MIT Professors: Obama’s Push for US Manufacturing Misses Global Picture

Thursday, 14 Mar 2013 08:04 AM

By Dan Weil

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President Barack Obama’s effort to boost the sagging fortunes of the U.S. manufacturing sector doesn’t account for globalization, MIT professors John Deutch and Edward Steinfeld write in The Wall Street Journal.

Obama has implemented a bevy of subsidies. “The idea behind the initiative is simple: lowering manufacturing costs will allow American firms to sell more products in world markets,” they say.

“Government support will help spread know-how throughout U.S. industry and boost this country's competitiveness.”

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But that’s not how it works, according to Deutch and Steinfeld. The manufacturing industry, including nascent clean-energy technologies, is global in nature and thus can’t be thought of as a single entity in the United States.

“Rather, the manufacture of key energy technology products depends on an interdependent supply chain whose many components often reach final assembly in a location different from the point of sale or headquarters of the manufacturer,” they write.

While it’s understandable that Obama’s effort focuses on benefits for U.S. companies and workers, “it doesn't acknowledge the growing global character of manufacturing, especially in high-technology fields, or the difficulty of designing assistance programs that target ‘inside the U.S.’ activities only,” Deutch and Steinfeld say.

“If done right, advances achieved from the U.S. program will benefit firms around the world and create better products and more jobs in the U.S. and elsewhere,” they note.

“[I]t is important to encourage other countries in Europe and Asia to mount similar advanced technology programs and to assure that U.S. firms have access to these efforts. In a world economy that depends on innovation and production, the U.S. must encourage technology transfer and the opportunity to invest and trade globally.”

A recent survey by Travelers Insurance illustrates the importance of globalization for the manufacturing sector. It shows that that 71 percent of manufacturing companies are conducting sales outside of the United States.

“As new risks emerge for manufacturers, insurers like Travelers believe that the new landscape requires a more evolved view of global businesses,” says Jim Mandes, manufacturing industry manager for Travelers Commercial Accounts.

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