If you tuned into the presidential debate Tuesday nightwondering why President Obama and Mitt Romney spent so much time hitting eachother on manufacturing and China, then you don't live in a swing state.
The good news is that America really has a future inmanufacturing. The brightest minds atHarvard, MIT, and in the consulting community see enormous possibilities forAmerican manufacturing. We're competitive in energy costs, labor productivity,and other factors. Reshoring has alreadybegun. Both the candidates recognize the possibilities, which is why thead war on China and manufacturing has been underway since this summer.
Here's a quick primer on what the candidates have beensaying, and where American manufacturing can travel in the next few years:
1. Could a collegegraduate get a manufacturing job?
Audience member Jeremy Epstein said he's wondering about ajob after he graduates, and President Obama launched into his jobs plan, with afocus on manufacturing. Even the Huffington Post's Howard Fineman, whom Iadmire, missed the point in a post-debate Tweetstating that Americans don't want manufacturing jobs. In fact, the Bureau of Labor Statisticsreports that there are roughly 250,000 job openings in manufacturing, and afair number of those challenging positions require a college degree. Thinkengineers, managers, accountants, scientists, and the like. It's a good joboption for many college graduates, and consulting firms like BCG believe thatthe U.S. could produce 2-3 million more manufacturing jobs in the coming years.
2. Who's createdmanufacturing jobs?
Mitt Romney said we've lost 500,000 manufacturing jobs sinceObama took office. The larger picture is this: The United States lost 5.5million manufacturing jobs 2000-2009--before and during the Great Recession,the largest decline on record. The vast majority of the bloodletting occurredduring the Bush Administration. We've gained 500,000 manufacturing jobs sincethe beginning of 2010. That's the largest gain in manufacturing jobs since theearly 1990s. Granted, the gains are a drop in the bucket compared to what weneed, but at least the needle is generally headed in the right direction. It'strue that China passed the United States to become the largestmanufacturer in the world, but that was a trend well underway before Obamatook office in 2009.
3. Who's tougher onChina? Here, both candidates have pointsto make.
Mitt Romney rightly points out that President Obama has failedto designate China as a currency manipulator. There is no question thatChina manipulatesits currency. There is also no question that China's exchange rate policyharms American jobs.Unless you've been living in a cave, you know that Mitt Romney will "designateChina as a currency manipulator on day one of his Administration." But, whyhasn't Mitt Romney asked House Speaker John Boehner to bring a bipartisancurrency bill to the floor for a vote? Why did Paul Ryan voteagainst a China currency bill in 1010, when more than half of HouseRepublicans supported it? The China currency bill was the only major bill tobeat a Senate filibuster by Mitch McConnell over the past two years. Also,after Romney calls out China, what's the plan to change China's behavior?
President Obama reminds us that he's cracked down on China.He's put tariffs on Chinesetires, a move that Romney opposed. He's initiated an action against Chineseauto parts, andhas supported relief for American solar, steel, and other producers againstdumped and subsidized products from China. His enforcement initiatives are thebest we've seen since the 1980s. President Obama further charges that Romneyinvested in Chinese firms...and still does.
4. Who's got a planto grow manufacturing?
President Obama has laid out a plan to create 1 million newmanufacturing jobs in a second term. Investing in education, innovation, andinfrastructure, trade enforcement/opening new markets, eliminating tax breaksfor offshoring and deepening tax cuts for manufacturing in America are keyelements of the plan, as well as investing in all domestic forms of energy.Mitt Romney doesn't offer a specific job creation promise on manufacturing, andfocuses on traditional energy investment, broad tax relief, and reducingregulation, as well as crackingdown on China and entering into free trade agreements with Latin Americannations.
5. Differences on theauto bailout.
There is no doubt that President Obama helped to save theAmerican auto industry and transformed it for the future. Americanconsumers have better choices, and Chrysler and GM are hiring again afterdecades of shedding production and jobs. The Administration used a managedbankruptcy, emergency loans, and other tools to achieve this. Most outsideobservers believe Mitt Romney's plan would have liquidated the industry as weknow it.
6. Is this focus onChina counterproductive?
Not at all. Putting pressure on China works. That's why thevalue of China's currency is now at an all-time high, even though it is still undervalued.We have more leveragethan most Americans believe. China does own some of our public debt, but itsholdings are falling. Sadly, perhaps, there are plenty of buyers of publicdebt--we don't need to depend on China. China buys dollars to help keep thevalue of its own currency artificially low. And, it buys dollars because itruns about a $28billion per month trade surplus with the United States. That's a terriblyunhealthy dynamic. On the other hand, China depends on the American consumerand unfettered access to our market. If we conditioned access to our market onplaying by the rules, China would have no other choice because it has nosubstitute. China is a growing market for U.S. exports, but it pales incomparison to Chinese imports to the United States. It's worth standing up toChina.
8. Are labor costsreally the only reason why Apple manufactures in China?
Actually, it's the leastsignificant reason of all. Bigger factors are the exchange rate, China'srestrictive policies on rare earth mineral exports (which are essential to thistype of production), subsidies, and lack of enforcement of labor, health, andenvironmental rules. Plus, for as good as Apple is at design, it is terrible atmanufacturing. Instead of investing in a sophisticated, modern productionfacility that is operated by robots and highly-paid American engineers, it optsto exploithundreds of thousands of Chinese workers. Public policy can help to create theproper ecosystem for Apple to shift its production to America. Not everymanufacturing job is coming back, but these certainly can.
So, what's next?
Expect a crescendo on China next week when the candidatesspar on foreign policy at the Boca Raton debate. And, expect shrill editorialsfrom all the editorial boards that got it wrong on China the first time as theyfret about "China bashing." When the elites are losing the argument, they startname-calling. The debate on manufacturing and China is long overdue. Let's keepit going.