ways to rebuild manufacturing
REBUILDING MANUFACTURING – THE KEYS TO AMERICAN PROSPERITY
Michele Nash-Hoff President, ElectroFab Sales A manufacturers’ sales agency specializing in fabrication services
U. S. LOST JOBS AND COMPANIES • From 2000 to 2010, the U.S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed. • U.S. Department of Commerce shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”
Every billion dollars of net imports costs 6,000 American jobs. So last year’s $566 billion deficit equates to 3.4 million jobs lost
TOP 10 TRADE DEFICIT COUNTRIES: THESE COUNTRIES ACCOUNT FOR 97% OF U.S. 2016 GOODS TRADE DEFICIT
SUPPLY CHAIN WEAKENED •U. S. textile industry has lost 63% of jobs since 2001 •Communication equipment industry has lost 47% of its jobs •Motor vehicles and parts industry has lost 43% of its jobs •U. S. machine tool industry consumption fell 78% in 2008 and another 60% in 2009 •U. S. printed circuit board industry has shrunk by 74% since 2000.
INDUSTRIES LOST •Fabless chips panels •Compact fluorescent lighting •Desktop, notebook and •LCDs for monitors, TVs and notebook PCs handheld devices like mobile •Low-end servers phones electrophoretic displays •Hard-disk drives •Lithium ion, lithium polymer •Consumer networking gear and NiMH batteries such as routers, access points, •Advanced rechargeable and home set-top boxes batteries for hybrid vehicles •Advanced composites used in •Crystalline and polycrystalline sporting goods and other silicon solar cells consumer gear •Inverters and power •Advanced ceramics and semiconductors for solar integrated circuit packaging.
THE HURTING ECONOMY
U. S. ISM PURCHASING MANAGERS INDEX
WAYS TO REBUILD MANUFACTURING • Develop a national manufacturing strategy to Improve business climate by – Changing Tax, Trade & Regulation Policies • Return manufacturing through reshoring • Foster success of start-up companies through incubators & accelerators • Train companies to transform into Lean companies • Educate community/youth about career opportunities in manufacturing
DEVELOP NATIONAL MANUFACTURING STRATEGY • Manufacturing strategy to specify optimal tax, trade, research, regulatory, and innovation policies • Rep. Daniel Lipinski (D-IL) introduced bill to develop mfg. strategy American Manufacturing Competitiveness Act (HR 2447) in 2014 • Wording incorporated into omnibus spending bill (HR 83) signed by President December 16, 2014.
WHAT IS WRONG WITH TRADE AGREEMENTS • Investor State Dispute Resolution – handled by Foreign Tribunals not U. S. courts • Buy America Act made Null & Void: waives procurement policies for all companies operating in trading partner countries • Country of Origin Labeling not allowed by WTO • Increases number of L1 visas • Doesn’t address foreign mercantilism: currency manipulation, product dumping, & government subsidies
PRESIDENT TRUMP’S PROPOSED TRADE POLICIES •
Reduce Trade Deficit
•
Renegotiate NAFTA
•
Negotiate bi-lateral trade agreements with United Kingdom & Japan
•
Increase enforcement of current Trade Agreements
•
Address currency manipulation & Dollar misalignment
•
Tax penalties for sourcing offshore
TRUMP’S PROPOSED TAX REFORM • • • • •
Reduce Corporate tax rate to 20% Reduce Capital Gains Tax to 15% Reduce tax brackets from 7 to 3 Border Adjustable Taxes A one-time repatriation tax – Note: Only 30-35% of manufacturers are C corps – the rest are Sub-chapter corporations, LLCs, partnerships, and sole proprietorships where taxes pass through to individuals so it is important to keep personal tax rates as low as possible
COALITION FOR A PROSPEROUS AMERICA • Non profit, non partisan organization that is an unprecedented alliance of manufacturing, agriculture and labor working for smart trade policies. • Members include farmers, ranchers, associations, and businesses in copper, steel, livestock, textile, tooling, machining, electronics, software, and other industries, as well as the industrial labor.
Coalition for Prosperous America Recommends New Trade Policies • Congressional Resolution to establish goal of eliminating trade deficit • Pursue trade deficit reduction as a primary objective of agreements. • Renegotiate past agreements • Utilize tax, fiscal and monetary policies to eliminate trade deficit • Aggressively and systematically attack and neutralize foreign mercantilism.
HOUSE CONCURRENT RESOLUTION 37 • Expressing the sense of Congress that Congress and the President should prioritize the reduction and elimination, over a reasonable period of time, of the overall trade deficit of the United States. •
Sponsor: Rep. Brooks, Mo [R-AL-5] (Introduced 03/22/2017)
BORDER ADJUSTABLE TAXES • Consumption taxes are “border adjustable taxes” (Value Added Taxes or Cost of Goods Taxes) allowed under WTO rules. • 159 countries have such taxes & U. S. doesn’t. • VATs average 17% globally so subsidize domestic shipments abroad with a 17% tax rebate. • VATs can be used to cut domestic taxes by: – Reducing personal and corporate income taxes – Reduce payroll taxes drastically
VAT COUNTRIES – RED NON VAT COUNTRIES - BLUE
HOW TO GET MULTINATIONALS TO PAY TAXES • Reform taxes at federal level based on the Sales Factor Apportionment Framework. – Amount of corporate taxes "would be determined solely on the percent of company's world-wide sales made in to U. S. – Encourages exports because all exports are fully excluded from corporate income tax – Profit to be taxed by the U. S. is determined by simple formula. – Reduces or eliminates the tax incentives to locate jobs, factories, and corporate headquarters offshore
CURRENCY MISALIGNMENT
HOW TO FIX CURRENCY MANIPULATION/MISALIGNMENT • The U.S. dollar is currently 25.5% overvalued according to calculations by Dr. John R. Hansen • Japan’s currency is undervalued by 25% and Germany’s by 23.6%. • His solution: Charge a Market Access Charge (MAC) of 0.5% charge “on any purchase of U.S. dollar financial assets by a foreign entity or individual
RETURN MANUFACTURING TO AMERICA • Harry Moser founded Reshoring Initiative in 2010 to return manufacturing to the U. S. • Objective: Change the Mindset from “Offshored is Cheaper” to “Local Reduces the Total Cost of Ownership.” • Train OEMs on why to source local & how to use TCO Calculator & suppliers on how to “sell” local sourcing. • Encourage production near the customer
COSTS RISING IN CHINA
PPV AND LANDED COST MISS A LOT OF TCO 120% 100%
13%
23%
80% 60% 100% 40%
87%
77%
20% 0% TCO
PPV = Purchase Price Variance
LANDED COST
PURCHASE PRICE
Top Countries From Which Reshored FDI’d Reshoring fromand Region Rank
Source: Reshoring Initiative Library, 2010 through 2017.
1 2 3 4 5 6 7 8 9 10
Country China Germany Japan Canada Korea Mexico Switzerland Australia United Kingdom Italy
Jobs
Companies
89,988 64,383 54,314 19,964 15,852 13,020 11,043 10,173
907 239 224 172 55 98 51 22
8,946
59
7,305
74
Reshoring to U. S. Region Rank 1 2 3 4 5 6 7 8 9 10
State SC TN MI NC GA TX AL OH NY IN
Jobs Companies 73,256 262 46,572 164 35,407 182 33,198 221 31,877 148 30,601 157 28,225 118 26,551 182 19,838 188 15,908 144
Sources: Reshoring Initiative Library, cases from 2010 – 2017
Avg. Jobs/ Facility 280 284 195 150 216 195 239 146 133 138
Top 10 Offshore Negatives Rank
Negative Reasons Offshore
1 2 3 4 5 6
Quality/rework/warranty Freight cost Total cost Delivery Inventory Rising wages Supply chain interruption risk/Natural disaster risk/Political instability Intellectual property risk Communications Green Considerations
7 8 9 10
Source: Reshoring Initiative Library, December 2017
# of times cited 292 196 147 100 91 88
78 64 61 53
Top 10 Reshored & FDI Industries: Rank
2 3
Industry Transportation Equipment Electrical Equipment, Appliances, Components Apparel & Textiles
4 5 6 7 8
Computer/Electronic Products Plastic & Rubber Products Chemicals Machinery Wood & Paper Products
45,210 38,170 37,421 21,653 20,736
9 10
Medical Equipment & Supplies Fabricated Metal Products
20,681 19,889
1
Jobs 298,747 56,515 48,525
Top Positive Reasons to Reshore 10 Rank Positive Reasons to Reshore/FDI 1 2 3 4 5 6 7 8 9 10
Government Incentives Proximity to customers/market Skilled workforce availability/training Image/brand Eco-system synergies Lead time/Time to market Infrastructure Automation/technology Manufacturing/engineering joint innovation (R&D) Higher productivity
Source: Reshoring Initiative Library, December 2017
# of times cited 527 493 446 398 336 251 239 211 155 141
Top Countries From Which Reshored and FDI’d Rank
Country
1 2 3 4 5 6 7 8
China Germany Japan Canada Korea Mexico Switzerland Australia
9 10
Jobs
Companies
89,988 64,383 54,314 19,964 15,852 13,020 11,043 10,173
907 239 224 172 55 98 51 22
United Kingdom
8,946
59
Italy
7,305
74
Source: Reshoring Initiative Library,2010 through 2017.
Reshoring and FDI • 2017: 171,000 manufacturing jobs • Up 50% from 2016 • Up 2,800% from 2010
WHAT CAN YOU DO AS A COMPANY? • • • •
Start on journey to become a “Lean” company Implement Lean accounting Use Design for Manufacturing software Use “Reshoring Tools” to return mfg. to America • Choose U. S. vendors to wherever possible • Become active in organizations that promote these ideas, such as Coalition for a Prosperous America (www.prosperousamerica.org)
CAN YOU DO ANYTHING AS AN INDIVIDUAL? • Don’t feel there is nothing you can do • Margaret Mead said, “Never doubt that a small group of thoughtful, committed citizens can change the world: indeed, it’s the only thing that ever has.”
• Remember, our country was founded by a small group of people that did indeed change the world by forming the United States of America
QUESTIONS FOR YOU! • What are you doing to help rebuild American manufacturing? • Are you helping companies make, buy, or sell more Made in USA products? • How can you help more companies reshore competitively? • What are you doing to develop the next generation of manufacturing workers?
• Michele Nash-Hoff is an authorized speaker for the Reshoring Initiative on how to return manufacturing to America. She is available as a speaker on a variety of topics related to manufacturing and workforce development. • Contact: Michele Nash-Hoff • Email: [email protected] • Phone: 619-265-7607 • Author of Can American Manufacturing Be Saved? Why we Should and How we Can • Columnist for Industry Week • www.savingusmanufacturing.com
Michele Nash-Hoff President, ElectroFab Sales A manufacturers’ sales agency specializing in fabrication services
U. S. LOST JOBS AND COMPANIES • From 2000 to 2010, the U.S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed. • U.S. Department of Commerce shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”
Every billion dollars of net imports costs 6,000 American jobs. So last year’s $566 billion deficit equates to 3.4 million jobs lost
TOP 10 TRADE DEFICIT COUNTRIES: THESE COUNTRIES ACCOUNT FOR 97% OF U.S. 2016 GOODS TRADE DEFICIT
SUPPLY CHAIN WEAKENED •U. S. textile industry has lost 63% of jobs since 2001 •Communication equipment industry has lost 47% of its jobs •Motor vehicles and parts industry has lost 43% of its jobs •U. S. machine tool industry consumption fell 78% in 2008 and another 60% in 2009 •U. S. printed circuit board industry has shrunk by 74% since 2000.
INDUSTRIES LOST •Fabless chips panels •Compact fluorescent lighting •Desktop, notebook and •LCDs for monitors, TVs and notebook PCs handheld devices like mobile •Low-end servers phones electrophoretic displays •Hard-disk drives •Lithium ion, lithium polymer •Consumer networking gear and NiMH batteries such as routers, access points, •Advanced rechargeable and home set-top boxes batteries for hybrid vehicles •Advanced composites used in •Crystalline and polycrystalline sporting goods and other silicon solar cells consumer gear •Inverters and power •Advanced ceramics and semiconductors for solar integrated circuit packaging.
THE HURTING ECONOMY
U. S. ISM PURCHASING MANAGERS INDEX
WAYS TO REBUILD MANUFACTURING • Develop a national manufacturing strategy to Improve business climate by – Changing Tax, Trade & Regulation Policies • Return manufacturing through reshoring • Foster success of start-up companies through incubators & accelerators • Train companies to transform into Lean companies • Educate community/youth about career opportunities in manufacturing
DEVELOP NATIONAL MANUFACTURING STRATEGY • Manufacturing strategy to specify optimal tax, trade, research, regulatory, and innovation policies • Rep. Daniel Lipinski (D-IL) introduced bill to develop mfg. strategy American Manufacturing Competitiveness Act (HR 2447) in 2014 • Wording incorporated into omnibus spending bill (HR 83) signed by President December 16, 2014.
WHAT IS WRONG WITH TRADE AGREEMENTS • Investor State Dispute Resolution – handled by Foreign Tribunals not U. S. courts • Buy America Act made Null & Void: waives procurement policies for all companies operating in trading partner countries • Country of Origin Labeling not allowed by WTO • Increases number of L1 visas • Doesn’t address foreign mercantilism: currency manipulation, product dumping, & government subsidies
PRESIDENT TRUMP’S PROPOSED TRADE POLICIES •
Reduce Trade Deficit
•
Renegotiate NAFTA
•
Negotiate bi-lateral trade agreements with United Kingdom & Japan
•
Increase enforcement of current Trade Agreements
•
Address currency manipulation & Dollar misalignment
•
Tax penalties for sourcing offshore
TRUMP’S PROPOSED TAX REFORM • • • • •
Reduce Corporate tax rate to 20% Reduce Capital Gains Tax to 15% Reduce tax brackets from 7 to 3 Border Adjustable Taxes A one-time repatriation tax – Note: Only 30-35% of manufacturers are C corps – the rest are Sub-chapter corporations, LLCs, partnerships, and sole proprietorships where taxes pass through to individuals so it is important to keep personal tax rates as low as possible
COALITION FOR A PROSPEROUS AMERICA • Non profit, non partisan organization that is an unprecedented alliance of manufacturing, agriculture and labor working for smart trade policies. • Members include farmers, ranchers, associations, and businesses in copper, steel, livestock, textile, tooling, machining, electronics, software, and other industries, as well as the industrial labor.
Coalition for Prosperous America Recommends New Trade Policies • Congressional Resolution to establish goal of eliminating trade deficit • Pursue trade deficit reduction as a primary objective of agreements. • Renegotiate past agreements • Utilize tax, fiscal and monetary policies to eliminate trade deficit • Aggressively and systematically attack and neutralize foreign mercantilism.
HOUSE CONCURRENT RESOLUTION 37 • Expressing the sense of Congress that Congress and the President should prioritize the reduction and elimination, over a reasonable period of time, of the overall trade deficit of the United States. •
Sponsor: Rep. Brooks, Mo [R-AL-5] (Introduced 03/22/2017)
BORDER ADJUSTABLE TAXES • Consumption taxes are “border adjustable taxes” (Value Added Taxes or Cost of Goods Taxes) allowed under WTO rules. • 159 countries have such taxes & U. S. doesn’t. • VATs average 17% globally so subsidize domestic shipments abroad with a 17% tax rebate. • VATs can be used to cut domestic taxes by: – Reducing personal and corporate income taxes – Reduce payroll taxes drastically
VAT COUNTRIES – RED NON VAT COUNTRIES - BLUE
HOW TO GET MULTINATIONALS TO PAY TAXES • Reform taxes at federal level based on the Sales Factor Apportionment Framework. – Amount of corporate taxes "would be determined solely on the percent of company's world-wide sales made in to U. S. – Encourages exports because all exports are fully excluded from corporate income tax – Profit to be taxed by the U. S. is determined by simple formula. – Reduces or eliminates the tax incentives to locate jobs, factories, and corporate headquarters offshore
CURRENCY MISALIGNMENT
HOW TO FIX CURRENCY MANIPULATION/MISALIGNMENT • The U.S. dollar is currently 25.5% overvalued according to calculations by Dr. John R. Hansen • Japan’s currency is undervalued by 25% and Germany’s by 23.6%. • His solution: Charge a Market Access Charge (MAC) of 0.5% charge “on any purchase of U.S. dollar financial assets by a foreign entity or individual
RETURN MANUFACTURING TO AMERICA • Harry Moser founded Reshoring Initiative in 2010 to return manufacturing to the U. S. • Objective: Change the Mindset from “Offshored is Cheaper” to “Local Reduces the Total Cost of Ownership.” • Train OEMs on why to source local & how to use TCO Calculator & suppliers on how to “sell” local sourcing. • Encourage production near the customer
COSTS RISING IN CHINA
PPV AND LANDED COST MISS A LOT OF TCO 120% 100%
13%
23%
80% 60% 100% 40%
87%
77%
20% 0% TCO
PPV = Purchase Price Variance
LANDED COST
PURCHASE PRICE
Top Countries From Which Reshored FDI’d Reshoring fromand Region Rank
Source: Reshoring Initiative Library, 2010 through 2017.
1 2 3 4 5 6 7 8 9 10
Country China Germany Japan Canada Korea Mexico Switzerland Australia United Kingdom Italy
Jobs
Companies
89,988 64,383 54,314 19,964 15,852 13,020 11,043 10,173
907 239 224 172 55 98 51 22
8,946
59
7,305
74
Reshoring to U. S. Region Rank 1 2 3 4 5 6 7 8 9 10
State SC TN MI NC GA TX AL OH NY IN
Jobs Companies 73,256 262 46,572 164 35,407 182 33,198 221 31,877 148 30,601 157 28,225 118 26,551 182 19,838 188 15,908 144
Sources: Reshoring Initiative Library, cases from 2010 – 2017
Avg. Jobs/ Facility 280 284 195 150 216 195 239 146 133 138
Top 10 Offshore Negatives Rank
Negative Reasons Offshore
1 2 3 4 5 6
Quality/rework/warranty Freight cost Total cost Delivery Inventory Rising wages Supply chain interruption risk/Natural disaster risk/Political instability Intellectual property risk Communications Green Considerations
7 8 9 10
Source: Reshoring Initiative Library, December 2017
# of times cited 292 196 147 100 91 88
78 64 61 53
Top 10 Reshored & FDI Industries: Rank
2 3
Industry Transportation Equipment Electrical Equipment, Appliances, Components Apparel & Textiles
4 5 6 7 8
Computer/Electronic Products Plastic & Rubber Products Chemicals Machinery Wood & Paper Products
45,210 38,170 37,421 21,653 20,736
9 10
Medical Equipment & Supplies Fabricated Metal Products
20,681 19,889
1
Jobs 298,747 56,515 48,525
Top Positive Reasons to Reshore 10 Rank Positive Reasons to Reshore/FDI 1 2 3 4 5 6 7 8 9 10
Government Incentives Proximity to customers/market Skilled workforce availability/training Image/brand Eco-system synergies Lead time/Time to market Infrastructure Automation/technology Manufacturing/engineering joint innovation (R&D) Higher productivity
Source: Reshoring Initiative Library, December 2017
# of times cited 527 493 446 398 336 251 239 211 155 141
Top Countries From Which Reshored and FDI’d Rank
Country
1 2 3 4 5 6 7 8
China Germany Japan Canada Korea Mexico Switzerland Australia
9 10
Jobs
Companies
89,988 64,383 54,314 19,964 15,852 13,020 11,043 10,173
907 239 224 172 55 98 51 22
United Kingdom
8,946
59
Italy
7,305
74
Source: Reshoring Initiative Library,2010 through 2017.
Reshoring and FDI • 2017: 171,000 manufacturing jobs • Up 50% from 2016 • Up 2,800% from 2010
WHAT CAN YOU DO AS A COMPANY? • • • •
Start on journey to become a “Lean” company Implement Lean accounting Use Design for Manufacturing software Use “Reshoring Tools” to return mfg. to America • Choose U. S. vendors to wherever possible • Become active in organizations that promote these ideas, such as Coalition for a Prosperous America (www.prosperousamerica.org)
CAN YOU DO ANYTHING AS AN INDIVIDUAL? • Don’t feel there is nothing you can do • Margaret Mead said, “Never doubt that a small group of thoughtful, committed citizens can change the world: indeed, it’s the only thing that ever has.”
• Remember, our country was founded by a small group of people that did indeed change the world by forming the United States of America
QUESTIONS FOR YOU! • What are you doing to help rebuild American manufacturing? • Are you helping companies make, buy, or sell more Made in USA products? • How can you help more companies reshore competitively? • What are you doing to develop the next generation of manufacturing workers?
• Michele Nash-Hoff is an authorized speaker for the Reshoring Initiative on how to return manufacturing to America. She is available as a speaker on a variety of topics related to manufacturing and workforce development. • Contact: Michele Nash-Hoff • Email: [email protected] • Phone: 619-265-7607 • Author of Can American Manufacturing Be Saved? Why we Should and How we Can • Columnist for Industry Week • www.savingusmanufacturing.com
