Reconstructing American Manufacturing in Four Steps, According to Reagan Task Force
WASHINGTON A new report from a Ronald Reagan Institute task force to revitalize U.S. industry to compete with China recommends retraining workers using federal education grants, investing in sectors vital to national security and stimulate technological development with allies.
Released Tuesday ahead of the Reagan National Defense Forum next month, the report laments a large technical skills gap, productivity lagging behind U.S. peers, a delay in capital investment in manufacturing, a fragile supplier ecosystem, and inadequate coordination. both between local government entities and the United States and its partners.
“Our declining manufacturing competitiveness leaves the economic infrastructure and defense capabilities of the United States under-prepared for geopolitical events, global competition and even major armed conflicts,” the 37-page report states. âTo revive our manufacturing base and maintain our advantage as the world’s largest economy, the United States must employ innovative thinking from the public and private sectors. “
Meanwhile, centrally coordinated Chinese efforts are making gains in production capacity and technological investment, shifting it toward the creation of a self-sustaining defense industrial sector and, more broadly, its “stated goals of supplanting it. ‘America as the world’s first economy and overhaul the rules – international-based system,’ according to the report.
The bipartisan National Security and US Manufacturing Base Competitiveness Task Force is chaired by Co-Chairs Marillyn Hewson, former Managing Director of Lockheed Martin, and Managing Director of investment firm Bridgewater Associates, David McCormick . Members outside the defense community include Kathy Wengel, head of the global supply chain at Johnson & Johnson, and the co-chairs of a Congressional task force with a similar focus: Representatives Mike Gallagher, R-Wis ., and Elissa Slotkin, D-Mich.
The report comes at once President Joe Biden and former President Donald Trump focused his attention on reviving US industry. The Senate this year passed the U.S. Innovation and Competition Act, a bipartisan package aimed at making the U.S. economy more competitive with China and strengthening U.S. supply chains. The legislation could surface this week as an amendment to the annual Defense Policy Bill.
While the report sounds some familiar notes in Washington, it comes here from a task force of business and political leaders who Hewson says feel a sense of urgency and agreement on the scale of the challenge. .
âWe are making this very strong link between our national security and our economic competitiveness and there is no doubt you will hear it from both sides of the aisle,â Hewson said. âThere was no discussion of the issues, it was just about: what are the most important things we can do in this urgent situation to resolve them? “
The task force presents four key recommendations, with dozens of ideas for implementing them:
1. To fill a technical skills gap in the workforce, employers should be allowed to compete for federal education grant programs that traditionally subsidize college degrees to support certification programs, apprenticeships, and internships. . Another recommendation is that the federal government provide direct financial incentives for students to earn degrees and diplomas in key technical fields. Some problems are that workers in manufacturing jobs are underpaid, visas for skilled foreign workers are difficult to obtain, and fewer foreign students stay in the United States. According to research from McKinsey & Company behind the report, the situation is dire. If current trends continue, 2 million jobs would be lost by 2030.
2. To address underinvestment in the manufacturing sector, new public-private capacity could finance investments in sectors critical to national security. The report proposes calls for either a bond guarantee program, a government-backed sovereign wealth fund, new private capital vehicles with their own tax incentives, or an âindustrial finance companyâ with similarities to the Japanese and German financial entities. The report says action is needed as the biggest declines in US manufacturing over the past two decades have been seen in “learning curve” industries like communications equipment and semiconductors. US companies in capital-intensive manufacturing industries need to catch up with their counterparts in Europe and East Asia when it comes to modernizing their factories, properties and equipment.
3. To strengthen supply chain weaknesses, some of which are exposed by the pandemic, he recommends modernizing the Defense Production Act, a 1950s law historically used to remove bottlenecks in the supply chain. defense supply and more recently used to address pandemic-related deficiencies. Adjustments to the law could be used to allow new “special manufacturing zones” with expedited and simplified permits, preferential tax treatment, targeted labor programs and capital investments. Or they could be used to create new visas and citizenship pathways for skilled immigrants working in critical manufacturing sectors with, for example, expedited visa exams and green cards for highly skilled applicants.
4. It also recommends a new body made up of the G7 and Quad countries (US, India, Japan and Australia) to coordinate on issues such as investment screening, export controls, artificial intelligence and networking. 5G / 6G. In line with the inaugural session of the US-EU Technology and Trade Council this summer, he recommends extending those talks to Quad Allies. Another recommendation is to allow American suppliers to export without a license certain less sensitive devices controlled by the International Traffic in Arms Regulation to the United Kingdom and Australia.
While the task force is not the first to look at the skills gap, supply chains and corporate zones, Hewson said the idea was to highlight them for national leaders.
âWhat our task force has tried to do is really focus on some recommendations that we think, given the urgency of the issue, that we can act on immediately,â Hewson said. “These are the key pieces that we believe could make the biggest difference in the short term and have even gone so far as to identify what we thought it would mean, in terms of jobs and solving the problem.”
Last year, a separate Reagan task force recommended measures to expand the defense innovation base and challenge China, including creating a new National Guard-like tech unit and a special visa program.
Joe Gould is the Congressional and Industry reporter for Defense News, covering budget and defense policy issues on Capitol Hill as well as industry news.