by Don C. Brunell
President, Association of
Washington Business

Theres an old saying about fighting with one hand tied behind your back. It means that youre at an unfair disadvantage. What makes it even worse is when people in your own corner keep tightening the knot rather than loosening it so you have a chance to survive and win.
Nowhere is that more true than with Americas manufacturers. Once the backbone of the American economy, today they are under increasing pressure from foreign competitors who pay lower wages and have fewer costly regulations. Yet in the United States, the amount of money it takes to make products keeps rising.
U.S. manufacturers are doing everything they can to cut their costs and become more efficient, but today the problem is external costs, meaning costs over which employers have no control. Those are things like taxes, mandated employee benefits, liability insurance and lawsuits, energy prices, and regulatory costs.
According to the National Association of Manufacturers (NAM), the situation is bad and getting worse.
In a 2003 study, NAM found that external costs added 22.4 percent to U.S. manufacturers production costs compared to their nine global competitors; countries such as Canada, Japan, China, South Korea and Mexico.
The most recent study shows that those costs have escalated dramatically and now add 31.7 percent to U.S. manufacturers. Thats a whopping 42 percent increase!
Everyone, especially our elected officials and government bureaucrats, must realize manufacturing today is competitive worldwide. It is virtually impossible for U.S. producers to pass that increase along through higher prices. In fact, prices in the global marketplace are virtually flat. For example, in the last decade, manufacturing prices have increased only 4 percent, while prices in construction, health care, education and other non-manufacturing sectors increased nearly 60 percent.
The stakes are enormous. Manufacturing in the U.S. generates about $1.4 trillion a year, or about 12 percent of our gross domestic product, and supports 20 million family-wage jobs with good benefits. It accounts for 75 percent of our industrial R&D (research and development) and two-thirds of U.S. exports of goods and services.
Washington is a leading manufacturing and exporting state. We make and send abroad everything from airplanes to 18-wheelers, irrigation systems to digital voltage surge relays, and bottled apple juice to frozen french fries. Our state also is a high cost state when it comes to state and local regulations, taxes, unemployment insurance, wages and the minimum wage. In the past, our low and reliable electric rates gave us an offsetting advantage. Today electricity is no longer cheap, and the supply is in question.
If we do not reverse the trend, those jobs for our children and grandchildren, as well as the American-made products we prefer, will be lost to foreign competitors.
So, what should we do?
The first step is a comprehensive energy policy for our state and nation which develops all sources of energy which encourages domestic exploration for gas and oil, development of clean coal and safe nuclear power, and continues to promote production of wind and solar power.
In addition to a comprehensive energy policy, NAM has outlined a series of actions Congress must take if U.S. manufacturers are to regain their competitive edge:
Invest in basic and cutting edge research.
Promote science and math education.
Focus skilled worker training in critical areas.
Reauthorize the R&D tax credit.
Repeal the death tax.
Make current tax cuts permanent.
Expand health savings accounts.
End frivolous lawsuits.
Support fair trade policy for U.S. exporters.
Bring environmental costs in line with global competitors.
U.S. manufacturers are already doing their part to remain competitive through innovation, worker training, and new equipment. Now it is time for elected officials to do their part to lower the costs so American employers can fight back with both fists. Its the only way manufacturing survives. To review the new NAM report, log on to www.nam.org/costs.