The Reality of the IMBALANCE of Trade

President Obama has asked the U.S. industry to "win the future" and to do so with “innovation and by doubling exports within the next five years”. The current data makes it seem that things look good. U.S. exports are up about twenty percent so far in 2011. The problem is that the exports are being drowned out by a renewed flood of imports. As a result, the U.S. trade deficit is rising back toward the four percent of GDP level that is considered unsustainable, and portends even lower economic growth potential.

With the goal of ‘doubling’ exports, and spurred on by additional funding for development of high-speed trains, wind turbines, batteries, and solar panels, American factories are supposed to be looking toward increased production of vast high-tech products in the near future to “spur a U.S. economic renaissance that would produce good middle class jobs”.

Hi-Tech manufacturing requires an educated, trained workforce, at every level. …so why is ‘manufacturing’ relegated to the ‘hi-tech’ industries as defined by the larger companies in the industrial complex? Manufacturing is ANY kind of work that requires mastery of real things. The demands of eye-hand coordination can be intellectually demanding - with maintenance and repair work also fostering individual responsibility.

Many inventions are the result of a reflective moment when an individual worker made an assumption based on the skills acquired while on the job. Experience in production leads to innovation!

In a recent interview about companies who move their production to China, Applied Materials Executive Vice President Mark Pinto emphasized that “the critical factor in the trend is not R&D or innovation per se, but the availability of production facilities. Manufacturing also requires innovation.”

As stated by Clyde Prestowitz, President of the Economic Strategy Institute, “Innovation isn't the mana from heaven - It doesn't arise from some unique American gene. Rather than innovation leading to production, it is production that leads to innovation.”

The reason for this imbalance of exports vs. imports is not that America lacks innovation. No country has been more innovative in the past one hundred years than the United States. The reason America is increasingly losing out and lagging behind is that it lacks production - and that lack of production capability is now also leading to a decline in innovative capability.

Consider this: There is NO industrial training in most of the major US city’s schools with an alarming 38% (average) drop-out rate. These young people are willing and able to learn how to ‘make something’!

The truth is that an export-doubling target is meaningless unless all manufacturing is considered worthwhile and supported by the academic community within their curriculums, and by the removal federal, state, and local government restrictions and barriers for those entrepreneurs willing to invest in small manufacturing facilities, and train entry level employees. Investments in modern production facilities require the availability of an experienced workforce.

An experienced workforce would result in a renewed effort for modern production facilities. We do need to focus more on domestic production that can competitively substitute for imports by using our competitive advantage of ‘innovation’……that is the ONLY thing that will lead to more exports.