By Kevin Meyer
Here I naively thought perhaps we had moved on. Over the past several months we've had story after story of companies realizing the folly of following the the lemmings to supposedly cheaper overseas locales and coming home. And over the past several years we've told you story after story of companies in all kinds of industries being globally competitive and successful manufacturing from North America.
Furniture, apparel, even toys – companies are succeeding from U.S. plants by focusing on improvement and creating customer value.
But leave it to Industry Week to jolt me back to reality, to how far we still have to go. Another article on all the horrible hurdles and barriers American manufacturers face. The usual stuff.
The single most significant drag on manufacturing competitiveness is the United States' high corporate tax rate — an average federal-state statutory rate of 40% that has not changed in decades. On a trade-weighted basis, the U.S. rate is 8.6 percentage points higher than its nine largest trading partners. This represents the single most important piece of the total structural cost burden on U.S. manufacturers.
And as usual it doesn't take into account how the U.S. tax system, more than that of any other industrialized nation, has loopholes and offsets galore. Right GE? However I do agree that the U.S. system is also far more confiscatory of overseas profits that the others, and that does need to change. And simplification would remove incredible cost.
The article goes on in similar fashion with regards to regulatory, legal, health care, employee benefits, and other costs. Same old thing. Bottom line?
While manufacturers face a host of challenges, the data demonstrate that domestically imposed costs – by commission or omission of government — further undermine our ability to compete by adding at least 20% to the cost of making stuff in this country.
Yes 20% is a big number and I'm not denying it needs to be improved. If it's all valid in the first place, as I noted above. Four years ago I suggested that companies should stop whining and start competing. A bunch apparently took me up on the challenge as they are succeeding. Some more have just recently come to the realization that cheap overseas facilities aren't as cheap – or risk free – as they thought and are coming back home. Some have realized that if they focus on internal inefficiencies as well as the potential for value creation from the customer's perspective, even a 20% differential isn't that high of a hurdle.
And some are destined to just whine and complain some more. We'll check back in another four years and see how they're doing. Any wagers?