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LEE: Manufacturing for tomorrow

America needs policies that unleash free-market forces

- The Washington Times - Wednesday, September 29, 2010

In a blatant effort to bolster his Democratic Party's election prospects, House Majority Leader Steny H. Hoyer has touted a new manufacturing agenda for America. Mr. Hoyer's plan fails at the outset because our global competitors do not set manufacturing agendas year to year or election to election like we do. They plan for the next generation. If we are to compete and win, so must we.

I believe this strongly because, unlike my peers in Congress, I am not a politician, but a businessman. Before coming to Congress last year, I helped lead a manufacturing firm that produced automation components, such as the damper that enables your airline seat to recline or the precision assembly parts that likely produced your bluejeans. The shock absorbers at the end of the subway line under the U.S. Capitol bear our company's logo.

Though America is still the world's largest manufacturing economy ($1.72 trillion in 2009), the jobs picture tells a different story. In the past decade, nearly 6 million manufacturing jobs have been lost in the United States, with 272,000 of them in New York state.

The plain truth is that U.S. policy and policymakers bear much of the blame.

Our poor policy decisions start with taxes. At 39.21 percent, America's anti-competitive corporate tax rate is the world's second-highest, topped only by Japan's. While politicians in Washington bash American companies and workers who create value, our foreign competitors have beaten us to the pro-growth punch.

The average corporate rate for the 30 largest industrial economies has fallen from 37.6 percent in 1996 to 26.3 percent today. In a recent study of the research and development (R&D) incentives of eight leading Western economies, the United States finished dead last. Even France boasts a better R&D tax regime.

Meanwhile, we burden U.S. workers with a 39 percent corporate tax rate, fail to set a long-term R&D tax policy, and now Mr. Hoyer's Democrats are planning to increase capital gains and dividend taxes. This is no way to run tax policy.

Even with a competitive tax regime, the success of U.S. manufacturers still depends on U.S. brainpower. Yet U.S. universities take our best and brightest and produce an overabundance of personal-injury lawyers and Wall Street executives, not the engineers we need to compete. Our competitors are smarter about smarts. Sixty-three percent of Japan's undergraduate degrees are in engineering fields. China graduates 56 percent of its students in engineering. South Korea, 46 percent. The United States trails at 32 percent. We need to do better at the brain game.

We know that high tort costs - cable television makes a pretty penny on trial-lawyer ads - and poor intellectual-property-rights enforcement take their toll as well. But America's shortsighted trade policy deserves a special critique.

America was built on free trade, and without opening new markets to U.S. products, our economy would stagnate in the best of times. In the worst of times, it is economic suicide not to open them.

President Obama has endorsed trade agreements with Colombia, Panama and South Korea, but he has met resistance from Mr. Hoyer and House Speaker Nancy Pelosi (who have not earned a private-sector paycheck since 1981 and 1987, respectively). Barriers to free trade cost American jobs and make our products more expensive abroad and imports more expensive here at home. With a $50-billion-per-month trade deficit, we need to export more U.S. products to the world.

We also need to ensure that we are getting a good trade deal with China. Real action to have the yuan decoupled from the dollar is long overdue, and so is reform of China's indigenous-innovation and market-access policies, which keep out U.S. exports.

I recently summed up all of this a five-point jobs plan, "Manufacturing for Tomorrow." It seeks to correct America's self-defeating policies with a certain and competitive tax code, a more scientific work force, improved intellectual-property enforcement, tort reform and new markets through freer trade. In short, U.S. policy needs to be as forward-thinking as U.S. manufacturers already are.

Consider this: As Democrats put out another election-year press release, Japan recently announced a plan to cut its corporate rate below the U.S. level, and a new study shows China will overtake the U.S. in manufacturing output by 2013.

Wake up, Congress. It is time to look over the horizon.

Rep. Christopher Lee is a Republican member of the U.S. House of Representatives from New York.

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