The Biden-Harris transition website posts Biden’s policy for U.S. manufacturing and for addressing supply chain shortages due to Covid19. But can we take what is written at face value? Like all politicians’ statements, this one is high-level, sweeping verbiage with little or no defined detail.
Of course, this is only the beginning – high-level statements made by incoming administrations are just ideas and typically lack execution and implementation detail. But at this time in American history, we are at a critical crescendo in manufacturing and global supply chains, and new policies by the incoming Biden-Harris Administration are important for us to understand.
The Biden-Harris transition website states:
“Joe Biden will work to ensure that the U.S. does not face shortages of the critical products America needs in times of crisis and to protect our national security. To combat the COVID-19 pandemic, Biden will immediately marshal all of the tools of the Federal government to secure sufficient supplies, treatments, and, as soon as possible, a vaccine to combat the pandemic. At the same time, he will implement fundamental reforms that shift production of a range of critical products back to U.S. soil, creating new jobs and protecting U.S. supply chains against national security threats.”
The president-elect also has pledged to incentivize “Made in USA” and reshoring through a 10% tax credit for companies that create U.S. jobs. This is good news for those of us working hard on initiatives to reshore manufacturing. But at this time, there are no identified specific steps to make this happen. As Rachel Maddow says, “Watch what they do, not what they say.”
We have a long way to go to recover U.S. strength in manufacturing. Not only do we need incentives such as tax credits, research grants, and an industrial policy, we also need a federal government that will go beyond rhetoric and high-level policy. We need actionable plans to assist with reshoring efforts.
In the end, the decision to reshore or expand manufacturing in the U.S. is based on the economics of the firm. If manufacturing can be cost-competitive in America, then it makes sense to produce here. In a recent study conducted by the Reshoring Institute, (https://reshoringinstitute.org/made-in-usa-survey ) participants told us they prefer products Made in the USA and are willing to pay up to 20% more for them.
To make products here, even if they are slightly more expensive, manufacturers must streamline their production to extract labor costs through automation, adoption of new technologies, and reengineering of production lines. This means that manufacturers are going to need assistance to make investments in capital equipment in the form of tax breaks and low-cost loans. Local and state economic development organizations will have to come through with other incentives to make their locations attractive.
Artificial barriers such as import tariffs won’t help make American manufacturers more efficient, in the long run. Only the hard work of becoming more efficient through streamlined and automated factories will make manufacturers competitive with world markets. There’s a lot of work to be done and help for manufacturers must come from the feds. Watch what they do, not what they say.