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New ‘Manufacturing Communities Act’ Would Spur Broad Manufacturing Renewal

manufacturing-blog

While America’s manufacturing sector has rebounded somewhat from Great Recession lows—for example, adding 865,000 manufacturing jobs since February 2010—the recovery languishes, and even those job gains recover less than one-sixth of the U.S. manufacturing jobs lost during the 2000s. Moreover, the U.S. manufacturing sector has seen no growth in real value added since the end of the Recession. In fact, in 2013, U.S. manufacturing value added remained 3.2 percent below 2007 levels.

Put simply, America’s manufacturing sector continues to underperform its potential, meaning that America’s policymakers need to be leveraging every tool and instrument at their disposal to bolster the health of America’s manufacturing economy. And here, a key component of the strategy for accelerating America’s manufacturing recovery should include better empowering regional- and community-based manufacturing ecosystems.

That’s exactly what new, bipartisan legislation in the Made In America Manufacturing Communities Act, unveiled on Tuesday, February 9, 2016, sets out to accomplish. Sponsored by Senators Kirsten Gillibrand (D-NY), Mark Kirk (R-IL), and Jerry Moran (R-KS) along with Representatives David Cicilline (D-NY), Richard Hanna (R-NY), John Katko (R-NY), Tom Reed (R-NY), and Tim Ryan (D-OH), the legislation supports local manufacturing ecosystems by creating a permanent program that designates local regions as “Manufacturing Communities,” which would put them at the front of the line to receive federal economic development funding for the purpose of investing in regional manufacturing.

The approach builds on the Investing in Manufacturing Communities Partnership (IMCP) program, which the Obama administration launched in October 2015 to strengthen the competitive edge of America’s manufacturing communities by offering national support for local efforts to develop talent and nurture industrial growth. The administration’s initiative brought together 11 federal agencies with more than $1 billion in economic development funding to share best practices among IMCP communities and encourage continued investments in targeted manufacturing sectors. Thus far, the IMCP program has supported the designation and launch of 24 such “Manufacturing Communities” throughout the United States.

The Made In America Manufacturing Communities Act both builds upon this approach—and makes it permanent—by creating a mechanism to award a designated community preferential consideration for up to $1.3 billion in existing federal economic development assistance across the same 11 federal agencies, reducing current burdens that communities and small manufacturers face in navigating and accessing federal support. The program would be coordinated by the Department of Commerce, with a goal of aligning and coordinating resources across the federal government to better leverage programs and resources behind locally driven manufacturing strategies.

In order to earn the designation, communities would have to demonstrate the significance of manufacturing already present in their region and develop strategies to use the designation in making investments in six areas:

  1. Workforce and training;
  2. Advanced research;
  3. Infrastructure and site development;
  4. Supply chain support;
  5. Trade and international investment; and
  6. Operational improvement and capital access.

Localities that have successfully earned the designation as a “Manufacturing Community” have comprehensively mapped the stakeholders in their local manufacturing ecosystems—including key actors from the private sector, public sector (at federal, state, and local levels), universities and community colleges, research institutions, and key suppliers—and have thoroughly charted the supply and value chains that underpin their regions’ manufacturing activity. Taking these steps collaboratively has helped these communities build strong and durable industrial clusters, while aligning industry needs for worker training, research, supply chains, capital access, infrastructure and site development and trade.

In essence, the proposed Made In America Manufacturing Communities Act advances a regionally driven approach to strengthening America’s manufacturing economy that has already shown itself to be effective. ITIF encourages Congress to rapidly pass this bi-partisan legislation as an important step toward a stronger and more sustainable American manufacturing recovery.

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About the author

Stephen Ezell is vice president, global innovation policy, at ITIF. He focuses on innovation policy as well as international competitiveness and trade policy issues. He is coauthor of Innovating in a Service-Driven Economy: Insights, Application, and Practice (Palgrave MacMillan, 2015) and Innovation Economics: The Race for Global Advantage (Yale, 2012). Ezell holds a B.S. from the School of Foreign Service at Georgetown University.
  • Sandy Montalbano

    This is great news!

    We agree that building a strong U.S. supply chain is paramount to a healthy manufacturing sector. The auto cluster in the south is a great example and plays a unique role in economic development. The new Manufacturing Communities Act will help create and strengthen ecosystems, which will encourage other companies, suppliers and foreign direct investment to join the clusters thus restoring the American supplier network.

    We see many companies moving toward localization. U.S. companies are reshoring and foreign companies are investing to be in close proximity to the U.S. market. It is a good strategic move for many companies due to rising offshore wages, counterfeit parts, IP risks, quality issues, risks along complicated supply chains, long lead times and carrying costs of large inventories. By reshoring and shortening supply chains, companies can greatly improve lead times, responsiveness to customers, quality, innovation and R&D.

    Reshoring is the fastest and most efficient way to strengthen the U.S. economy because it:

    • Helps balance the trade and budget deficits
    • Reduces unemployment
    • Reduces income inequality
    • Motivates skilled workforce recruitment by demonstrating that manufacturing is a growth career.
    • Helps maintain the broad industrial capability required for national defense

    The Reshoring Initiative Can Help
    In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the not-for-profit Reshoring Initiative’s free Total Cost of Ownership Estimator (TCOE) can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

  • femmespeak

    Thrilled to hear this! I think we are all coming to the same conclusion as to what needs to be done to increase manufacturing in the USA…regional collaboration and cluster strategies. This is exactly why NERETA is hosting a national Summit at the end of April in New Jersey…to teach workforce development, economic development and higher education professionals how to collaborate in creating cluster strategies for manufacturing in their respective regions. This is not just a three day event for regional teams coming to the Summit, but is also followed up by eight months (one webinar a month) of additional training to support their strategic planning and implementation needs. The implementation of the Workforce Innovation and Opportunity Act (WIOA) requires “sector strategies” …so this is the perfect time to ask regions to team up and work on this TOGETHER! We are honored and grateful to have Eric Hansen of Economic Transformations Group, Inc. leading the training…and thrilled to have so many prestigious presenters at the event and for the post conference course! To learn more about the summit, go to: summit.nereta.org.