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CRS — “Hollowing Out” in U.S. Manufacturing: Analysis and Issues for Congress
“Hollowing Out” in U.S. Manufacturing: Analysis and Issues for Congress (PDF)
Source: Congressional Research Service (via U.S. Department of State Foreign Press Center)
The health of the U.S. manufacturing sector has been a long-standing concern of Congress. Although Congress has established a wide variety of tax preferences, direct subsidies, import restraints, and other federal programs with the goal of retaining or recapturing manufacturing jobs, only a small proportion of U.S. workers is now employed in factories. Meanwhile, U.S. factories have stepped up production of goods that require high technological sophistication but relatively little direct labor. Labor productivity in manufacturing, as measured by government data, has grown rapidly, suggesting that the manuf acturing sector as a whole remains healthy.
Recent data, however, challenge the belief that the manufacturing sector, taken as a whole, will continue to flourish. Unlike previous expansions, the two most recent cyclical upturns in the U.S. economy have generated few jobs in manufacturing. Moreover, statistics suggest that domestic value represents a diminishing share of the valu e of U.S. factory output. One interpretation of these data is that manufacturing is “hollowing out” as companies undertake a larger proportion of their high-value work abroad. These developments raise the question of whether the United States will continue to generate highly skilled, high-wage jobs related to advanced manufacturing.
The evidence concerning “hollowing out” is ambiguous, as conceptual issues and statistical deficiencies make it difficult to determine whether the recent decline in manufacturing value added, relative to shipments, is a short-term phenomenon or a long-term trend.
Despite improvements in recent years, U.S. statistical agencies still tend to treat manufacturing and services as unrelated economic activities, and it is not clear that existing data series on domestic economic activity, trade, and freight transportation adequately capture changes in the nature of manufacturing, the sources of employment, and the creation of value.
Nonetheless, evidence suggests strongly that physical production activities account for a diminishing share of the final value of manufactured products, with service-related inputs such as research, product development, and marketing becoming more important. Further, the production of many goods is dispersed across multiple locations along global supply chains, making it difficult to determine where value is added. Such shifts pose a challenge to efforts to capture economic value by promoting goods production in the United States. In the context of national security, the fact that U.S. manufacturers of vital products are critically dependent upon inputs from abroad is frequently a subject of concern. International comparisons indicate that the United States is in no way unique in its dependence on foreign inputs to manufacturing. Although the output of U.S. factorie s contains a large proportion of foreign value added, many other countries appear to be even more dependent upon foreign value added than is the United States, at least with respect to goods traded in international markets.
Twelve Ways to Build Trust in the ICT Global Supply Chain
Twelve Ways to Build Trust in the ICT Global Supply Chain
Source: Brookings Institution
The globalization of commerce and trade has created many benefits. Supply costs have been reduced for many products. Computers and other items can be made of parts from a number of different locales. Countries can specialize in particular goods and companies can focus on the things they do best. Raw materials may come from one area, while manufacturing and production lie elsewhere, and sales and marketing take place in still another place. In this as well as other examples, contemporary commerce involves a complex interchange of hundreds or thousands of individuals, organizations, technologies, and processes across a variety of different continents.
But long supply chains and inadequate or nonexistent product evaluation before deployment, create a situation where widespread vulnerabilities exist in products and networks that can be exploited by others during design, production, delivery, and post-installation servicing. There are industry-wide risks associated with procurement, transportation, and management. Everything from raw materials and natural disasters to market forces, national laws, and political conflict can be problematic. Problems in one area can cascade elsewhere and magnify risks dramatically for the system as a whole.
In this paper, West discusses twelve ways to build trust in the Information and Communications Technology (ICT) global supply chain. With the assistance of a group of leading experts brought together at the Brookings Institution in February, 2013 plus follow-up interviews, he explores the operational threats and technological vulnerabilities that we face, and makes recommendations to identify best practices, standards, and third-party assessment for supply chain assurance.
West argues that vulnerabilities in the supply chain and product development, generally, facilitate a myriad of attack and exploitation techniques, such as unauthorized remote access after product deployment for many malicious activities, degradation of ICT networks, and damage to critical infrastructures. West suggests that developing agreed-upon standards, using independent evaluators, setting up systems for certification and accreditation, and having trusted delivery systems will build confidence in the global supply chain as well as the public and private sector networks that sustain them. These and other types of evaluations make information available to purchasers and therefore give them a firmer basis for product selection.
America’s Growth Corridors: The Key to National Revival
America’s Growth Corridors: The Key to National Revival
Source: Manhattan Institute
Much of the discussion about American economic recovery and growth in 2012 focused on the usual suspects: regions on the Pacific and Atlantic coasts and on the shores of the Great Lakes. But the best recent economic record, as well as the best prospects for future prosperity, are to be found elsewhere in the United States.
We have identified four regions of the country that we call "growth corridors." What they lack in media attention they make up for in past performance and likely future success. Over the past decade-and, in some cases, far longer-these regions have created more jobs and gained more population than their counterparts along the ocean coasts or along the Great Lakes.
The four growth corridors are:
1. The Great Plains region, made up of Montana, Wyoming, Colorado, New Mexico, Texas, Oklahoma, Kansas, Nebraska, and the Dakotas
2. The "Third Coast" stretch of counties whose shores abut the Gulf of Mexico and which range through Texas, Louisiana, Mississippi, and Florida
3. The "Intermountain West," consisting of counties in the north of New Mexico and Arizona, parts of eastern California and western regions of Montana, Wyoming, and Colorado, as well as the non-coastal eastern regions of Oregon and Washington and all of Idaho, Utah, and Nevada
4. The "Southeast Manufacturing Belt" of counties in eastern Arkansas, all of Tennessee, and large swaths of Kentucky, the Carolinas, Georgia, Alabama, Mississippi, and southwestern Virginia
These regions have different histories and different trajectories into the future, but they share certain key drivers of economic growth: lower costs (particularly for housing); better business climates; and population growth. Some have benefited from the strong global market for commodities, particularly food, natural gas, and oil. Others are expanding because of a resurgence in manufacturing in the United States.
In this report, we describe the growth corridors in some detail and explore what their success means for the country as a whole. Part 1 describes what the corridors are, in terms of geography, population, and history. Part 2 explains why they are succeeding while America’s traditional economic powerhouses are growing at relatively anemic rates. Part 3 explains how the growth corridors are advancing, noting the key industries in each. Part 4 considers the contrast between the growth corridors and the rest of the nation and explains why the growth-corridor mix of culture and policies is crucial to the future success of the United States.
To be sure, New York, Los Angeles, the San Francisco Bay Area, and Chicago will remain the country’s leading metropolitan agglomerations for the foreseeable future. But an important urban story of the coming decades will be the emergence of interior metropolitan areas such as Houston, Dallas–Fort Worth, Tampa, Oklahoma City, and Omaha. On a smaller scale, fast-growing Lafayette (Louisiana), Baton Rouge, Midland (Texas), Sioux Falls (South Dakota), Fargo, and a host of other smaller cities will continue to expand. We may also witness the resurgence of New Orleans as a leading cultural and business center for the south and the Gulf Coast.
This ascendancy of the growth corridors follows one of the great principles of American history. The "most important effect of the frontier," as Frederick Jackson Turner noted, was how it promoted democracy by spreading opportunity. [1] The expanding frontier-then rural, now metropolitan-reinforces the fundamental individualism at the core of American culture.
Equally important, the corridors reveal the most immediate way to propel a broad growth trajectory for the entire United States. By restoring a strong growth path, as well as the optimism that accompanies it, the corridors could help bring about a resurgence whose benefits will extend far beyond their boundaries to touch the entire nation.
CRS — U.S. Manufacturing in International Perspective
U.S. Manufacturing in International Perspective (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The health of the U.S. manufacturing sector has long been of great concern to Congress. The decline in manufacturing employment since the start of the 21st century has stimulated particular congressional interest. Members have introduced hundreds of bills intended to support domestic manufacturing activity in various ways. The proponents of such measures frequently contend that the United States is by various measures falling behind other countries in manufacturing, and they argue that this relative decline can be mitigated or reversed by government policy.
This report is designed to inform the debate over the health of U.S. manufacturing through a series of charts and tables that depict the position of the United States relative to other countries according to various metrics. Understanding which trends in manufacturing reflect factors that may be unique to the United States and which are related to broader changes in technology or consumer preferences may be helpful in formulating policies intended to aid firms or workers engaged in manufacturing activity. This report does not describe or discuss specific policy options.
The main findings are:
• The United States remained the largest manufacturing country in 2010, although its share of global manufacturing activity has declined in recent years.
• Manufacturing output has grown more rapidly in the United States over the past decade than in most European countries and Japan, although it has lagged China, Korea, and other countries in Asia.
• Employment in manufacturing has fallen in most major manufacturing countries over the past two decades. The United States saw a disproportionately large drop between 2000 and 2010, but its decline in manufacturing employment since 1990 is in line with the changes in several European countries and Japan.
• U.S. manufacturers spend far more on research and development (R&D) than those in any other country, but manufacturers’ R&D spending is rising more rapidly in China, Korea, Mexico, and Taiwan.
• A large share of manufacturing R&D in the United States takes place in high-technology sectors, particularly pharmaceutical and electronic instrument manufacturing, whereas in other countries a far greater proportion of manufacturers’ R&D outlays occur in medium-technology sectors such as motor vehicle and machinery manufacturing.
A Decade of Hard Times in Places that Rely on Manufacturing Employment
A Decade of Hard Times in Places that Rely on Manufacturing Employment
Source: Federal Reserve Bank of Cleveland
While the fraction of people employed in the manufacturing sector has declined greatly in the United States over time, manufacturing still makes up a large fraction of employment in some parts of the country. One way to see this is by looking at how the share of manufacturing employment is distributed across counties. The right tail of the distribution shows a set of counties where manufacturing makes up a much higher share of employment than the average for the country (which is 11 percent).
CRS — U.S. Wind Turbine Manufacturing: Federal Support for an Emerging Industry
U.S. Wind Turbine Manufacturing: Federal Support for an Emerging Industry (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Increasing U.S. energy supply diversity has been the goal of many Presidents and Congresses. This commitment has been prompted by concerns about national security, the environment, and the U.S. balance of payments. Investments in new energy sources also have been seen as a way to expand domestic manufacturing. For all of these reasons, the federal government has a variety of policies to promote wind power.
Expanding the use of wind energy requires installation of wind turbines. These are complex machines composed of some 8,000 components, created from basic industrial materials such as steel, aluminum, concrete, and fiberglass. Major components in a wind turbine include the rotor blades, a nacelle and controls (the heart and brain of a wind turbine), a tower, and other parts such as large bearings, transformers, gearboxes, and generators. Turbine manufacturing involves an extensive supply chain. Until recently, Europe has been the hub for turbine production, supported by national renewable energy deployment policies in countries such as Denmark, Germany, and Spain. However, support for renewable energy including wind power has begun to wane across Europe as governments there reduce or remove some subsidies. Competitive wind turbine manufacturing sectors are also located in India and Japan and are emerging in China and South Korea.
U.S. and foreign manufacturers have expanded their capacity in the United States to assemble and produce wind turbines and components. About 470 U.S. manufacturing facilities produced wind turbines and components in 2011, up from as few as 30 in 2004. An estimated 30,000 U.S. workers were employed in the manufacturing of wind turbines in 2011. Because turbine blades, towers, and certain other components are large and difficult to transport, manufacturing clusters have developed in certain states, notably Colorado, Iowa, and Texas, which offer proximity to the best locations for wind energy production. The U.S. wind turbine manufacturing industry also depends on imports, with the majority coming from European countries, where the technical ability to produce large wind turbines was developed. Although turbine manufacturers’ supply chains are global, recent investments are estimated to have raised the share of parts manufactured in the United States to 67% in 2011, up from 35% in 2005-2006.
The outlook for wind turbine manufacturing in the United States is more uncertain now than in recent years. For the past two decades, a variety of federal laws and state policies have encouraged both wind energy production and the use of U.S.-made equipment to generate that energy. One apparent challenge for the industry is the scheduled expiration at year-end 2012 of the production tax credit (PTC), which the industry claims could reduce domestic turbine sales to zero in 2013. In anticipation, at least a dozen wind turbine manufacturers announced layoffs or hiring freezes at their U.S. facilities in 2012, citing uncertainty around the renewal of the PTC as one reason. Other factors affecting the health of the U.S. wind industry are intense price competition from natural gas, an oversupply in wind turbines, and softening demand for renewable electricity.
CRS — Manufacturing Extension Partnership Program: An Overview
Manufacturing Extension Partnership Program: An Overview (PDF)
Source: Congressional Research Service (via University of North Texas Digital Library)
The Hollings Manufacturing Partnership (MEP) is a program of regional centers that assist smaller, U.S.-based manufacturing companies in identifying and adopting new technologies. Operating under the auspices of the National Institute of Standards and Technology (NIST), centers in all 50 states and Puerto Rico provide technical and managerial assistance to firms. Federal funding is matched by non-federal sources. Existing resources in government, business, and academia are leveraged while the program endeavors to build on current state and local activities and industrial extension efforts.
The MEP program has, at times, been included in the discussion surrounding termination of government programs that provide direct federal support for industry. Questions have been raised in congressional debate as to the appropriateness of government funding for this program when the technologies are available in the marketplace. Instead of the government picking “winners and losers,” opponents argue, the marketplace should make decisions regarding firms worthy of investment. However, proponents of the program stress that, to date, no direct funding is available to companies through MEP and that assistance is technical, scientific, and/or managerial. The centers facilitate the adoption of new technologies that foster competition and promote innovation. As Congress continues to make appropriation decisions, support for manufacturing extension may be discussed in the context of the role of the federal government in facilitating research and technological advancement.
CRS — U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations
U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Textiles are a major issue in the ongoing Trans-Pacific Partnership (TPP) negotiations to establish a free-trade zone across the Pacific. Because the negotiating parties include Vietnam, a major apparel producer that now mainly sources yarns and fabrics from China and other Asian nations, the agreement has the potential to shift global trading patterns for textiles and demand for U.S. textile exports. Canada and Mexico, both significant regional textile markets for the United States, have also been accepted into the TPP talks.
U.S. textile manufacturers produce yarn, thread, and fabric for apparel, home furnishings, and for various industrial applications. In 2011, the U.S. textile industry generated $53 billion in shipments and directly employed about 238,000 Americans, accounting for 2% of all U.S. factory jobs. Approximately one-third of U.S. textile production is exported, with the bulk of the exports going to Western Hemisphere nations that are members of the North American Free Trade Agreement (NAFTA) or the Central American-Dominican Republic Free Trade Agreement (CAFTA-DR). Both free trade agreements provide that certain exports from member countries may enter the U.S. market duty-free only if they are made from textiles produced in the region. This has encouraged manufacturers in Mexico and Central America to use U.S.-made yarns and fabrics in apparel, home furnishings, and other products. Exports to the NAFTA and CAFTA-DR countries contributed to a U.S. trade surplus of $2.5 billion in yarns and fabrics in 2011.
The TPP has the potential to affect U.S. textile exporters in at least two ways. First, it could enable Asian apparel producers, principally Vietnam, to export clothing to the United States dutyfree. This would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the U.S. market and, because Vietnamese manufacturers make little use of U.S.- made textiles, could reduce demand for U.S. textile exports. Second, if the TPP were to allow Western Hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the U.S. market, an enlarged Vietnamese textile industry could, at some future time, compete with U.S. exporters in Mexico and Central America.
Textile industry trade groups have urged the United States to insist on a “yarn forward” rule, requiring that yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region for the garment to enter the United States duty-free. On the other side, retailers and apparel companies want to be able to import apparel from the lowest-cost producer, regardless of whether U.S. textiles are used; they urge that textiles and apparel be treated like other products in any TPP agreement. Members of Congress have voiced their support for both sides.
The TPP seems likely to have less impact on those segments of the U.S. textile industry that do not supply apparel manufacturing. U.S. manufacturers of household and technical textiles appear to be internationally competitive, and it is not evident that lower-wage countries would have comparative advantage in these highly capital-intensive sectors.
Manufacturers: Fiscal Shock Already a Drag on Economic Growth
Manufacturers: Fiscal Shock Already a Drag on Economic Growth
Source: National Association of Manufactuers
The National Association of Manufacturers (NAM) today released a new report, Fiscal Shock: America’s Economic Crisis, that shows that the United States is already struggling due to Washington’s failure to address the pending fiscal cliff. The report indicates that there will be a 0.6 percent loss in GDP growth by the end of 2012. It is unsurprising that, according to recent surveys, 55 percent of manufacturers and other small business owners wouldn’t start their business in today’s climate.
Yet, if the United States falls off the fiscal cliff, the effects will be far worse. The report displays the significant harm massive tax increases and sequestration cuts will have to the United States over the next three years. The results include the following:
• More than 6 million jobs lost
• Unemployment rate of more than 11 percent
• A cumulative 12.8 percent drop in GDP
• 10 percent loss in household income
• A recession in 2013 and dramatically slowed growth in 2014
Making Value: Integrating Manufacturing, Design, and Innovation to Thrive in the Changing Global Economy
Source: National Academy of Engineering
Manufacturing is in a period of dramatic transformation. But in the United States, public and political dialogue is simplistically focused almost entirely on the movement of certain manufacturing jobs overseas to low-wage countries. The true picture is much more complicated, and also more positive, than this dialogue implies.
After years of despair, many observers of US manufacturing are now more optimistic. A recent uptick in manufacturing employment and output in the United States is one factor they cite, but the main reasons for optimism are much more fundamental. Manufacturing is changing in ways that may favor American ingenuity. Rapidly advancing technologies in areas such as biomanufacturing, robotics, smart sensors, cloud-based computing, and nanotechnology have transformed not only the factory floor but also the way products are invented and designed, putting a premium on continual innovation and highly skilled workers. A shift in manufacturing toward smaller runs and custom-designed products is favoring agile and adaptable workplaces, business models, and employees, all of which have become a specialty in the United States. Future manufacturing will involve a global supply web, but the United States has a potentially great advantage because of our tight connections among innovations, design, and manufacturing and also our ability to integrate products and services.
The National Academy of Engineering has been concerned about the issues surrounding manufacturing and is excited by the prospect of dramatic change. On June 11-12, 2012, it hosted a workshop in Washington, DC, to discuss the new world of manufacturing and how to position the United States to thrive in this world. The workshop steering committee focused on two particular goals. First, presenters and participants were to examine not just manufacturing but the broad array of activities that are inherently associated with manufacturing, including innovation and design. Second, the committee wanted to focus not just on making things but on making value, since value is the quality that will underlie high-paying jobs in America’s future. Making Value: Integrating Manufacturing, Design, and Innovation to Thrive in the Changing Global Economy summarizes the workshop and the topics discussed by participants.
Manufacturing Opportunity: How America can regain global leadership in manufacturing
Manufacturing Opportunity: How America can regain global leadership in manufacturing
Source: Deloitte
Manufacturing is experiencing a crisis of confidence in the United States. Americans view the manufacturing sector in the U.S. as fragile and unstable. They are concerned about the long-term stability of manufacturing employment and fear that manufacturing jobs will inevitably be moved to workers in other countries. Despite these fears, Americans remain steadfast in their support of manufacturing in the United States and the economic benefits that result.
Today there are new pathways to manufacturing opportunity in America that are both available and achievable. And public policy has a major role to play in supporting these directions.
This report relies on collaborative efforts with a number of organizations working on important issues affecting the manufacturing industry, as well as surveys of American citizens, business and labor leaders, university presidents, and directors of some of the United States’ largest national laboratories. It presents a case for optimism – and for hard work. It examines some of the main challenges facing any attempt to cultivate an American manufacturing renaissance, and highlights recommendations that could help the United States overcome these roadblocks.
CRS — Job Creation in the Manufacturing Revival
Job Creation in the Manufacturing Revival (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The health of the U.S. manufacturing sector is of intense interest to Congress. Numerous bills aimed at promoting manufacturing have been introduced in Congress, often with the stated goal of creating jobs. Implicit in many of these bills is the assumption that the manufacturing sector is uniquely able to provide well-paid employment for workers who have not pursued advanced education.
U.S. manufacturing output has risen significantly over the past two years as the economy has recovered from recession. This upswing in manufacturing activity, however, has resulted in negligible employment growth. Although a variety of forces seem likely to support further growth in domestic manufacturing output over the next few years, including higher labor costs in the emerging economies of Asia, higher international freight transportation costs, and increased concern about disruptions to transoceanic supply chains, evidence suggests that such a resurgence would lead to relatively small job gains within the manufacturing sector. For more on supplychain risk, see CRS Report R40167, Globalized Supply Chains and U.S. Policy, by Dick K. Nanto, and CRS Report R41831, The Motor Vehicle Supply Chain: Effects of the Japanese Earthquake and Tsunami, by Bill Canis.
The past few years have seen important changes in the nature of manufacturing work. A steadily smaller proportion of manufacturing workers is involved in physical production processes, while larger shares are engaged in managerial and professional work. These changes are reflected in increasing skill requirements for manufacturing workers and severely diminished opportunities for workers without education beyond high school. Even if increased manufacturing output leads to additional employment in the manufacturing sector, it is likely to generate little of the routine production work historically performed by workers with low education levels.
As manufacturing processes have changed, factories with large numbers of workers have become much less common than they once were. This suggests that promotion of manufacturing as a tool to stimulate local economies is likely to meet with limited success; even if newly established factories prosper, few are likely to require large amounts of labor.
CRS — Domestic Content Legislation: The Buy American Act and Complementary Little Buy American Provisions
Domestic Content Legislation: The Buy American Act and Complementary Little Buy American Provisions (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Congress has broad authority to place conditions on the purchases made by the federal government or with federal dollars. One of many conditions that it has placed on direct government purchases is a requirement that they be produced in the United States. The most well known of these requirements is the Buy American Act, which is the major domestic preference statute governing procurement by the federal government. The Buy American Act applies to direct purchases by the federal government of more than $3,000, providing their purchase is consistent with the public interest, the items are reasonable in cost, and they are for use in the United States. The act requires that “substantially all” of the acquisition be attributable to American-made components. Regulations have interpreted this requirement to mean that at least 50% of the cost must be attributable to American content. While the act has only been substantively amended four times since its enactment in 1933, every Congress in the intervening years has seen fit to enact some form of additional domestic preference legislation.
Other domestic preference statutes, known as “Little Buy American Acts,” either impose a higher domestic content requirement on procurements that are covered by the Buy American Act or apply to indirect purchases (i.e., purchases not made by a federal entity, but which are made with federal funds). The Buy America Act and the Berry Amendment, the most commonly recognized of the Little Buy American Acts, are representative of the two most prominent categories of Little Buy American Acts. The majority of Little Buy American Acts govern purchases not directly made by a federal entity, but which use federal funds. The Buy America Act, which attaches a domestic content requirement to purchases made with federal transportation funds, is illustrative of this type of legislation. Unless the definitions of the Buy American Act are referenced, these provisions generally require the purchase of 100% American-made products.
The second most common category of Little Buy American Act affects certain direct purchases of the federal government (i.e., ones that are governed by the Buy American Act), for which Congress has decided a greater percentage of American content should be required, as opposed to the standard 50%. The Berry Amendment is probably the most recognized legislation in this category. The Berry Amendment is a “super percentage” statute which limits the Department of Defense when purchasing certain goods to such goods that are 100% American in origin.
This report summarizes (1) the Buy American Act, what it does and does not cover; (2) the Little Buy American Acts found in permanent law, emphasizing what they govern, major exceptions and why Congress felt them necessary in light of the requirements of the Buy American Act; and (3) the temporary Little Buy American provision found in the American Recovery and Reinvestment Act.
CRS — U.S. Solar Photovoltaic Manufacturing: Industry Trends, Global Competition, Federal Support
U.S. Solar Photovoltaic Manufacturing: Industry Trends, Global Competition, Federal Support (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Every president since Richard Nixon has sought to increase U.S. energy supply diversity. In recent years, job creation and the development of a domestic renewable energy manufacturing base have joined national security and environmental concerns as rationales for promoting the manufacturing of solar power equipment in the United States. The federal government maintains a variety of tax credits, loan guarantees, and targeted research and development programs to encourage the solar manufacturing sector, and state-level mandates that utilities obtain specified percentages of their electricity from renewable sources have bolstered demand for large solar projects.
The most widely used solar technology involves photovoltaic (PV) solar modules, which draw on semiconducting materials to convert sunlight into electricity. By year-end 2011, the total number of grid-connected PV systems nationwide reached almost 215,000. Domestic demand is met both by imports and by about 100 U.S. manufacturing facilities employing an estimated 25,000 U.S. workers in 2011. Production is clustered in a few states, including California, Oregon, Texas, and Ohio.
Domestic PV manufacturers operate in a dynamic and highly competitive global market now dominated by Chinese and Taiwanese companies. All major PV solar manufacturers maintain global sourcing strategies; the only U.S.-based manufacturer ranked among the top ten global cell producers in 2010 sourced the majority of its panels from its factory in Malaysia. Some PV manufacturers have expanded their operations beyond China to places like the Philippines and Mexico. Overcapacity has led to a significant drop in module prices, with solar panel prices falling more than 50% over the course of 2011. Several PV manufacturers have entered bankruptcy and others are reassessing their business models. Although hundreds of small companies are engaged in PV manufacturing around the world, profitability concerns appear to be driving consolidation, with ten firms now controlling half of global cell and module production.
The Department of Commerce and the U.S. International Trade Commission are investigating allegations that U.S. producers have been injured by dumped and subsidized imports from China. If significant duties are ultimately imposed, U.S. production could become more competitive with imports, but the cost of installing solar systems might rise. On the other hand, a number of federal policies that have helped to spur domestic demand for solar PV products have expired or reached their funding limits. These include the 1603 cash grant program and the advanced energy manufacturing tax credit; S. 591, which would extend the credit, has been introduced in the 112 th Congress. Under current law, the Investment Tax Credit for PV systems will sunset at the end of 2016.
The competitiveness of solar PV as a source of electric generation in the United States will likely be adversely affected both by the expiration of these tax provisions and by the rapid development of shale gas, which has the potential to lower the cost of gas-fired power generation and reduce the cost-competitiveness of solar power, particularly as an energy source for utilities. In light of these developments, the ability to build a significant U.S. production base for PV equipment is in question.
The Future of Manufacturing
Talent, the ability to innovate and the strategic use of public policy will play a significant role in defining manufacturing sector competitiveness in developed and emerging economies going forward, finds The Future of Manufacturing, a report by the World Economic Forum. Written in collaboration with Deloitte Touche Tohmatsu Limited, the study finds that the global manufacturing ecosystem is undergoing a dramatic transformation, with many emerging economies developing significant manufacturing and innovation capabilities, enabling them to produce increasingly complex products, leading to the globalization of manufacturing supply chains. Fading labour rate arbitrage, exposure to currency volatility, sovereign debt pressures and emerging protectionist policies will be countervailing forces to further globalization of manufacturing value chains.
The report highlights the key trends that will define manufacturing competition over the next 20 years and which will require the attention and collaboration of policy-makers, civil society and business leaders. With an estimated 10 million jobs with manufacturing organizations worldwide that cannot be filled today due to a growing skills gap, the report identifies talent as one of the key differentiators that will define the future of the sector. The other top differentiators identified in the report include the strategic use of public policy and the ability to innovate. The infrastructure necessary to enable manufacturing to flourish and contribute to job growth will grow in importance and sophistication and be challenging for countries to develop and maintain. Growing materials resources competition and scarcity will fundamentally alter country and company resources strategies and competition, and serve as a catalyst to significant materials sciences breakthroughs.
The Economics of Offshoring
This paper examines the various economic issues on offshoring (international outsourcing). It begins with a discussion of the factors that determine a firm’s decision to offshore and illustrates, with simple models, the cost saving of offshoring certain stages of production and the advantages of specializing in some input production and engaging in other input trade. The paper then examines the recent trend in offshoring with emphasis on the rise of IT offshoring and also the characteristics of firms in relation to offshoring and exporting. The effect of offshoring and national welfare is then discussed in light of numerous results in recent empirical studies. After examining the current U.S. programs to help the displaced workers, the paper concludes with the various short-run and long-run policy proposals to solve the growing public concern and vexation on offshoring.
Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline
Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline
Source: Information Technology & Innovation Foundation
In the 2000s, U.S. manufacturing suffered its worst performance in American history in terms of jobs. Not only did America lose 5.7 million manufacturing jobs, but the decline as a share of total manufacturing jobs (33 percent) exceeded the rate of loss in the Great Depression. Despite this unprecedented negative performance, most economists, pundits and elected officials remain remarkably blasé about what has transpired. Manufacturing, they argue, has simply become incredibly productive. While tough on workers who are laid off, outsized job losses actually indicate superior performance. All that might be needed are better programs to help laid-off production workers. And there is certainly no need for a determined national manufacturing competitiveness strategy.
+ Full Report (PDF)
EPA Finalizes Air Toxic Emissions Standards for Polyvinyl Chloride (PVC) Production Facilities/Standards will cut harmful emissions that impact local communities
EPA Finalizes Air Toxic Emissions Standards for Polyvinyl Chloride (PVC) Production Facilities/Standards will cut harmful emissions that impact local communities
Source: U.S. Environmental Protection Agency
The U.S. Environmental Protection Agency (EPA) today issued strong final standards requiring facilities that produce polyvinyl chloride and copolymers (PVC) to reduce harmful air emissions, which will improve air quality and protect people’s health in communities where facilities are located. Exposure to toxic air pollutants, like those emitted from PVC facilities, can cause respiratory problems and other serious health issues, and can increase the risk of developing cancer. In particular, children are known to be more sensitive to the cancer risks posed by inhaling vinyl chloride, one of the known carcinogens emitted from PVC facilities.
The final standards are based on currently available technologies and will reduce emissions of air toxics, such as dioxin and vinyl chloride. Facilities will have the flexibility to choose the most practical and cost-effective control technology or technique to reduce the emissions. Facilities will be required to monitor emissions at certain points in the PVC production process to ensure that the standards are met.
Currently, there are 17 PVC production facilities throughout the United States, with a majority of these facilities located in Louisiana and Texas. All existing and any new PVC production facilities are covered by the final rule.
+ Full Document (PDF)
Severe Weather and Automobile Assembly Productivity
It is expected that climate change could lead to an increased frequency of severe weather. In turn, severe weather intuitively should hamper the productivity of work that occurs outside. But what is the effect of rain, snow, fog, heat and wind on work that occurs indoors, such as the production of automobiles? Using weekly production data from 64 automobile plants in the United States over a ten-year period, we find that adverse weather conditions lead to a significant reduction in production. For example, one additional day of high wind advisory by the National Weather Service (i.e., maximum winds generally in excess of 44 miles per hour) reduces production by 26%, which is comparable in order of magnitude to the estimated productivity drop during the launch of a new vehicle. Furthermore, the location with the best weather (Arlington, Texas) only loses 2% of production per year due to the weather, whereas the location with the most adverse weather (Lordstown, OH) suffers an annual production loss of 11%. Our findings are useful both for assessing the potential aggregate productivity shock associated with inclement weather as well as guiding managers on where to locate a new production facility – in addition to the traditional factors considered in plant location (e.g., labor costs, local regulations, proximity to customers, access to suppliers), we add the prevalence of bad weather.
New Reports Add Urgency to Call for President Obama to Stop China’s Cheating
New Reports Add Urgency to Call for President Obama to Stop China’s Cheating
Source: Alliance for American Manufacturing
More than 400,000 jobs in the U.S. auto supply chain have been lost since 2000 and another 1.6 million U.S. jobs are at risk unless China’s illegal trading practices are curtailed, according to three separate reports released today.
“Taken together, these three reports show beyond a shadow of a doubt that China’s blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale are undercutting companies in the U.S. auto supply chain,” said Scott Paul, Executive Director of the Alliance for American Manufacturing (AAM), a non-profit, non-partisan partnership of leading manufacturers and the United Steelworkers.
“It’s essential that federal action be taken to challenge these abuses before they completely undermine the job recovery underway in the U.S. auto industry,” Paul said.
As a result of this web of subsidies and illegal practices, China’s exports of auto parts have surged over the past decade. A large portion of these exports are bound for the U.S. market. China is the fastest-growing source of U.S. auto parts imports. In fact, since 2001, an AAM investigation has found that $62 billion worth of Chinese auto parts have been imported into the U.S., causing the auto parts trade deficit between the U.S. and China to increase by more than 850%.
+ Growing Threats to the U.S. Auto-Parts Industry from Heavily Subsidized Chinese Tires and Parts (Economic Policy Institute)
+ Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011 (Economic Policy Institute)
+ China’s Support Program for Automobiles and Auto Parts Under the 12th Five Year Plan (PDF; Law Offices of Stewart and Stewart)
