Machine Design

Decline of U.S. manufacturing threatens national security

U.S. manufacturing generates $1.43 of additional economic activity for every $1 of goods produced — more than any other economic sector.

Wayne Law
Executive Vice
Purchasing & Distribution
Motion Industries Inc.
Birmingham, Ala.

U.S. manufacturing generates $1.43 of additional economic activity for every $1 of goods produced — more than any other economic sector. It has contributed significantly to one of the highest living standards in history.

But this extraordinary growth engine is losing steam. Since July of 2000, U.S. manufacturing has lost nearly 3 million jobs, many of which have gone overseas. The loss is compounded by a lack of skilled workers able to fill the remaining jobs. Manufacturing exports as a share of GDP have shrunk since 1997, reflecting increased global competition, an overvalued dollar, and difficult economic times abroad. These factors and an ever-increasing demand for foreign-made goods have pushed the U.S. trade deficit to historic highs. At the same time, U.S. manufacturing's share of capital investment and R&D expenditures has declined.

No surprise that U.S. bearing makers have been caught in the economic downdraft. Bearings are key components in everything from automobiles and exercise equipment to spy satellites. The last few years have seen a lot of consolidation among industrial distributors and bearing manufacturers alike. And some U.S.-based bearing makers are moving operations offshore to serve emerging markets.

But a growing dependence on foreign-made bearings brings into question both the capability of U.S. industry to deal with a national emergency and the potential political ramifications of sourcing from foreign countries that may not agree with U.S. policies. Loss of U.S. bearing makers is not just an economic issue but also one of national security, says Joe Swann, president of Rockwell Power Systems.

So why is U.S. manufacturing struggling? The high cost of doing business in this country is one reason, especially expenditures related to health care, litigation, regulation, and energy. U.S. manufacturing bellwether Caterpillar Inc., for example, has added capacity overseas — notably in China — but hasn't built a new factory in the U.S. for several years. Caterpillar CEO James Owens in a recent Business Week magazine interview cites spiraling health-care costs as the primary reason, calling it a "national problem." Further, Owens suggests that policymakers must address the challenges facing U.S. manufacturers competing in a global theater.

Jim Berges, president of Emerson Electric, says U.S. manufacturing has a demonstrated ability to overcome pure wage differentials with trading partners through innovation, capital investment and productivity. But when the structural costs multipliers are piled on, the task becomes unmanageable even for best-in-class companies. Berges says companies should urge state and federal legislators to focus on addressing and removing these penalties, changes that will benefit the entire economy.

Trade group the National Association of Manufacturers (NAM) has its own recommendations. It urges legislators to enact laws that level the playing field. In particular, markets should determine exchange rates and countries such as China must comply with international trade rules.

NAM aims to lower the cost of producing goods in the U.S., contain health-care costs, enact legal and regulatory reforms, and help ensure a plentiful and inexpensive energy supply. NAM further says to promote innovation and investment with a tax system that encourages R&D and offer incentives to attract scientists and engineers to this country.

In addition to NAM's recommendations, Bearing Specialists' Association (BSA) member firms are encouraged to get involved at the local level. Educate your workforce about U.S economics. Relate local events to relevant economic principals to further understanding of how world events impact their paychecks. Support local colleges and high school economics education by serving as a guest speaker or supporting such organizations as Junior Achievement.

BSA also recommends becoming active in your local chamber of commerce, community development board, coalitions to nurture new business, and so on. Develop strong relationships with local and political officials. Brief officials about how their decisions impact your organization and markets. Lastly, get the word out. Develop an active media relations program including new releases, interviews, and letters to the editor.

A healthy U.S. manufacturing base is vital to our future. To protect it, we must be willing to get involved.

BSA ( is an international service and educational organization of bearing distributors.

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