U.S. manufacturing is at a "critical crossroads" according to a new report from consulting firm Booz & Co., with the plastics sector "on the edge" -- it could become a global competitor or see its operations displaced to other countries. The report, "Manufacturing's Wake-Up Call" (PDF), warns that manufacturers and policymakers are at a true crossroads. If things go well, U.S. manufacturing could account for 95% of all products Americans consume. But if they don't, output could drop by half. Today, U.S. manufacturers provide about 75% of the products that Americans consume. "As labor costs and currency rates play a smaller part in manufacturing decisions, there is an opportunity for U.S. business leaders and policymakers to rise to the challenge and create conditions that support manufacturing," said Arvind Kaushal, a partner at Booz & Co, "The potential for a rebound is there, but only if the right actions are taken," he said. The report breaks down each manufacturing segment, classifying their prospects into four different categories:
- Global leaders. Aerospace, chemicals, machinery, medical equipment, and semiconductor industries have a critical worldwide advantage stemming from their high investment scale, established intellectual property, skilled workforces, and close ties with customers.
- Regional powers. Food, beverages, and tobacco; nonmetallic mineral products; wood products, and petroleum coal segments, among others, benefit from the U.S. as their largest market. Mexico and Canada offer additional markets for these companies.
- On the edge. Paper, plastics, electrical equipment and components, computer equipment, fabricated metal products, pharmaceuticals, printing, and certain automotive equipment companies are besieged by low-cost overseas competitors. They could become global competitors themselves or see their operations displaced to other countries.
- Niche players. Textiles, apparel, leather, furniture, and appliances companies serve small-scale niche markets through domestic operations, while most production is outside the United States.
- Think and grow regionally. The U.S. needs to build a better future with Mexico, shifting less-demanding, labor-intensive processes to that country while helping to build a safer consumer economy there and retaining highly skilled work in the United States.
- Develop and attract skilled talent. The U.S. needs more robust manufacturing education programs, immigration reform, and promoting the attractiveness of manufacturing careers.
- Foster high-impact clusters. The public and private sectors can build geographical concentrations of suppliers, service providers and academic institutions, reinforced by investments in infrastructure.
- Simplify and streamline the tax and regulatory structure. The official U.S. statutory corporate tax rate stands at 39%. Closing the gap between statutory and effective rates (typically 28%) would be a revenue-neutral way to put U.S. manufacturing on a level global playing field.