U.S. Manufacturers Foresee Domestic Expansion, Cost Troubles

North American manufacturers consider the United States the most desirable country for expansion over the next three years, according to a survey released this week by the National Association of Manufacturers (NAM), The Manufacturing Institute, the Canadian Manufacturers and Exporters (CME), and Deloitte Touche Tohmatsu. The largest number of North American companies (44 percent) say they intend to expand production in the United States over the next three years. And 57 percent of U.S. manufacturers say they will become more globally competitive over the next five years across the supply chain from sales, marketing, and customer service to engineering and information technology.

The news, however, is not all rosy, according to NAM Vice President Emily DeRocco, who is also president of The Manufacturing Institute, which is NAM's research, education, and workforce affiliate. "The survey clearly shows concerns that manufacturing companies want government to address," DeRocco said. "Manufacturers cited controlling labor costs, enacting favorable tax policies, and assisting with the severe shortage of skilled manufacturing workers, including engineers, scientists, and technicians, as the top three areas that policymakers should address to help improve their global competitiveness. With an election on the horizon, U.S. candidates should redouble their efforts to explain how they will address these major pressure points and improve prospects for a continued strong manufacturing production base in America.

"Indeed, structural, non-production costs (corporate tax rates, employee benefits, legal costs, natural gas prices, and pollution abatement) for U.S. manufacturers have increased to an amount 31.7 percent higher than the average for our major trading partners, representing a significant and long-term problem for America's manufacturers and their employees," she added.

Nearly 80 percent of respondents identified tax cuts for manufacturers as the key factor promoting innovation and research & development. "Clearly, Congress needs to extend the R&D credit that expired at the end of last year," DeRocco noted.

The survey sheds new light on how North American manufacturers view free-trade agreements. Contrary to widely held perceptions, North American manufacturers paint a positive picture of their experiences with the North American Free Trade Agreement (NAFTA) after almost 15 years. Almost half (49 percent) say that NAFTA helped their business to become more competitive, while only 10 percent say it has hurt their business. The remaining 41 percent said it did not affect them one way or the other.

"On the trade policy side, the significant competitive momentum that is felt among U.S. manufacturers in this survey is reflected by the surge in U.S. export sales that has stabilized the U.S. economy this year," said Frank Vargo, NAM vice president of International Economic Affairs. "This report is a clarion call to negotiate and approve free trade agreements that will knock down barriers to U.S. exports. Congress should heed the news in this report and vote to strengthen the ability of North American-based manufacturers to compete effectively in the global economy."

The survey, Made in North America, reflects the views of 321 top-tier executives in a broad range of North American manufacturing companies of all sizes, NAM said. The majority of companies represented in the survey (45 percent) are based in the United States. To download the survey, go to www.nam.org/northamericansurvey.

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