Earlier this year I chaired the first hearing of the Senate Subcommittee on Manufacturing and Competitiveness. This in itself was a victory. For too long, Congress has paid little attention to the critical question of how we can keep America's manufacturing sector competitive in an increasingly global marketplace.
Manufacturing is critical to our economy. It accounted for 17 percent of gross domestic product in 1994. Manufacturing is particularly important to our workers, 18.3 million of whom were employed in that sector in 1996 - that's 15 percent of total non-farm civilian employment.And ''manufacturing'' does not just mean automobiles. Chemicals and allied products, including pharmaceuticals and paints, made up 1.9 percent of GDP in 1995, as did electronics. Motor vehicles and equipment tied with printing and publishing as the fifth largest manufacturing industry at 1.2 percent of GDP.
Unfortunately, as the painful experiences of the 1970s show, we must not allow ourselves, or those in our manufacturing sector, to become complacent. We cannot afford to ignore the growth of foreign competition. And we must understand and address changes in our economic and technological infrastructure that can have severe effects on manufacturing.
That is why this subcommittee is so important. During our first hearing, we heard from representatives of a cross-section of America's manufacturers. They came to discuss national and cross-industry problems, trends, strengths, weaknesses and potential obstacles.
What did they have to say?
Kenneth McLennan of the Manufacturers Alliance for Productivity and Innovation emphasized the need for continued free trade. He pointed out that the United States is the world's leader in manufacturing exports.
American products made up 13.1 percent of the world's total exports in 1994. Some 10.3 million American jobs were supported by exports this year, earning a wage 13 percent higher than the national average.
A broader message came through loud and clear from the various witnesses: We must establish and maintain a higher overall economic growth rate for our economy as a whole if manufacturing is to continue improving its productivity and if it is to keep serving as an engine of growth and prosperity. Higher growth rates allow companies to invest in new plant and equipment and research and development, investments which increase productivity. Increased productivity makes our goods more competitive and keeps Americans employed at good jobs with good wages.
But increased growth will not just happen. If the federal government punishes manufacturers through a complicated tax code that imposes multiple layers of taxation on saving and investment, through complicated and unnecessary regulations and mandates, through a legal system that encourages frivolous litigation and through a short-sighted educational policy that ignores the importance of skilled workers, our economy and our people will suffer.
If we continue to rack up huge budget deficits and begin to build a wall around our country to keep out motivated immigrants, the pool of investment income and job-creating entrepreneurship on which our economy must draw will soon be depleted.
We all know about the troubles American automakers had during the 1970s, into the 1980s. Government regulation, trade and fiscal policy added greatly to those troubles. Thanks to improved quality control and innovation, conditions have improved. What is more, the re-emergence of our automobile sector and the industries associated with it has been joined by a surge in other manufacturing jobs.
Michigan has led the way. Last year companies in Michigan accounted for one of every five manufacturing positions created in the United States. In the last six months of 1995, companies in the state added 21,300 manufacturing jobs, compared with the loss of 30,000 manufacturing jobs in the rest of the country. And in the final quarter of 1995, Michigan businesses created one of every three new manufacturing jobs in the country.
Overall, Michigan's businesses have added more than 400,000 jobs in the past five years and the state's unemployment rate has dropped from 10 percent in 1990 to 4.3 percent today, more than any other state.
Governor John Engler's free-market-oriented policies of tax cuts and regulatory reform have paid off for our state's workers. It seems clear, in my view, that policies in some states, like Michigan, have succeeded in creating manufacturing jobs, while other state policies have not.
It is my hope that we can look to Michigan's successes for guidance on how to make federal policies more conducive to a vibrant, competitive manufacturing sector. For my part, I intend to focus on finding out what policies work and fighting for those policies in Congress.