As the chief executives of two global trade associations that represent manufacturers, we are pleased with the focus of many governments in promoting pro-manufacturing agendas that benefit our members around the world.
In many countries, governments are making significant investments in public-private partnership research institutes that are focused on advanced manufacturing and innovation. For example, Germany’s Fraunhofer-Gesellschaft has established 67 institutes, the Republic of China (Taiwan) has 11 such organizations, and the United Kingdom has seven. In arguably the boldest initiative, China has pledged to invest $600 billion in research and development in seven priority areas, of which one is high-end manufacturing equipment.
In the United States, by contrast, policymakers remain beset by indecision and complacency to “level the playing field,” even as the country’s share of the global manufacturing market erodes. The time for action is now, beginning with passage — in the remaining days of the current Congress — of the Revitalize American Manufacturing and Innovation Act (S 1468, HR 2996).
The U.S. manufacturing sector has historically been a powerful engine for economic development and job creation, and it remains vitally important today. In 2011, manufacturing contributed $1.8 trillion to the nation’s economy and was responsible for 47 percent of all U.S. exports. Moreover, manufacturing has a significant “multiplier effect.” The Milken Institute estimates that for every job created in manufacturing, 2.5 jobs are created in other sectors. In some industry sectors, such as electronics and computer manufacturing, the multiplier effect is 16-1.
Unfortunately, the United States lacks its own manufacturing strategy, and the result has been an attrition of domestic manufacturing capabilities. The U.S. manufacturing industry knows all too well the ferocity of the global marketplace. Over the last half century, U.S. manufacturing employment as a percentage of non-farm employment has fallen from nearly 30 percent to roughly 10 percent. In the last decade, the United States’ share of the global manufacturing sector has dropped as well. Countries such as South Korea, China, Japan and Germany have a larger share of the advanced manufacturing sector than the United States, and each of these countries has a positive trade balance in advanced manufacturing products. In contrast, the United States had an $81 billion trade deficit in 2010.
But promoting manufacturing is about more than job creation. It is also about supporting an ecosystem of innovation. A 2012 Brookings report, titled “Why Does Manufacturing Matter?,” concluded, “The location of production is an important determinant of which countries lead current and future technology cycles.” Co-location of innovation and production offers many intangible benefits not always quantifiable on a company’s balance sheet.
To remain a global technology leader, the U.S. public and private sectors must better appreciate the importance of domestic manufacturing capabilities to innovation. Enactment of the RAMI Act would be a great step for the United States to demonstrate its long-term commitment to innovation. Introduced by Sens. Sherrod Brown, D-Ohio, and Roy Blunt, R-Mo., and Reps. Tom Reed, R-N.Y., and Joseph Kennedy, D-Mass., the legislation would authorize a national network of institutes for manufacturing innovation, focused on bridging the gap from basic research and development to full-scale production and commercialization of products. The Obama administration has already established four such institutes and has plans to launch more, but building a more robust and diverse network of institutes will require Congress to pass the RAMI Act.
The RAMI Act has strong bipartisan support and was passed by the House of Representatives in September. The Senate Commerce Committee has approved the bill as well. Although there are only a few working days left in the current lame -duck session, the RAMI Act can still win congressional approval before the year’s end.
Such a development would be encouraging news for America’s manufacturers and everyone who benefits from U.S. manufacturing. We call on Congress to complete action on this bill and President Barack Obama to sign it into law. This would be a key step towards “leveling the playing field” globally and laying the foundation for future U.S. economic development and technological innovation.
Dr. John Mitchell is president & CEO of IPC – Association Connecting Electronics Industries and Denny McGuirk is president & CEO of Semiconductor Equipment and Materials International.