New NAM president John Engler: Level the playing field for manufacturing
John Engler became president of the National Association of Manufacturers on October 1, 2004, but his record of support for manufacturing issues precedes this new role. The former three-term Michigan governor brings to the NAM a lifelong commitment to reducing the size of government as a means to boosting economic growth and job creation. Engler insists that lower taxes on businesses and individuals, and reasonable and scientifically-based regulation, will create more wealth, improve standards of living for all in come groups and best sustain America’s vital middle class.
Prior to becoming Michigan’s 46th Governor in 1991, Engler had served for 20 years in the State legislature, including seven years as State Senate Majority Leader. He was the youngest person ever elected to the Michigan State House of Representatives. He serves on the boards of Northwest Airlines, Universal Forest Products and is a past chairman of the National Governors’ Association. Engler spoke exclusively with PLANT ENGINEERING magazine about his new role at NAM, his assessment of manufacturing issues, and his look at the future of manufacturing here and around the world:
PE: Has anything surprised you since you assumed your role as President of the NAM?
Engler: I have always made it a point to avoid surprises when I can %%MDASSML%% by doing my homework, scouting out the territory and anticipating problems. I invested a lot of time in learning about the NAM before I accepted the presidency. I knew I was taking the helm of a healthy organization with a super staff. I knew manufacturing is coming out of a tough downturn, and that we face some daunting challenges.
I guess if there was any surprise %%MDASSML%% and it was a pleasant one %%MDASSML%% it was in how strong the membership base is, and how committed our members are to the organization and to the future of manufacturing. It’s been tough out there, but our members are committed and supportive.
PE: There has been much gloom from economists on the health of manufacturing, yet you’ve indicated there is reason to be hopeful. What is the basis of your optimism?
Engler: To paraphrase Mark Twain, I believe reports of the death of U.S. manufacturing are premature. Without question we have been through a tough patch. Between July of 2000 and January of last year we lost 3 million manufacturing jobs. We regained about 86,000 since then, but that’s a drop in the bucket. Our percentage of the GDP has declined also to about 13 percent.
But though there is no doubt manufacturing has been through a tough time between 2000 and 2003, to some extent, those statistics merely reflect manufacturing’s dramatic gains in productivity which have averaged more than 5 percent the last three years. Manufacturing produces more than ever before with fewer people. Still, U.S. manufacturing employs about 14.5 million people, whose compensation runs 26 percent higher than that of workers in other sectors, and also supports several million more jobs in other sectors.
U.S. manufacturing, despite its recent troubles, remains the most efficient and productive in the world. Standing alone, U.S. manufacturing would be the eighth largest economy in the world. We provide three-fifths of all R&D and two-thirds of U.S. exports %%MDASSML%% worth $50 billion a month. And I think we’re poised for a major breakout. In the first three quarters of 2004, manufacturing grew at a 5.8 percent rate, well ahead of the 4.0 percent of the overall economy. Exports and capital investments are rising. Our members are optimistic. So yes, I am very optimistic about the future of manufacturing in America.
PE: You say U.S. manufacturers need a level playing field to compete in the global marketplace. How will the NAM help achieve this goal?
Engler: We have a broad-based, ambitious trade agenda that pursues a level playing field on several fronts simultaneously. During the recent manufacturing recession, our export sector was especially hard hit. A major factor in this was the overvalued dollar that began to soar back in 1997. But the NAM helped persuade the Bush Administration to address this issue and the dollar today is moving back toward its historical level, though it is still about 7 percent above its 1997 level. Our exports are rising again in no small measure because of this realignment of the dollar.
We work through the World Trade Organization to reduce trade barriers around the globe. We work for regional trade pacts, such as the North American Free Trade Agreement and the Central America Free Trade Agreement, the latter of which will be on the Congressional agenda this year. We are especially effective in pursuing bilateral trade agreements such as the ones recently negotiated between the U.S. and Australian and Singapore.
While the WTO works to reduce trade barriers, bilateral trade agreements enable us to virtually eliminate them all at once. By the way, very little of our trade deficit is with the countries that have joined us in free trade agreements; more than 80 percent of it is with the others. So renewal of Trade Promotion Authority is one of our top priorities in the 109thCongress.
Of course, we face some special problems in Asia, especially with China, where we are contending with rampant piracy of our products, unfair tariff barriers, domestic subsidies and currency manipulation., in no uncertain terms.
PE: What can individual plants do to assist in reaching competitive goals, and what can the NAM do to help?
Engler: I don’t believe our members need us to teach them about the need to become more competitive %%MDASSML%% they’ve been beating the world at that for a long time. There isn’t anything ambiguous about it; you either learn to compete in the brutally competitive world marketplace or you go out of business. We do offer our members a variety of useful publications and cost-saving services that can help them become more competitive %%MDASSML%% discounts on freight shipments, the Site Selection Network, the NAM Tax Recovery Program, and our joint effort with the Department of Commerce to help more small manufacturers export, just to name a few.
We are working to help manufacturers deal with rising health care costs. The answer lies in an aggressive two-track strategy of reducing health care costs while experimenting with changes or alternatives to our present health care system. For example, chronic conditions, such as diabetes and asthma, account for 70 cents of every health dollar. Many of our members are achieving great savings through aggressive disease management. Also, we want to help make insurance more affordable by providing health insurance credits, encouraging greater use of health savings accounts, increasing small business purchasing power and allowing rollover of unused Flexible Spending Account funds.
I should add that a major thrust of our work is to improve education and worker training. More and more of our members are telling us they have jobs going begging because they cannot find qualified applicants. Our schools are not providing young people with the math, science and communications skills they need to function in modern manufacturing. We launched our Dream It! Do It! campaign in Kansas City in February that we hope other communities will see as a prototype for improving education, and providing a qualified work force for the 21stcentury.
PE: What’s the best legislative way to create incentives for plant expansion, and what is the NAM doing in that area?
Engler: The best thing Congress can do to create incentives for expansion is to reduce the external costs imposed on manufacturers in the U.S. By external costs, I don’t mean the cost of wages and benefits and land that everyone has to pay because those costs are built in. But we did a study last year that found that purely external costs associated with taxes, health care, regulations, energy prices and litigation add 22.4 percent to the cost of labor in this country compared to our nine major trading partners. U.S. businesses carry a much higher tax load than our foreign competitors. We simply have to rein in soaring health care costs. Government regulations are much more costly than they need to be. After all these years, we still don’t have an energy policy, and no other country in the world permits its legal establishment to pillage business the way we do. We’re shooting ourselves in the foot and we can’t blame other countries for it.
The NAM has taken the lead in identifying and analyzing this external cost burden, and we are using it as a basis for advocating our pro-growth, pro-manufacturing agenda. We’re the most effective business group in Washington today, and we are getting things done.
PE: What would the NAM like to achieve at your first National Manufacturing Week as NAM president?
Engler: My main goal in Chicago is to get to know more of our members, see some of the exhibits of advanced manufacturing, and meet with corporate executives on the front line of industrial competition. We’re holding a National Town Meeting on Manufacturing which I hope will be the first of many. We’ll have senior government people and leaders of business talking about the challenges facing manufacturing today, and taking questions and comments from manufacturers attending the exhibits.
I think it is vital that all of us in manufacturing begin to see ourselves as a distinct community of doers and shakers, the people who make things and create wealth in this country. It should be a matter of pride to all of us to be manufacturers, and the future of manufacturing depends on our ability to speak with one voice on the issues that matter most to us.
PE: Which is the easier job, Governor of Michigan or President of the NAM?
Engler: Well, I said when I took this job that it is a rare opportunity. I mean, the governor’s job is open every four years, this one came open for the first time in the last 15 years. So maybe the NAM job is easier than the governorship if only because I don’t have to think about running for reelection in four years.
But the jobs are alike in many ways. I deal with an array of complex issues. I need to listen to a diverse group of voices and forge a consensus among them. And then I have to rally support to persuade our government to do what it should do anyway.
Both jobs offer tough challenges where the stakes are high and the opportunity is great. I love it. I’m having a great time.