Free trade is dead. For manufacturing, good riddance

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I’ve argued, along with Harry Moser and others, for a new industrial policy that picks U.S. manufacturing “to win.” As contrarian a view this was a decade ago, there’s consensus today that we should do just that.

The list of desired outcomes reads like an economic manifesto:

  • Protecting key domestic manufacturing industries and nurturing new or reimagined sectors — like semiconductors

  • Providing incentives to localize manufacturing supply chains from offshore outposts, via new investments in domestic supply chains, or both

  • Accelerating the pace of automation in small manufacturers to overcome workforce shortages but more, to improve their global competitiveness

  • Aligning underutilized economic zones — including rural economies — with high-potential manufacturing opportunities

There’s more, but the big takeaway is that “free trade” is dead. The staggering loss of middle-class jobs, the transfer of wealth and expertise and infrastructure to offshore outposts, today underscores the hard lesson that nothing was free about free trade. Time to complete the policy scaffolding to protect and subsidize U.S. manufacturing.

Here are suggestions to update the protectionist playbook in light of recent events:

> Work to roll back the value of the dollar

As tariffs or BATs (border adjusted tax) are used to level the domestic playing field, we should also work to improve the competitiveness of U.S. companies manufacturing at offshore locations in support of local consumers. America’s stalwart dollar is a problem. As the Wall Street Journal‘s Bob Tita notes, “For U.S. manufacturers operating overseas factories, their sales in foreign currencies are worth less in dollars now because of the unfavorable exchange rates caused by the strengthening dollar.”

The fix is straightforward: jettison “market-based” thinking and intervene to manage the value of the dollar. Robert Blecker of the Economic Policy Institute outlines the path forward: “The dollar has not fallen compared to the currencies of the developing nations that now account for more than half of the U.S. trade deficit. Some of these nations, especially China, maintain fixed exchange rates and intervene heavily to prevent the type of market-driven adjustment that is now occurring between the dollar and the euro. As a result, relying on financial markets to bring the dollar down is not enough. More active management of the dollar’s decline including cooperation with major U.S. trading partners and action to end foreign manipulation of currency value is vital to ensure that the dollar falls in a comprehensive and sustainable fashion.”

> Focus grants and loan programs on uptooling small manufacturers

Economic development can be a miasma of local and regional assistance for business that lacks focus or operates at cross-purposes. Whatever the case, well intentioned efforts often fall flat.

There should be no confusion today about what U.S. manufacturers need from development funding: targeted manufacturing-related grants, awards, and loan programs that facilitate automation and tech-fueled upgrades. Full stop. Uptooling U.S. manufacturers today achieves a rare trifecta of outcomes: improved processes that result in better products, relief from a tight labor market, but also workforce development, as technology attracts a new generation of employees.

> Tap in to manufacturing’s nerd appeal

As the “tech wreck” leaves STEM grads uncertain about a career in tech, manufacturing is today poised to fill the career void for this wave of nerdy talent. The timing couldn’t be better. Investments in technology provide manufacturers with a calling card for talent that’s long eluded them.

But the latest wave of technology layoffs this fall has been met by a tepid response from manufacturing brands and associations who otherwise should be coordinating a full-blown recruiting campaign to attract this generation of STEM talent.

At its core, the dissonance between what should be done and what is being done can be chalked up to what Glenn Plagens, CEO of Colorado MEP Manufacturer’s Edge, called the need for “community players coming together again to determine what the next steps are.” In other words, the ongoing challenge of developing a more connected manufacturing community.

Nevertheless, developments today are trending toward alignment. If a concerted national campaign that emanates from Washington D.C. is a bridge too far, coordinated local efforts that highlight manufacturing’s tech stars is an important next step.

It’s a straightforward tactic that, in addition to the others, will work to protect U.S. manufacturing at this important time.

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