To turn the corner on manufacturing, California leaders are first acknowledging the pain

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The Golden State’s most dependable manufacturing truth teller may be the trade group charged with its health and efficacy — the California Manufacturers and Technology Association, or CMTA.

CMTA released data earlier this month that points to more pain than pluses. They deserve credit for doing so.

Manufacturing is measured in multiple ways. Today, more manufacturing companies call California home than any state. But as reports cited by CMTA tell us, California now lags way behind America’s leading manufacturing outposts in private-sector investments and job growth across manufacturing’s varied sectors; at the same time, it tops the list in undesirable categories like energy costs, insurance premiums for workers comp, and corporate tax rates. See the correlation?

How far behind is debatable, but the trends are unmistakable. According to Site Selection magazine’s Conway Projects Database, states like Texas and Ohio are adding “corporate facility projects with significant impact, including headquarters, manufacturing plants, R&D operations, and logistics” at a rate that leaves California in the dust. In 2020, Texas added 781 private-sector corporate projects that exceeded $1 million, added 20 jobs, or involved 20,000 square feet of new floor area. California added 103, behind such manufacturing stalwarts Louisiana (116) and South Carolina (110). The per-capita ranking — projects per million residents — are even worse. (Arizona led the rest of the West with 108. Colorado (29) and Utah (21) lagged further.)

The trends aren’t a surprise to those in a position to fight back on behalf of California manufacturing. CMTA president Lance Hastings and other advocates like Jim Watson of the CMTC, California’s NIST-sponsored Manufacturing Extension Partner, helped craft a comprehensive road map for the sector in 2019. The California Forward Advanced Manufacturing recommendations outline a “statewide manufacturing ecosystem strategy” along four primary axes: strategy, workforce, infrastructure, and trade.

Its proscriptions are detailed and touch on many of the high points in today’s national narrative, like “taking action to upskill our workforce, rebuild our infrastructure, fight for free trade, and promote sustainability.” It also calls for the creation of a new manufacturing bureaucracy, a network of new departments, councils, institutes, and committees. The tactics seem well reasoned. But there’s so much. It can be a head-spinning roadmap.

I can envision company executives asking simply for lower business costs, targeted tariffs and value-added taxes that level the playing field for U.S. companies, more suppliers and better tools to find them, and marketing air cover to encourage consumers and OEMs to buy local, to support local manufacturers.

If California leaders don’t want to emulate Texas, perhaps China’s approach is worth watching. Miao Wei, a retiring minister of industry and trade, made news earlier this year by stating that the global manufacturing leader is in fact “30 years away from becoming a manufacturing ‘great power.'”

It’s a bit of an overstatement.

But his language reflects the importance of manufacturing in the world’s second-largest economy: “Basic capabilities are still weak, core technologies are in the hands of others, and the risk of ‘being hit in the throat’ has significantly increased,” he said, and concludes: “We must maintain our strategic resolve, stay clear-headed, and deeply understand the gaps and deficiencies.”

China leaves little doubt of its intentions to be the global manufacturing superpower. California — and other Western states that ranked poorly — will hopefully redouble efforts to deliver on the recommendations in the California Forward plan, to advance manufacturing.

A renewed sense of urgency would be welcome. So much is at stake.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

A boycott of the Beijing Olympics would be preposterous. Ask the brands that manufacture there

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In American politics, China is the equal-opportunity villain. All sides have found reasons to pick a fight, including the media, where voices are drumming up support for a boycott of China’s 2022 Beijing Olympic Games.

But an Olympic boycott is the worst of all options to protest China’s behavior or effect lasting change.

For starters, history tells us they don’t work. What was gained from the Carter administration’s boycott of the 1980 Moscow Olympics? Certainly not a USSR withdrawal from Afghanistan. Wider economic embargoes are typically no better. What of the 60-plus year Cuban embargo? If the intention was to sustain the Castro regime for half a century, mission accomplished.

Yet even a symbolic boycott of the Beijing games would ignore our current codependency with China and make for an embarrassing spectacle. Last week’s galling Washington Post op-ed, “Companies must boycott the Beijing Olympics,” aptly demonstrates why.

The Post lectures long-running Olympic sponsors like Visa, Coca-Cola, and General Electric that “[t]heir endorsement of the Games is effectively an endorsement of China as a global leader, entitled to a worldwide celebration of its achievements and worth.”

What, then, of the myriad American brands whose products are made in China, brands that will festoon U.S. Olympians as they parade in opening ceremonies, compete in the Games, or socialize in Beijing? Are they to boycott the games as well? What message would this send to the Chinese factory workers who manufacture their gear? (Here’s the latest on how Ralph Lauren is trying to thread the needle with the “official” U.S. uniforms to be worn in opening and closing ceremonies for the Tokyo games. U.S. outdoor industry brands must be rolling their eyes.)

The degree to which U.S. companies rely on Chinese labor is staggering. Denver’s VF Corp. — parent company to stellar consumer brands like The North Face, Timberland, Vans, and many more — owns or operates over 400 factories in China alone. They’re in good company. U.S. firms operating offshore “effectively endorse” China as a global manufacturing leader every day.

The codependency runs deep. U.S. brands rely on Chinese employees to fulfill the brand promises they make to customers here and around the world. Kühl, Utah’s successful OI brand, proudly proclaims its products are “Born in the Mountains” — the Wasatch Mountains, one suspects. They’re also made in China.

But to single out Kühl or any of hundreds of U.S. brands, is no more appropriate than berating Visa or GE. When U.S. brands have more options to invest in domestic labor and factories, but don’t, The Washington Post will have front page news. Better than today when its columnists parrot the op-ed board to implore companies to ask, “[is] it really consistent with our values to sponsor the Genocide ­Olympics?” even as Chinese labor helps U.S. companies bring American “values” to life every day in the products they make.

An informed approach by U.S. policymakers would encourage American athletes to travel to China and win, as they work overtime to help U.S. companies reshore jobs and fulfill the brand promises they make every day.

No, an Olympic boycott will do nothing to deter China from subjugating its Uyghur population. To effect lasting change, to regain leverage, America must reestablish the domestic supply chains that enable its companies to manufacture more products on American soil. As we’ve written before, a reinvigorated U.S. manufacturing base is the one development certain to capture Beijing’s attention.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.