Four Initial Steps Toward Revitalizing Manufacturing

I was recently invited to the White House as a representative of small- and medium-sized businesses for a meeting with Vice President Joe Biden to discuss the administration's plans to revitalize manufacturing in America.

The event coincided with the launch of the administration's new Manufacturing Agenda, which states in part, "In today's increasingly competitive global marketplace, manufacturing activities will be undertaken by private actors who will locate their factories where total all-in cost is the lowest. ... Fundamentally, if we want to capture the positive benefits from a vibrant and thriving manufacturing sector, the government must help to create a competitive business climate."

As a small manufacturer, I couldn't agree more. Let's hope the administration's agenda is quickly put into action. Here are four initial steps toward revitalizing manufacturing:

•Understand the cost structure of the manufacturing sector: First, the government should gather a more sophisticated understanding of manufacturing-sector dynamics, particularly regarding small- and medium-sized companies like mine. I currently serve on the Manufacturing Council, a forum set up by Secretary of Commerce Gary Locke. I strongly support the council's recommendation to conduct an international cost and competitiveness analysis of the sector on an ongoing basis to identify all areas where we are at a competitive disadvantage with companies overseas. We cannot develop a strategy to reduce costs before reaching a fundamental understanding of exactly what those costs are. The analysis will subsequently allow us to take fact-based steps to improve our competitiveness. Without an overarching strategic rethinking of how to help manufacturing, it will continue to shrink each year.

•Address the credit crisis in manufacturing: One big problem threatening recovery is the unprecedented difficulty small businesses, particularly manufacturers, face accessing bank loans for day-to-day operations or investment.
The administration's initiative to channel unspent Troubled Asset Relief Program (TARP) funds through community banks for small business loans is a potentially productive way to get us needed credit. If American manufacturers cannot access sufficient credit to increase production as the economy improves, new job orders will head to our overseas competitors.

•Address our global trade imbalance. On this point, the Manufacturing Council's recommendations could not be more clear: "The greatest opportunity for eliminating our trade deficit is through correcting trade imbalance with China, which now accounts for over 40% of the overall trade deficit and over 60% of the trade deficit in manufacturing." Correcting the imbalance will require eliminating currency manipulation and subsidies to foreign manufacturing firms, as well as barriers to U.S. exports.

•Incentivize - don't discourage - manufacturing in America: American manufacturers are burdened with costs that put them at a global disadvantage. For example, more than 70 percent of manufacturers are structured as "S Corporations," partnerships and other entities, including many family-owned companies. When Congress increases taxes on higher income brackets, these tax increases also apply to our companies because of the way they're structured, depriving us of needed resources.

Small- and medium-sized businesses are the heart of U.S. manufacturing and the job creators of our communities. We can compete with anyone in the world if we are on a level playing field. The time for action is now.

James McGregor is vice chairman of McGregor Metalworking Companies, based in Ohio