Manufacturing Policy is Important to the Ceramic Industry
For the U.S. glass and ceramic industry, domestic manufacturing policy and innovation will be crucial to facing challenges involved with global competition.
The manufacturing industry has always been an important foundation of the U.S. economy. From glass and ceramics that are critical to automotive, food, medical, construction, and electronics manufacturing to other discrete and process industries, manufacturing is vital. In fact, current research indicates that no other sector creates more economic value or supports more additional jobs than manufacturing.
In our current climate, manufacturing is getting a lot of attention for a number of reasons. For example, a study by the National Association for Manufacturers, Manufacturers Alliance for Productivity and Innovation, and The Manufacturing Institute highlights two key items:¹
- No sector creates more economic value or supports more additional jobs than manufacturing. This is reflected in the multiplier effect, and it underscores why a strong and healthy economy requires a vibrant and growing manufacturing sector.
- Manufacturing is also vital to attracting investment from overseas. Manufacturing companies in the U.S. are responsible for nearly half of all U.S. exports, while foreign-headquartered companies now invest nearly $750 billion in U.S. manufacturing and employ more than 1.6 million people.
More recently, a USA Today report says that manufacturing is growing at its fastest pace since 2014. Highlights from this report state that “U.S. factory activity grew at the fastest pace in 2½ years in February as new orders and production both advanced,” and that “17 of the 18 manufacturing sectors reported growth last month, with only furniture contracting.”²
This is good news for manufacturing companies and the economy as a whole. But there is still much more to be done for long-term sustained growth. U.S. manufacturing companies know what bad times look like, as recent years have brought severe recessions. Yet U.S. manufacturing has rebounded time and time again as a result of quality, innovation, knowledge, and leadership. So long-term sustainability—in growth, talent and innovation—is paramount. And one of the best ways to underpin manufacturing growth and expansion is through manufacturing policy.
Importance of U.S. Manufacturing Policy
Much discussion surrounds the importance of U.S. policy and manufacturing. Jack Karsten, a research analyst with the Center for Technology Innovation at the Brookings Institute, emphasizes the importance of policy in that “the federal government plays a role both in funding manufacturing R&D and incentivizing training programs such as apprenticeships that prepare workers to use new technologies. Growing manufacturing sectors like clean energy also depend on maintaining federal regulations on environmental protection and energy efficiency.”³
Another important point is the impact of policy on small- and medium-sized companies, which often serve as suppliers in the larger supply chain of manufacturing. Mark Mills, who serves as a senior fellow at the Manhattan Institute and a faculty fellow at Northwestern University’s McCormick School of Engineering, recently commented in a study on manufacturing policy that “for small manufacturers, the cost of regulatory compliance was the equivalent of $35,000 per year per employee.”4
In addition, the Boston Consulting Group undertook a project with a major retail customer. They found that reducing the constraints of policy barriers has the potential to present an opportunity to create more than 1.5 million American jobs and educe more than $300 billion in consumer goods that are currently imported.5
To develop an infrastructure that provides a policy foundation for long-term manufacturing growth and development, including for large and smaller ceramic manufacturers, the strategy at minimum must be addressed from local and national perspectives. Research from McKinsey and Co. emphasizes that “policy can play a role in modernizing smaller manufacturers through financing programs, business accelerators, or tax incentives. The U.S. federal government has established the Manufacturing Extension Partnership for small and medium-size firms, but it does not have the scale for maximum impact. Smaller firms need expanded access to advanced technology, whether at federal labs, universities, or public-private hubs.”6
In a piece for The Wall Street Journal, Martin Baily points out that automation is a critical component of the future of manufacturing and will therefore impact future manufacturing policy.7 As manufacturing jobs in the future will be highly skilled, policy implications will be related to training, as well as university/community college collaborations with industry to close the skills gap and to undertake joint research and development.
As Bailey points out, “The government also should do what it can to nurture the ecosystems that exist around large manufacturers because as these big companies transition to new ways of manufacturing, they may have to rely on small local firms to provide the skills and technologies they don’t have in-house.”8
State and local governments must also strive to increase manufacturing innovation. This can be done through incentives to attract industries as they expand. Another method involves providing incentives that foster industry and university research that results in innovation. Thus, a strong U.S. manufacturing policy must align with state and local needs.
Key Questions for Policymakers
The bottom line is, when considering U.S. manufacturing policy for long-term benefits, we should continually ask our policy leaders the key questions highlighted by Indiana University’s Manufacturing Policy Initiative:9
- How does U.S. public policy impact productivity and economic growth [including at the state and local levels]?
- How can the country best prepare a workforce to meet the needs of 21st century manufacturing?
- How can we most efficiently and effectively identify and resolve disputes in international trade?
For the U.S. glass and ceramic industry, domestic manufacturing policy and innovation will be crucial to facing challenges involved with global competition. With favorable policies that support U.S. manufacturing growth, innovation, workforce development, and a favorable environment, manufacturers have reason for optimism.
“9th Edition of Facts About Manufacturing,” www.themanufacturinginstitute.org/Research/Facts-About-Manufacturing/~/media/A9EEE900EAF04B2892177207D9FF23C9.ashx, p. 2.
Davidson, Paul, “Manufacturing grows at fastest pace since 2014,” March 1, 2017, www.usatoday.com/story/money/2017/03/01/manufacturing-grows-fastest-pace-since-2014/98546040.
Karsten, Jack, “Trump administration brings a different approach to manufacturing,” July 14, 2017, www.brookings.edu/blog/techtank/2017/07/14/trump-administration-brings-a-different-approach-to-manufacturing.
Mills, Mark, “Prometheus Bound: How Regulations Stifle a U.S. Manufacturing Renaissance,” October 4, 2017, as cited in https://chiefexecutive.net/walmarts-got-policy-roadmap-renewing-u-s-manufacturing.
Guillot, C., “Walmart’s Got a Policy Roadmap for Renewing U.S. Manufacturing,” October 4, 2017, https://chiefexecutive.net/walmarts-got-policy-roadmap-renewing-u-s-manufacturing.
Ramaswamy, Sree, et. al, “Making it in America: Revitalizing U.S. Manufacturing,” November 2017, www.mckinsey.com/global-themes/americas/making-it-in-america-revitalizing-us-manufacturing.
Bailey, M.N., “How the U.S. Gets Manufacturing Policy All Wrong,” June 2, 2015, www.wsj.com/articles/how-the-u-s-gets-manufacturing-policy-all-wrong-1433301281.
Manufacturing Policy Initiative @SPEA, Indiana University, https://manufacturingpolicy.indiana.edu.
Any views or opinions expressed in this column are those of the author and do not represent those of Ceramic Industry, its staff, Editorial Advisory Board or BNP Media.