Last July we told you about a duel at NAM, where the Hunter/Ryan bill divided the larger "manufacturers" (primarily outsourcers) and the small domestic manufacturers. The bill would allow manufacturers to petition the government for relief under trade laws due to foreign governments subsidizing their currencies… obviously aimed squarely at China. The small manufacturers were in favor, but the large ones, fearing a trade war that could disrupt their globally outsourced supply chains, were against it. In October we updated you on the story, with the news that NAM’s executive committee voted not to endorse the bill, basically siding with the small number of large company members against the wishes of their smaller company members that form the majority.
As we pointed out both times, neither side really gets it. The large company outsourcers are chasing cheap labor to China and beyond, and the smaller companies want external subsidies and barriers to provide a shield against supposed "competitive burdens." Neither wants to do what is really necessary for long-term global competitiveness: look internally to remove waste.
The latest issue of Manufacturing & Technology News brings us the latest scoop. The disenfranchised smaller company members of NAM, lead by steel company Nucor, are creating a coalition with farmers and labor officials in an attempt to influence trade policy. As one of the farm members put it:
"We are people who are getting off our asses and are doing something," says Fred Stokes, a Mississippi farmer and executive director of the Organization for Competitive Markets, which is spearheading the initiative. "We’re building a coalition of manufacturing, agriculture, services, labor, consumer interests, environmentalists and Archie Bunker regular Americans who give a damn about the country and who will come together and say we are doing it wrong. There is an argument to be made that we need trade, but there is nothing that we can produce in this country that somebody somewhere else can produce cheaper, so the question is, what are we going to do?"
Those of us in the lean world can think of a couple dozen things Mr. Stokes can do, but we’ll answer his question later. The large company outsourcers and NAM execs probably also have a couple ideas what he can do, but I won’t distract you with speculative visual imagery. But I bet I know what Mr. Stokes wants: trade barriers and subsidies.
Mr. Stokes is very familiar with subsidies. Farm subsidies will suck $190 billion (with a "b") out of the economy over the next decade. Additionally the artificial price supports create situations where American consumers pay multiples of the going global price for some staples, like sugar, which alone costs us $2 billion a year more than it should. The subsidies lead to overproduction, which leads to dumping, which makes it impossible for farmers in poorer countries to compete. It’s that regulation balloon again… push it in on one side and it will pop out out in another, often unexpected spot.
It’s pretty easy to keep on making the same crop year after year, ignoring the global market, and relying on subsidies and price supports to stay afloat. Your biggest problem is probably trying to find a grain elevator that isn’t already filled up thanks to all the other subsidized farmers. Just like it’s easy to keep on making the same sprockets and gears and motors, keeping your head in the sand and hoping the government will help keep you in business by shielding you against competition.
Fortunately there are successful companies and individuals in both industries, lead by courageous and visionary people who believe there must be a better way. Farmers have found success by identifying and exploiting market niches with specialty crops. Some are even diving into lean manufacturing methods.
Back to answering Mr. Stokes’ question about what he, and farmers and protectionist-minded manufacturers can do now. Take a look around you. Look at the companies that are succeeding in the U.S., who aren’t making excuses or looking for the government to distort their market. Realize that what they are doing is looking inside, at their internal processes. They have leveraged lean tools, culture, people, and leadership commitment to reduce their wasteful convoluted processes. In doing so they have reduced their costs by far more than the so-called "competitive burdens" are worth. These are companies of all sizes and technologies. And yes, they include some foreign companies operating very well on U.S. soil, like Honda and Toyota. By reducing their costs they are able to compete, globally, based on delivering customer value.
Mr. Stokes and his friends can daydream about operating as an island, while the global market grows up around them. Like it or not, geographic barriers are falling. The internet, entrepreneurial highly-educated people worldwide, and increasing global capital wealth are creating highly competitive companies – feeding strong markets – worldwide. Globalization has already arrived. They can try to ignore or distort it… and fail. Or they can learn to compete to capture part of the pie.