American manufacturing served as the backbone for America during its Golden Age - the years when we defeated Nazi Germany, helped rebuild the war-torn nations overseas, outlasted the Soviet Union in the Cold War, and witnessed the birth of a booming, prosperous middle class (and, subsequently, a booming economy).
In the 1970s, however, manufacturing began a steep decline that has resulted in today’s reliance on foreign nations - namely, China. This has been problematic for our nation for many years, but the coronavirus pandemic sheds even greater light on the severity of the issue and the need for a return to the American manufacturing of the 1940s.
No Longer a Self-Reliant Nation
For the past several years, China has ranked as the world’s number one exporter. Last year, it exported $2.499 trillion worth of goods. Electrical machinery and computers made up over 40 percent of their exports. Other main exports included furniture, plastics, and vehicles.
80% of active pharmaceutical ingredients used in drugs produced in America come from China and India.
The United States also depends heavily on China for pharmaceutical products. 80 percent of active pharmaceutical ingredients used in drugs produced in America come from China and India. Not only is such reliance an issue, but legitimate concerns have also been raised as to the safety of products that we are receiving from abroad. In 2018, for instance, a Chinese drug producer came under fire for violating standards in the production of several different types of vaccines.
American Companies Abroad
Unfortunately, the dependence is not limited to importing Chinese products. Offshoring has become a popular move for many prominent American companies, such as L.L. Bean, Chevy, Apple, and - ironically - American Girl. Despite China’s glaring human rights issues, such companies choose to produce in China because it’s more economically beneficial than producing in the U.S. The relatively low corporate tax rate of 25%, cheap labor, and lower energy costs - among other things - have drawn these businesses abroad and kept them there.
Impact on Americans
Between 2001 and 2017, millions of American jobs were lost due to imports and outsourcing. Manufacturing witnessed the greatest loss with a loss of approximately 2.5 million jobs. Every state has been impacted, though some - such as New Hampshire and Oregon - have been hit harder than others. The U.S. trade deficit with China has been steadily on the rise, leading to continual job loss, lower average income for Americans, and, thus, the decline of the American middle class.
The economic impact is not the only concern. Threats to national security increase with globalization. During World War II, the United States was far more capable than any other country to equip its military. The nation rapidly switched from producing civilian goods to manufacturing tanks, aircraft, arms, and ammunition. This ability to outproduce the Axis Powers contributed to the Allies’ ultimate victory.
Between 2001 and 2017, millions of American jobs were lost due to imports and outsourcing.
Today, foreign countries are outpacing us in manufacturing. Machine tool production - once an industry dominated by the U.S. - is now controlled by China. Furthermore, other countries are catching up to - and surpassing - us in technological advancements. In 2013, the Pentagon warned that U.S. defense systems could be compromised due to “offshore manufacturing of components, combined with the global sourcing of commercial technologies.”
Coronavirus Highlights Overreliance
COVID-19 will have devastating effects on the American economy for multiple reasons. Manufacturing around the world is being disrupted, as we first saw in China during the onset of the global outbreak. Companies, such as Apple, that manufacture primarily in China are already seeing depressions in productivity and sales. In late February, the Harvard Business Review warned of the effects of such disruptions to supply chains and worldwide manufacturing operations. With factories shutting down, necessary parts are not being produced and shipped, leading to further halts in manufacturing. Ports are also being affected, causing delays in shipments. Departures from Chinese ports dropped 20 percent in February.
A more frightening consequence of U.S. reliance on China is the potential lack of access to pharmaceuticals. Not only have many Chinese factories closed, negatively impacting the drug supply chain and causing a slowdown in drug production, but China has also threatened to deny the United States necessary drugs. An article from Xinhua News, China’s state-run media agency, stated that the world should thank China for its handling of the coronavirus and hinted that they could easily impose pharmaceutical export controls on the U.S., leading to an even greater crisis as we face the virus.
A Return to Self-Reliance is Needed
Evidently, reshoring and reducing our reliance on foreign imports would be of great benefit to our nation’s economy and security. Of course, this would, by no means, be a simple process devoid of obstacles. While the United States boasts the second largest export economy, we have not been able to get our prices as low as China for a number of reasons, including more expensive materials and high minimum wages and taxes. We do not currently have the trained workforce needed for increased manufacturing. We also lag behind China in access to rare earth metals, which are necessary for production. While these problems are currently hindering us from reclaiming dominance in manufacturing, they are not insurmountable.
Reshoring is a crucial step, but companies will not willingly return to the U.S. if higher minimum wages are mandated and greater taxes are imposed on businesses. It simply would not make sense for them economically. Historically, tariffs have worked to protect home-based companies from foreign competition, and they could incentivize offshored companies to return to the States. Corporate tax rates that match those of the rest of the world could also prompt reshoring.
The resurgence of trade schools could provide the necessary skilled workforce for a return to greater American manufacturing.
The resurgence of trade schools could provide the necessary skilled workforce for a return to greater American manufacturing. Due, in large part, to the student loan crisis, more young Americans are considering and opting to attend trade schools instead of a traditional 4-year university. Public figures, such as Mike Rowe, are encouraging students to choose this path over crushing student debt and a degree that will not land them a job capable of resolving that debt.
Despite our reliance on China for products produced with rare earth metals, we are not lacking in these resources. These metals and minerals are needed for electric cars, wind turbines, cell phones, and much more - and the United States has plenty of untapped deposits. In recent years, the U.S. has made great strides towards mining these deposits (specifically in Wyoming). In 2017, President Trump signed an executive order that boosted resources for exploration in this field. In 2019, three U.S. Senators from West Virginia and Arkansas introduced the Rare Earth Element Advanced Coal Technologies Act that would incentivize the development of technologies to extract rare earth elements. An increase in this type of mining would enable us to move away from our dependence on China, who currently supplies 80 percent of our rare earth metals.
While the coronavirus pandemic is a worldwide tragedy and will have severe and lasting consequences on individuals, businesses, and governments around the globe, we can certainly learn from it. Disrupted supply chains and economic losses, coupled with threats to national health and security could lead to the renewal of American manufacturing. Secretary of Commerce Wilbur Ross has already stated that this crisis could prompt the return of U.S. businesses from overseas. Of course, the current concern remains halting the spread of COVID-19 and caring for those who have already been, and will likely be, affected by the virus. Hopefully, though, in the coming months, we will all be able to pick up, dust off, and begin building an even brighter future for America.
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