Three Policies That Can Revive and Strengthen US Manufacturing Part 2

Three Policies That Can Revive and Strengthen US Manufacturing Part 2

1. Applying VAT to Knock Down the Trade Deficit

The value-added tax is a tax used by over 130 countries. By waiving the VAT on exported goods and applying it on imported goods, imports would increase in price, helping goods manufactured in the US to be more cost competitive. VAT is usually 17% in the countries that impose it. Theoretically, this percentage would bring over $300 billion in revenue per year – that is 17% on $2 trillion worth of imports.

Of course, in order for VAT to work in the US, tax relief and tax reduction should be put in place on both the business and the consumer sides. Without the current system which involves double taxation on exported goods (when leaving the US and then again when entering the destination country), but with a VAT system instead, US exports will benefit from better pricing.

2. Investing More in Automation

Investing more in automation when many people are left out of a job due to manpower-reduction technologies may seem counterintuitive. Well, looking at the big picture, this tactic is not at all unreasonable. And while keeping our jobs in manufacturing will always be of great focus in the betterment of our economy, the future will definitely not present too many opportunities to those countries that don’t keep up with their investment in automation and other such manufacturing technologies.

Investment in factory automation and technology research is not pushed enough by policy makers in the US as it is in other developed countries. In the last five years, the US National Robotics Initiative has funded less than 15% of the applications registered by researchers. Encouraging both bigger investments in automation and tax breaks can do a big difference for the better in the future of US manufacturing.

3. Revitalizing Our Manufacturing Hubs

Little is left of the former industrial heartland of America, but the Rust Belt would be able to keep on giving through regional centers of expertise. Such a center is usually started by a regional development agency or a chamber of commerce. This group would be the middleman that brings together government agencies, businesses and schools in order to create a larger interconnected group of people and organizations that can direct its focus towards working as a unit, with the ultimate purpose being to attract new business and support innovation.

For example, even if manufacturing US consumer electronics is an industry that has been almost completely off-shored, the towns and cities that thrived on this type of manufacturing work in the past still possess the manufacturing know-how and manufacturing talent to lay the groundwork for innovation, attracting new business, and for building a more fair and competitive market. The potential exists, and it’s about time we start leveraging that potential.


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