign tax advantage for U.S. producers by shifting towards taxes on consumption and away from taxes on income and jobs.  Proposals from both Democrats and Republicans in Washington are being developed to achieve this goal right now.

We request that you work with us to prioritize developing and implementing a manufacturing and trade strategy for California and the nation that would incorporate improving the business climate through tax and regulatory reform, increasing net exports to help eliminate the U.S. trade deficit, and increase California job creation and growth. A healthy and vibrant California depends on a balanced, growing, and vital manufacturing industry and your support is needed. We ask policy makers to consider our recommendations and focus upon aligning governmental functions towards a comprehensive strategy to increase manufacturing as a share of our economy and our job opportunities.We would welcome the opportunity to meet with you to discuss our recommendations. “

Task Force Members

Karen Arneson, Parallax Inc., Rocklin

Christina Blackman, Davis Chamber of Commerce

John Dunn, Los Rios College

Alan Goodrich, PLM Consultant

Catherine Houston, United Steelworkers District 12

Walter Smyth, CBRE, Roseville

Emily Ziser, Davis Chamber of Commerce

 

Sponsors:

City of West Sacramento                               

Coalition for a Prosperous America

County of Placer

Gerdau

United Steelworkers (USW)

City of Davis

City of Elk Grove

Center for Applied Competitive Technologies

Consolidated Communications

Employment Training Panel

Gallina LLP

Advanced Test Equipment Rentals

Advantage Roseville

California Metals Coalition

CNMI

Los Rios Community College

Manex

Sierra College

Rabobank

Rancho Cordova

 

Partners:

California Summit

SME

I encourage leaders of manufacturing companies, business, professional, and trade organizations in other states to add their voices to ours to urge the next president and Congress to make developing a Manufacturing Strategy to promote growth a top national priority along with developing a comprehensive Trade Strategy that has the goal of balanced trade.