Washington, D.C. — A new report from the Center for American Progress provides a road map for how U.S. manufacturers can regain global competitiveness and overcome the strategic risks presented by global supply chains, particularly with respect to health care and national defense.
Until recently, the United States was the world’s largest manufacturing exporter. In recent years, however, its competitive lead has eroded, despite the fact that the United States is the world leader in scientific research—the basis of manufacturing innovation. In “Building U.S. Manufacturing Competitiveness and Capacity,” CAP Senior Fellow and Chief Economist Marc Jarsulic looks at the reasons why the United States is failing to more effectively turn its prowess in scientific discovery into competitive advantage in manufacturing, which would help domestic industries meet the challenges posed by countries such as Germany and China. The report provides a road map for bridging the so-called valley of death between scientific discovery and commercial manufacturing production.
Jarsulic writes that the source of these failures lies in unaddressed collective action problems. Individual profit-maximizing firms underinvest in applied proof-of-concept research, measurement technology and standards, and workforce development, because they cannot capture all the benefits of those investments. This slows productivity growth, since these kinds of investments are needed to translate basic scientific discoveries into manufacturing processes and allow workers to adapt to continual technical change. Jarsulic lays out several recommendations to solve this problem, including:
- Reconfiguring and expanding the existing the National Institute of Standards and Technology-coordinated Manufacturing Extension Partnership program (MEP) to help small- and medium-sized businesses translate cutting-edge scientific discoveries into new manufactured products and manufacturing processes and deliver higher wages and employment levels for manufacturing workers.
- Reconfiguring and expanding the Manufacturing USA (MUSA) network of research institutes to ensure that early-stage scientific research suitable for use in manufacturing production is sited in the United States and to develop the production processes that are specifically geared to address climate change.
- Mandating that the U.S. Department of Labor develop workforce training for firms participating in MEP and MUSA in order to enable workers to adapt to new production processes.
- Requiring the federal government to buy manufactured goods from high-performing U.S. firms, with high productivity, high wages, and good workforce training, in order to support good jobs and encourage innovation.
Additionally, Jarsulic finds that the COVID-19 crisis has exposed risks within the global supply chain where the United States does not currently have the domestic manufacturing capacity to meet demand in the event of an emergency. To remedy this, Jarsulic recommends:
- Carefully mapping supply chains for strategically important manufactured products.
- Supporting expansion of important domestic manufacturing capacity where strategically necessary.
- Developing supply agreements with trusted partner nations where important strategic risks exist.
“Improving the United States’ manufacturing industry’s global competitiveness is crucial both to provide well-paying jobs and to maintain national security,” Jarsulic said. “The good news is that as the world leader in technological innovation, we are well-positioned to regain the lead if the federal government, industry, and nonprofits come together to work toward this goal by pursuing policies to improve competitiveness.”
Read the report: “Building U.S. Manufacturing Competitiveness and Capacity” by Marc Jarsulic
Read the fact sheet: “Fact Sheet: Rebuilding the Competitiveness of U.S. Domestic Manufacturing” by Marc Jarsulic
For more information or to speak with an expert, contact Julia Cusick at [email protected].