Badly battered by the recent economic downturn, the U.S. manufacturing sector is now on the road to recovery but is still operating below its previous peak. And as tough as the recession has been on U.S. manufacturers, the sector must confront even more substantial structural challenges, including the rapid pace of technological innovation and the new rules of the global economy. Because of these factors, the sector must deal with unparalleled global competition for capital and markets, which places immense pressure on U.S. manufacturers to reduce costs and boost productivity.

To address these challenges, the U.S. Department of Commerce undertook a comprehensive review of the manufacturing sector, exploring the question, "How can government help manufacturers compete?" Below are some of the recommendations the department set forth in its report entitled "Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers."

The government should…

• Make recent tax cuts permanent to allow manufacturers to draw the capital needed to support their future competitiveness. This will encourage investment in manufacturing and other sectors of the economy. Important features of the recent tax cuts include the elimination of the estate or "death" tax, the temporary increase in expensing limits and new incentives for small business investment.

• Simplify tax rules to ease the burden of tax complexity and compliance on manufacturers. The Treasury Department should review how to make rules less "taxing," paying special attention to the provisions that are especially cumbersome for manufacturers, including depreciation, the corporate alternative minimum tax and the research and experimentation tax credit.

• Create an assistant secretary-level position at the Department of Commerce to focus on manufacturing and services. This person should serve as the main liaison to the U.S. manufacturing sector. He/she should conduct a benchmark analysis of the U.S. environment for manufacturing. Additionally, the assistant secretary should establish a new office of industry analysis.

• Set up a manufacturing council under the chairmanship of the Secretary of Commerce. The council would facilitate regular communication between the government and the manufacturing sector. It would also provide counsel on how to implement the president's manufacturing initiative.

• Establish an interagency working group on manufacturing. This group would be chaired by the Secretary of Commerce and would be responsible for coordinating the implementation of government initiatives.

• Enrich the pool of investment capital available to manufacturers by creating incentives for saving. To accomplish this, Congress should adopt tax incentives to boost the savings rate of American taxpayers. This would also help address the mounting U.S. trade deficit.

• Lower the cost and improve the availability of healthcare, which is the biggest and fastest rising cost faced by U.S. manufacturers. To do this, the government should create association health plans, promote health savings accounts, speed up the Food and Drug Administration's review of new and generic drugs, deploy new technologies—including electronic prescribing—to minimize expensive medical errors, and enact medical liability reform.

To read all of the department's recommendations, see the full report at www.commerce.gov/DOC_MFG_Report_Complete.pdf. (You'll need Adobe Acrobat Reader).

Source:

Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers
U.S. Department of Commerce
January 2004
www.commerce.gov/DOC_MFG_Report_Complete.pdf