More Misfocus

I haven’t picked on NAM too much recently, basically nothing since their drama of early this year when their small number of large manufacturer members somehow outvoted the large number of small manufacturers to not support the Hunter-Ryan bill before Congress.  That was a neat trick, but it led to a new group slintering off called the Tooling, Manufacturing, and Technologies Association, which ostensibly wants to really reflect the views of small manufacturers.

But a week or so ago NAM had to get me riled up again, with a blog post pointing yet again to a Deloitte study on the structural costs that U.S. manufacturers face that the foreign competition doesn’t.

Structural costs in the form of corporate tax rates, employee benefits, torts, natural gas and pollution abatement add 31.7 percent to the production costs of American companies relative to that of our nine major trading countries, according to a 2006 study by the National Association of Manufacturers and underwritten in part by Deloitte & Touche USA. Three years ago, this cost disadvantage was 22.4 percent.

I don’t necessarily doubt that those increased costs are real, and the disparity is probably going to worsen.  The rest of the world, especially eastern Europe and now even France, is lowering tax rates while the U.S. Congress and a variety of presidential hopefuls are licking their chops to raise them.  China may not have high pollution abatement costs, but at the same time I don’t really have a desire to swim in the Yangtze anymore. 

What really gets me is NAM’s solution:

The necessary course of action? 

• Open more domestic sources of natural gas to keep energy prices in check.
• Reauthorize R&D tax credits and make federal tax cuts permanent.
• Support consumer-driven health plans by making information on health costs and quality more transparent.
• End frivolous lawsuits.
• Environmental compliance costs must be brought into closer alignment with our European competitors’ costs.

Want to address the loss of manufacturing jobs? Start with the above list.

I agree that those are worthy goals and will help competitiveness, although I’m not sure I’d want to saddle some of our industries with the same environmental compliance costs as Germany has.  But here’s the drub: in spite of those horrors, many companies are globally competitive from U.S.-based factories.  We wrote about this last year in response to the original report, and we continue to ask that companies stop whining and start competing. 

Domestic manufacturers, even in low margin industries like apparel and furniture, are doing fine.  Foreign manufacturers are building new auto and steel plants in the U.S.  The difference?  They have focused inward, examined their processes, and rooted out any waste they can find.  The cost of that waste far exceeds the "competitive burdens" listed by NAM and Deloitte.  I wish NAM success in convincing policymakers that those competitive burdens should be addressed, but meanwhile we’ll say it again:

Stop complaining and start competing.