U.S. manufacturing is in a state of crisis, and it may be a self-imposed dilemma for America. The January 2015 report from the Federal Reserve notes that there are fewer jobs in that industry than at the start of the Obama presidency, when there was 12,561,000 manufacturing jobs in the nation. By January of 2015, that number had been reduced to 12,330,000.
The crisis has its antecedents long before President Obama took office, during the tenure of President Clinton.
In October 0f 2000, Clinton signed legislation granting permanent normal trade relations to China. The measure had been bitterly opposed by conservatives, human rights groups, and unions. The move was consistent with his controversial policy of enhancing relations with Beijing, which included selling them supercomputers and nuclear technology, The moves are now seen as playing a significant role in building China’s sophisticated and aggressive military.
The change in U.S. trade policy eliminated potential tariff increases on Chinese imports. In addressing the issue, the Federal Reserve notes: “Our estimates reveal a negative and statistically significant relationship between the change in U.S. policy and subsequent growth in manufacturing…We find that U.S. imports of the goods most affected by the policy change increase substantially after 2001, and that this growth is driven by imports from China.”
Richard mcCormick, writing in the American Prospect back in 2009 noted that For American manufacturers, “the bad years didn’t begin with the banking crisis of 2008… Since 2001, the country has lost 42,400 factories, including 36 percent of factories that employ more than 1,000 workers (which declined from 1,479 to 947), and 38 percent of factories that employ between 500 and 999 employees (from 3,198 to 1,972). An additional 90,000 manufacturing companies are now at risk of going out of business. Long before the banking collapse of 2008, such important U.S. industries as machine tools, consumer electronics, auto parts, appliances, furniture, telecommunications equipment, and many others that had once dominated the global marketplace suffered their own economic collapse. Manufacturing employment dropped to 11.7 million in October 2009, a loss of 5.5 million or 32 percent of all manufacturing jobs since October 2000. The last time fewer than 12 million people worked in the manufacturing sector was in 1941. In October 2009, more people were officially unemployed (15.7 million) than were working in manufacturing.”
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Manufacturing has a singularly vital role in the U.S. economy. Senator Christopher Coons (D-Delaware) notes that “Workers in manufacturing jobs earn 22 percent more in annual pay and benefits than the average worker in other industries, according to the National Association of Manufacturers. Every new manufacturing job we create adds another 1.6 jobs to the local service economy, and for every dollar in manufacturing sales, another $1.34 is added to the economy. Investments in manufacturing have a stronger impact than investments in any other economic sector.”
The Economic Policy Institute recently reported that “Manufacturing industries generated $2.1 trillion in GDP (12.5 percent of total U.S. gross domestic product) in 2013. But even these figures do not fully capture manufacturing’s role in the economy. Manufacturing provides a significant source of demand for goods and services in other sectors of the economy, and these sales to other industries are not captured in measures of manufacturing sector GDP but are counted in the broader measure of its gross output. U.S. manufacturing had gross output of $5.9 trillion in 2013, more than one-third (35.4 percent) of U.S. GDP in 2013. Manufacturing is by far the most important sector of the U.S. economy in terms of total output and employment. The manufacturing sector supported approximately 17.1 million indirect jobs in the United States, in addition to the 12.0 million persons directly employed in manufacturing, for a total of 29.1 million jobs directly and indirectly supported, more than one-fifth (21.3 percent) of total U.S. employment in 2013.
“The manufacturing sector is also a particularly important provider of jobs with good wages for workers without a college degree. This can be seen in the manufacturing wage premium—the dollar amount by which the average manufacturing worker wage exceeds the wage of an otherwise comparable worker outside the manufacturing sector. The average wage premium for all U.S. manufacturing workers without a college degree was $1.78 per hour (or 10.9 percent) in 2012–2013.”
The ongoing weakness in the U.S. economy and job market, combined with Beijing’s continuing and dramatic military buildup, should encourage a timely and thorough re-examination of American trade relations with that nation.