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Create a Secretary of Manufacturing

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Three events in the last few months highlight why the United States needs a Secretary of Manufacturing, who will sit at the Cabinet Table with as much sway and importance as the Secretary of Agriculture, the Secretary of Defense, or any other Cabinet Officer.

The first was the cancellation of the Presidential helicopter program, a cancellation that will throw about 1,000 aerospace specialists out of work in Owego, New York. The President canceled the VH-71 helicopter project after being criticized for the program by Senator McCain. Sure, we do not want needless pork. But what sense does it make to throw these people out of work when we are spending close to a trillion dollars to create jobs in this country?

We need to create jobs that have a multiplier effect and that build on our comparative advantage. For example, we need to create jobs in aerospace. These jobs enhance our manufacturing and engineering prowess and increase our ability to compete internationally. They are a better place for American tax dollars to be invested than what I saw on one parkway in Washington, D. C. recently: a big sign announcing that stimulus funds were being used to replace a row of streetlights.

When we think about where to put stimulus funds or other United States investments, someone has to stand up for manufacturing. We have lost seven million manufacturing jobs in this country since 1969, and the manufacturing sector is close to a tipping point. Speak to any mid-level manager in an American manufacturing company and you will hear the same story. The effect of this off-shore movement of jobs is cascading.

Suppliers of input products to OEM manufacturers -- things like semiconductors or glass companies -- are all moving off-shore. The companies that create complex end products -- computers and PDA and cell phone manufacturers -- are all moving off-shore. And the great big investments in the next cycle of technology improvement -- like three and a half billion dollar semiconductor fabrication plants -- are all moving off-shore, largely to South Asia. So as a mid-level manager, if you're tasked with sighting a plant, you have to go where the input suppliers are, where the OEM customers are, and where the technology is -- namely, outside the United States.

A second significant event was an off-hand comment by the Untied States Trade Representative, Ron Kirk, the former mayor of Dallas. Speaking to House Democrats about three free trade agreements pending before Congress, he said, "Well, if we're not passing trade agreements, then what's the purpose of me being USTR? I might as well pack my bags and go back to Dallas." Ambassador Kirk is focused and will do a good job. He recently announced a trade law enforcement initiative which should be helpful for U. S industry. But the statement about trade agreements is revealing. Many trade agreements have probably not in fact helped U. S. manufacturers. They have allowed large amounts of imports of low priced products from China and elsewhere to come into this country and led to the shutdown of manufacturing plants.

Many economists would say low-cost imports are good for the economy even if they throw manufacturing employees out of work. But someone in the government needs to be responsible for reviewing these trends and doing something about them. To like effect, the Secretary of Commerce, who is often said to be in charge of manufacturing issues, has hundreds of other issues on his plate and little real authority over anything to do with manufacturing. In fact, two of the largest units within Commerce are the weather bureau and the Census.

A cabinet level official needs to be responsible for coordinating tax, trade, labor, spending, investment and technology policy as it relates to manufacturing. We have a Secretary of Agriculture, but the agricultural sector is much smaller than the manufacturing sector, even with its recent declines, in terms of both output and employment.

The third recent event was a conversation I had with my manicurist. Being an international trade lawyer, half way through my manicure and pedicure (something I recommend every red blooded American try), the conversation naturally turned to the declines in the industrial prowess of America. "My husband and I used to have a beauty supply business," my manicurist Annie said, "but then all the beauty supplies started coming from China. Companies that bought from the Chinese could sell product in the United States for less than we could buy it for from U. S. companies. So we had to close the business and I went back to what I was doing 20 years ago. Being a manicurist."

This kind of story is being replicated every day in this country. But the main point is that we are no longer talking about high-profile and glitzy industries being displaced and leading to job losses -- things like steel or computers or autos. Now, almost every industry is being displaced. I recently finished a trade case on something called light weight thermal paper. This is the paper used in ATM machines and for gas station receipts. Who ever even thinks about this product? Well it turns out the Chinese government has been subsidizing the production of this product in China for years and building up its industry at the expense of U. S. manufactures who used to make it.

Someone in the United States government has to monitor these trends and develop a long term, comprehensive response to them. There is no one magic bullet. We have lost millions of manufacturing jobs and entire American industries over the last four decades. It is time to designate someone whose main job it is to bring these back.

Gilbert B. Kaplan was formerly Deputy Assistant and Acting Assistant Secretary of the U. S. Department of Commerce. He is a partner in the international trade firm of King & Spalding in Washington, D. C. He filed the first successful anti-subsidy case by any U. S. industry against China, which led to large anti-subsidy duties on imports of Chinese pipe into the United States in 2008. On behalf of the United States government, he was one of the negotiators of the U. S./Japan Agreement on Trade in Semiconductors and the U. S. Agreement on lumber trade with Canada.