The Information Technology and Innovation Foundation (ITIF) argues in a new report that economists misunderstand the reason the United States has lost so many manufacturing jobs.
ITIF’s 10 principles
- Focus on traded sectors, not just manufacturing
- Focus on high-value-added, defensible sectors and segments
- Focus on the trade deficit, not jobs per se
- Recognize what should stay and what shouldn’t
- Understand that when U.S. companies succeed in overseas markets it can help U.S. employment
- Focus on attraction rather than compulsion
- Move beyond one-off deals and a low-cost business climate
- Change the playing field through technology
- Support the defense industrial base
- Pay attention to where advanced production is located in the United States
According to the report, ITIF is urging Trump to continue with his focus on growing U.S. manufacturing, but to use “a scalpel, not a sledgehammer,” while also providing 10 principles to guide U.S. manufacturing policy.
“It’s unfortunate that the Washington establishment has either dismissed the idea out of hand or relied predominantly on generic ideas like tax reform and infrastructure spending,” said ITIF president Robert D. Atkinson, the report’s lead author. “While those policies would certainly help the broader economy, they’re like using a sledgehammer when we really need a scalpel. The key to effective manufacturing policy is to focus on which jobs can and should be brought back and which production is better off performed in other nations.”
In the report, Atkinson and co-author Stephen Ezell, ITIF’s vice president for global innovation policy, argue that trade and falling U.S. competitiveness have accounted for at least half the jobs lost since 2000. The co-authors also suggest that while establishment economists shy away from suggesting how large the U.S. manufacturing sector should be, they believe that the United States should have a manufacturing sector at large enough for it to afford its imports without running a trade deficit.
“Why would we want to have companies bring back jobs such as assembling iPhones, absent some breakthroughs in automation that make it economical to produce them in the United States?” Atkinson says. “We should instead focus on the high-value-added jobs that will pay the kinds of wages Americans want to see.”
